NAED received the following email from a distributor who is concerned about deliveries direct from manufacturers to abandoned job sites.
“We are likely to face a situation of manufacturers racing to get projects out the door and in many cases, sent to job sites that are not able to accommodate them, due to mandatory job closure, such is the case right now in Pennsylvania. Most of these shipments are FOB factory, so the distributor will be charged, and who knows where the material will end up. We have been contacting vendors to delay shipments, but some have not been cooperative, as they want to get the billing done. I am hoping you might be able to reach out to the vendor community for a response which will demonstrate cooperation in this unprecedented time.”
NAED reached out to members of the Manufacturer’s Council with that concern, and received responses that include, “(We) will not ship a product to a job site unless requested to do so by our customers. In the last week, we have worked with many distributors to ensure they still want to receive products at their locations, most of them have. We have been cautious with shipments and emphatic to the channel considering the circumstances.” Another manufacturer responded by saying, “This could be one of the most interesting challenges of the coming weeks. We only accept orders from Distributors, and only ship to job sites per the details on a purchase order; or when requested by a Distributor. As an increasing number of sites are shutting down, for any order that specifies a ship to a job site, we are calling the distributor to ensure accuracy and viability. We have already seen orders either canceled or placed on delay in several of the major markets where construction has been halted (Boston, San Francisco, Pennsylvania).”
tED magazine spoke to Jason Bader, Managing Partner of The Distribution Team, about this new problem, especially when states are placing restrictions on workers or contractors are pulling employees off jobs. “The challenge is with assumptions,” Bader told tED magazine about states that are beginning lockdowns or restrictions. “You have to be very careful of assumptions. Theoretically, I am living in Pennsylvania, so my suppliers must know not to send materials to Pennsylvania. But that’s not the case. Suppliers may know what is in their immediate vicinity, or in the state they are manufacturing in, but trying to keep tabs on all 50 states is impossible.”
One distributor told the National Association of Electrical Distributors that he is contacting his top 20 suppliers and placing a hold on every order. Then, the distributor will begin the process of approving what should be cleared for delivery. This will take away confusion on when distributors technically take control of the products, and make sure they are not lost on abandoned job sites. Bader thinks this is a good strategy right now, and it might be easier than we believe. “Yes, you might have 300 suppliers in our database,” Bader explained to tED magazine. “But we live in a day and age that you can communicate at light speed. Distributors need to double down on the dialog between the two of them. Rather than throw out a blanket policy, they need to reach out to individual partners.”
“If we have a shipment on the road right now, what should we do with it? I don’t think we can keep operating as business as usual, because it’s not business as usual. The way we dealt with business two days ago is not the way we are doing business right now.”
Bader added he does not believe a FOB should be in every contract, but distributors need to be careful that they do not allow manufacturers to have too much control over customers. “Typically, as soon as it drops on a vehicle outside of a manufacturer, it’s the distributor’s property. Should distributors consider that terms of sale will be different in a drop-sale situation? Maybe so. Manufacturers may not want to do that. When we start seeing brands becoming more important to the contractor than the service provider of the distributor, then the manufacturer has additional control.”
At the end of the day, Bader says we all have to take into consideration that this is a stressful time for not just the supply chain, but the end-user as well. Sometimes making the cheapest decision right now will lead to even more problems months from now. “I would forgo the cost saving right now,” Bader advises. “The way that people perform today is going to galvanize who they are for future relationships with others. If they step up to the plate and do everything they possibly can, they will cement their relationships in the supply chain. If they think only of themselves, they will weaken those relationships and they are setting themselves up for a difficult road down the line.”Tagged with NAED