Progressive Distributor - What do your customers value?

Innovate or be eliminated

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A great deal of attention has been focused lately on the need for distributors to quantify their value to customers.

There is another side to the value coin, however. In addition to understanding what value they bring (or should bring) to customers, distributors also must understand what value they bring to their supply channel partners.

This point was made clear in the recent report, Facing the Forces of Change: Four Trends Reshaping Wholesale Distribution.

One of the most disturbing findings in the study by the Distribution Research and Education Foundation was the low opinion that manufacturers have of the marketing assistance they receive from distributors. A mere 19 percent of supplier panelists in the study thought distributors currently do a good job of marketing.

Think about it.

If 81 percent of suppliers believe that distributors do an inadequate job marketing their products, how long will they (or should they) wait before finding an alternative source to handle that important channel function?

The DREF report doesnt go so far as to predict that distributors will be eliminated entirely, but it does paint the following scenario that would shift responsibilities away from traditional distribution.

At least in theory, theres nothing to keep a supplier company from streamlining its MRO/OEM supply chain as it manufactures products, contract with a third-party logistics firm to warehouse and ship them, and employ a network of sales reps to market them. Better yet, from its viewpoint, the supplier could have customers place orders through an interactive website that contains extensive product information, outsourcing customer service to a call center.

The scenario isnt nearly as futuristic as it may seem.

Consider, for example, a recent announcement by Milacron to launch a nationwide network of trucks to take its products direct to more than 100,000 smaller U.S. metalworking businesses. Milacron also introduced a new website for customers to access information and order products.

Its not uncommon for a supplier to have a direct sales force to supplement its distribution network. Whats interesting is that Milacrons Mobile Tool Crib will also carry products from other suppliers, including 3M, Snap-On Tools and its subsidiaries, J.H. Williams and Sioux Tools, Lista cabinets and Fowler measurement products. In other words, one supplier is taking on distribution responsibilities for other suppliers.

Milacron isnt abandoning its network of distributors. But it doesnt require a huge leap in logic to assume the company wouldnt have introduced a comprehensive new sales and marketing program if it didnt believe its current distributor network wasnt as effective as it could be.

Its proof that if distributors cant come up with creative new marketing efforts, then suppliers will invent their own.

Heres a final thought on that topic from the DREF report:

Wholesaler-distributors in particular need to realize that a supply chain in which they do not take a leading integration role may be a supply chain that effectively excludes them.