After taking a hard look at the state of the electrical distributor-supplier relationship two years ago, tED checks to see if any improvements have been made since the Reimagining Distributor and Manufacturer Relationships survey was published.
In 2016, NAED took a hard look at the state of affairs with electrical distributors and their suppliers. What we learned wasn’t pretty, nor was it all that surprising.
According to the Reimagining Distributor and Manufacturer Relationships survey, of 246 NAED companies (102 distributors and 144 manufacturers), 91% of companies said there is a “real need” for manufacturers and distributors to reimagine how they can better work together and more collaboratively.
The survey also found that a higher percentage of distributors believe manufacturers are not prepared (i.e. mindset, culture, strategies) to partner, and that the opposite is also true in that more manufacturers than distributors believe distributors are not prepared to partner. In other words, both sides of the equation had their own views of how their alliances should look, and how those partnerships were really performing.
Collaboration was also stagnant, even though both distributors and suppliers saw it as an essential aspect of their partnerships. Roughly 63% of NAED distributors surveyed believe that their manufacturers are “actively involved” in creating partnerships with distributors, yet 37% of all NAED distributors that enter into relationships with manufacturers believe that those relationships have little chance of becoming truly collaborative partnerships.
“Historically, distributors have been focused on the transaction,” Dirk Beveridge, founder of Chicago-based UnleashWD and author of the survey, said at the time. “In today’s business environment, they need to ‘check’ that mindset and understand that true partnering doesn’t mean that my ‘win’ comes at your ‘loss.’”
Getting Everyone on the Same Page
It’s 2018 and the distributor-supplier relationship doesn’t look like it has changed much since NAED’s survey revealed some fairly deep disconnects in those alliances. In fact, Rock Kuchenmeister, general manager at K/E Electrical Supply Co., in Mt. Clemens, Mich., says it could take a decade for any significant transformation to take place.
“I don’t think there’s been much change in the last year-and-a-half, and namely because a lot of larger corporations are very slow to change,” says Kuchenmeister. “This is something that we look at 10 years from now to see if there’s been significant change, or not.”
But that doesn’t mean there hasn’t been some incremental progress since the NAED study was published. For example, Kuchenmeister says his firm has been working more closely with its manufacturers and those companies’ local reps and talking more openly about their relationships and respective responsibilities. “That’s what the study was all about—trying to figure out how those interconnected relationships really work,” he points out.
Whether those “ties that bind” have gotten easier or more difficult to nurture and maintain often depends on the parties involved. Put simply, not all suppliers provide an obvious route for distributors that want to work more closely with them. “With certain manufacturers it has definitely gotten easier, and I would say that there are some manufacturers out there where forming alliances has definitely become more difficult,” says Kuchenmeister.
In some cases, that’s because the manufacturer has effectively “watered down” the relationship or maybe devalued the bonds that it has with distribution. Pointing to one large maker of electrical products, in particular, Kuchenmeister says the supplier is “pulling away from distribution and, instead, going more direct-to-market with its products.”
On the other hand, Kuchenmeister says he’s also seen a handful of manufacturers “stepping up their games” and doing a better job of partnering with certain electrical distributors in specific geographical regions. A few K/E Electrical suppliers, for instance, are holding quarterly, semiannual, or annual meetings with the distributor in order to dig down deeper into the distributor-supplier alliance and figure out ways to enhance it.
“We’re working to try to improve that relationship, and we use that time to address issues, so that the problems don’t just fester,” Kuchenmeister says. “In some cases, we’re doing the same thing at impromptu meetings—all in the name of getting everyone on the same page and working from the same playbook in our competitive marketplace.”
Can’t We All Get Along?
After participating in the Reimagining Distributor and Manufacturer Relationships survey in 2016, Matthew Taets, regional sales manager at RAB Lighting in Northvale, N.J., brought back some of the “lessons learned” to his own company. As part of the survey process, RAB partnered up with manufacturer’s rep agency Rouzer Group—a pairing that allowed Taets to more closely examine how distributors envision the “value-add” that’s provided by both the manufacturer itself and by its rep agencies.
“It also helped us better understand distributors’ parameters on issues like pricing, employee compensation, and how they value their partners’ support services,” says Taets. Having those various elements ranked according to importance gave RAB an inside view on what’s most important to the distributor, “and how we, as the manufacturer and rep agency, can deliver those goods and services.”
From that experience, Taets says he learned that the amount of trust in the distributor-supplier relationship has to be extremely high, and more so than ever in today’s market conditions. “We know that the distributors have many options for going to market, and for what products they decide to sell,” says Taets. “They also realize that we may or may not be working with some of their competitors in their same markets. For this reason, when we’re sharing information with one another, there has to be a high level of trust that the confidentiality information is going to be respected and not shared or used against them in any way.”
So, has RAB made any changes to its approach as a result of the NAED survey? Taets says yes, and it’s mainly in the way he and other sales representatives meet and communicate with leaders and managers of distribution firms. “I can get to the heart of the problem faster because I understand more clearly what’s important to the distributor and what’s important to a healthy relationship,” says Taets. “That has resulted in a little less ‘beating around the bush’ and more getting straight to the heart of the matter, making real progress, and adding real value.”
You Can’t Partner with Everyone
Speaking to other NAED preferred suppliers that have yet to figure out the formula for solid distributor-manufacturer relationships, Taets says the best first step is to understand that, by definition, a partnership—much like a marriage—requires a level of exclusivity and commitment. And while 100% exclusivity is hard to achieve in today’s marketplaces (namely because suppliers need multiple go-to-market sources), he tells suppliers to put both time and effort into cultivating the most meaningful of those relationships.
“If there are 10 distributors in the market and you think that you’re going to partner with all of them, that’s really not a partnership. That’s inch deep and mile wide,” says Taets. “However, a solid three out of those 10 may be really good partners (with the remaining seven not as worthy of the relationship commitment), so put your energy into strategic partners and strive to form real, win-win partnerships with them.”
Tagged with best practices, partnership, research
Though my experience is from many years ago, I suspect it may be of merit to this discussion. The relationship is not and never has been between “suppliers” and “distributors” but an individual relationship between the employees of each. As one who convinced his employer to increase the number of a national chain’s branches that had been disenfranchised from two to four, I certainly was looking at the value of the relationship for which I was responsible, not the national connection. (You might guess the name of least one of these parties). The manager of one branch insisted on my providing quotations on requisitions from a very large user, though he, the distributor, hadn’t even received or obtained such an inquiry. It was as if I, the supplier, was expected to represent he, the distributor. I didn’t.