By Bridget McCrea
Nearly all (91%) of all electrical distributors and manufacturers think the time is now to reimagine and rethink the way they work together and collaborate. Of those companies, the recent NAED survey, Reimagining Distributor and Manufacturer Relationships also uncovered the fact that a higher percentage of distributors believe manufacturers are not prepared (i.e. mindset, culture, strategies) to partner. The opposite is also true in that more manufacturers than distributors believe distributors are not prepared to partner.
It’s clear that current mindsets, models, and methods contribute to the lack of trust between manufacturers and distributors, and that this lack of trust is the primary challenge to deep partnering and collaboration. “Distribution has the face-to-face contact and relationship with the contractor and if the distributor is doing a good job then it really shouldn’t matter what ‘brand’ we sell,” one NAED member wrote. “But imagine what the possibilities could be if the manufacturer and distributor were both working together.”
Conflict Resolution 101
After more than three decades of managing manufacturer-distributor relationships, Robert Nadeau, managing principal, Industrial Performance Group in Bonita Springs, Fla., says he’s not surprised at the results. In fact, he says conflict has always been present in manufacturer/distributor working relationships. And while frustration, curt emails, and stressful confrontations are what usually come to mind when most of us think about the word “conflict,” Nadeau says that some level of conflict is actually necessary in a working relationship.
“Positive conflict arises when there are minor disagreements about how the two parties are going to accomplish the goals they have set for the relationship. This type of conflict promotes dialogue, fosters new ideas and can lead to innovative solutions,” Nadeau points out. “Without positive conflict, the working relationship will stagnate.”
But conflict can also be destructive, and particularly when it involves a company that acts in “self-interest and with little regard for how its actions will impact the other party,” Nadeau explains. “Irreparable damage can be done to the working relationship if the two parties do not communicate with each other in an effort to resolve their differences.” In difficult economic times—such as the most recent recession, which many companies are still emerging from—where resources are tight and performance pressure is high, the level of destructive conflict has greatly increased in many working relationships.
The good news is that there are ways to reverse the trends identified in the NAED survey and start down the path to better supplier-distributor relationships. “Our research shows that the cornerstones of a solid manufacturer/distributor working relationship are common goals and two-way communication,” Nadeau points out. “When both parties are working toward a common goal and communicating on a regular basis, the level of conflict is usually low. And any conflict that does exist is usually positive in nature and can move the relationship forward in a constructive manner.”
Put simply, good communication is key. Nadeau, whose firm recently completed its own survey of manufacturers and distributors across a broad range of industries, found that the level of destructive conflict between many manufacturers and distributors has increased while the level of communication has declined. This is a problem because communication reduces uncertainty by helping both parties explain their actions. “And,” he notes, “it provides an opportunity for both parties to explain how they are being impacted by the actions of the other party.”
Cut the Bickering
Nadeau, who has been conducting his own survey since 1997, says getting distributors and manufacturers to discuss their relationships openly can be a lot like pulling teeth. “These conversations are generally long on opinion and short on facts,” says Nadeau. “Both sides really just like to bicker.” As evidenced by NAED’s survey, for example, neither side trusts the other. And in many cases—much like with a marriage or personal relationship—one or more of the parties is not committed to the relationship. “As a result, a lack of trust and commitment develops,” says Nadeau.
On the business front, this lack of commitment can quickly turn into a dysfunctional arrangement where neither party wants to address the elephant in the room…or do anything about it. Digging a little deeper, Nadeau set out to find out just what impact these dysfunctional alliances were having on distributors and manufacturers. He says issues like excess time spent fixing mistakes and expediting orders, and the expense associated with safety stock, were a few of the most popular responses to that question.
But when Nadeau’s firm asked, “What’s the dollars and cents impact?” the answers were all over the board. “They really had no idea what the dysfunctional relationships were costing them,” says Nadeau, “mainly because those categories of problems do not show up on a balance sheet. There’s no place for someone to say, ‘How much time did you spend expediting orders?’ or ‘How much time did you spend waiting?'”
For electrical distributors and manufacturers that want to shore up their relationships and start working in a more collaborative and cohesive manner, Nadeau says quantifying the impact of negative relationships is an absolute must. “If you don’t take the time to do that, then the whole conversation turns back to opinions,” he says. “It just becomes a whole he says/she says situation.”
To avoid this trap, Nadeau says companies should start by examining the mistakes (late orders, wrong orders, etc.) that occur as a result of poor communication and then drilling down on these questions: What types of mistakes are being made? How is it impacting our business? How much extra inventory do we have to hold to cover these mistakes? “If you go through these types of questions you can figure out how much the dysfunctional relationships are costing you,” says Nadeau.
Once those numbers are in place—and the business case for repairing and shoring up the relationships made—distributors and manufacturers can begin to make improvements. Nadeau says the companies that take the time to do this now will be leading the pack over the next few years. “The business challenges manufacturers and distributors face today are unlike anything they have faced in the past,” says Nadeau. “Responding to these challenges will require levels of trust, commitment, and communication not found in the typical manufacturer/distributor working relationship.”
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at firstname.lastname@example.org or visit her website at www.expertghostwriter.net.
Tagged with manufacturers, tED