By Bridget McCrea
Manufacturers rely heavily on expansive, strong distributor networks to promote, demonstrate, sell, and support their products in the broader market. The relationship between manufacturer and distributor is mutually beneficial in most cases, with each party benefitting from the other’s efforts and support. Both also have their eyes on the same prize: improving sales performance by offering quality, useful products to a wide range of end users.
The goal sounds straightforward in theory, but the path to getting there is not always clear for manufacturers and their distributors. Where manufacturers would love for their distributors to take on complete lines and stock and promote them extensively, many distributors would rather keep inventory lean and stocked with only those SKUs that move quickly. This can cause a rift between manufacturer and distributor, despite the similarities in their overarching goals.
“The biggest challenges that many manufacturers and distributors are dealing with are inventory levels and figuring out how to allocate inventory dollars,” says Randy Lee, national sales manager for Honeywell in Morristown, N.J. “We’re all trying to stay lean and mean, but that can drive your business positively or negatively depending on how much you keep on the shelf.”
Upping Inventory Levels
Having enough inventory on that shelf when the customer needs it is imperative, says Lee, who adds that while some distributors focus on this goal, others have allowed their inventory levels to wane as they strive to work in a leaner fashion and manage the ebbs and flows of the economic recovery.
Jim Kosciolek, senior vice president of sales and marketing at ILSCO in Cincinnati, says those distributors that do put an effort into stocking up reap the rewards of the exercise. “Carrying a significant amount of inventory is definitely to the distributor’s advantage,” says Kosciolek. “In fact, the need for significant local inventory at electrical distributorships has never been more important than it is today.”
In that same vein, Greg MacDonald, vice president of electrical distribution at Coleman Cable, Inc., in Waukegan, Ill., says the fact that distributors don’t always consider the company’s full line of products is a persistent challenge. “We have a broad product spectrum, but we don’t always feel like we get the attention across the entire line,” says MacDonald. “Our [distributors] look for us on a regular basis but they don’t dig into the rest of our line; we’re not able to convince them to look at our other products.”
Manufacturers Step In
In the interest of helping distributors achieve their inventory management goals, Lee says manufacturers like Honeywell have improved their service levels, lowered minimums on prepaid shipments, and taken other steps to help distributors manage their inventory levels. Honeywell, for example, recently introduced readySHIP, a program that includes 80 percent of the manufacturer’s most common SKUs that ship same-day if the order comes in before 3pm. “We understand that distributors are trying to keep their inventories lean,” says Lee, “so we’re going to do what we can to support that effort.”
Brian Stowell, North American marketing manager at Fluke Corporation in Everett, Wash., says he’d like to see electrical distributors rally behind individual manufacturers, rather than trying to cover entire product segments. “We all like our time in the sun,” says Stowell. “Unfortunately, this goes against everything distributors want to do, which is mainly to be very broad-sweeping. We’d like them to be very narrowly-focused so that our products are highlighted even more.”
The fact that some distributors “thinned down” as a result of the economic recession makes the goal of manufacturer-specific promotion that much harder, according to Stowell. Distributors are adding manufacturers but also doing more with fewer and fewer human resources. “A distributor that was working with 10 manufacturers now has 20 or 30,” Stowell explains, “but is managing that [increased load] with fewer and fewer people.”
As a result, getting that desired “time in the sun” has become an elusive aspiration for some manufacturers. “I’ve seen some distributors that are handling so many product lines that they barely have the time to breathe,” says Stowell. “That’s when it gets difficult to launch and run our programs.”
The Technology Twist
Another issue that MacDonald would like to see distributors address is Electronic Data Interchange, or EDI. The structured transmission of data between organizations by electronic means, EDI is a great facilitator between distributors and manufacturers, both of whom benefit from the decreased level of email, phone, and faxed orders and communications.
“We have some distributors using pieces of EDI, and others that aren’t using it at all. We’d like to see more of them get hooked in with us on EDI,” says MacDonald, who acknowledges the time, financial investment, and “top-down approval” required when shifting to EDI. Even with those hurdles to jump, he says the benefits can be significant. “Distributors will print orders off of their computer screens and then fax them to us, thinking that’s the easier way to do it,” says MacDonald. “In reality, they’re creating more work for themselves.”
Stowell would also like to see distributors stepping up to the plate when it comes to technology, particularly in terms of using mobile applications, location-based technologies (to hit customers with smartphone ads when they are within close proximity of the distributorship), focused email marketing messages, and other new innovations. “We’re always looking at how we can get our distributors engaged in and using newer technologies,” Stowell says. “We think those innovations could help drive our products even more and also help distributors leverage their promotion and marketing efforts.”
Finally, Lee says distributors could put more elbow grease into their pricing and/or markup strategies. This “wish list” entry will be especially critical over the next few years as the national economy improves, and as companies sell more products to an increasingly discerning and frugal customer base.
“A lot of the distributors have a cost-plus mentality and that enables a margin loss,” says Lee, who sees manufacturers as the key to achieving a better balance of sales and profits. “We recognize the fact that distributors have thousands of SKUs, and that they can’t be masters of everything, but they should work with manufacturers to maximize their profitability.”
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 tED