Heya Mr. Manufacturer– Distributors Will not be CatfishJuly 13, 2022
Catfish are native to North America. Since you may know, catfish are bottom feeders with slick, shiny skin and no scales, often known as “Mr. Whiskers.” They feast upon algae and prefer “dead stinky bait” as opposed to better, live alternatives. They feed through the night and could be predators. The majority are sleek and quick, but some have been recognized to grow over 50 pounds. Catfish known as Bull Heads are much more of a scavenger and feast upon decaying organic matter. Bull Heads are not the fighters that Channel Catfish are and become an easier catch.
Some manufacturers may consider their distributors in the exact same vernacular. They might believe distributors are slick, quick, and desperate to feast upon the almighty dollar. They say distributors “bottom-feed” on rebates, discounts and special promotions, preferring lowered prices (i.e., dead stinky bait) instead of the effort of selling value. Manufacturers believe some distributors have grown large and lazy, demonstrating the “Cadillac and Boat” syndrome. “I’ve all I need, a Cadillac and my bass boat, why break my neck trying to recapture much more market share?”
After spending a lot more than 35 years in the distribution business, I must admit that I’ve run into several distributors who fit that description. But they’re the exception, not the rule. Most distributors work very difficult, and are honest and loyal for their manufacturer. They recognize that they’re only as effective as the support they receive from their manufacturer. But additionally they recognize the reciprocal nature of the relationship. Put simply, the more support that distributors give manufacturers through investments in market share growth, then a more support they will receive from the manufacturer.
Distributors provide tremendous value. Most manufacturers understand this and will openly admit it, though some do so begrudgingly. Manufacturers who truly operate in a partnership relationship not just acknowledge the distribution value, nevertheless they seek to leverage that value at every opportunity. What value does distribution provide? The value may vary by industry and product, but it includes some or even every one of the following:
Some manufacturers don’t acknowledge this value openly and reside in a “Love-Hate” relationship with their distributors. They can’t deal with ’em and they can’t live without ’em. Obviously it’s true that the few distributors deserve this negative opinion. You will find those people who have made fortunes simply because they had products with exceptional brand equity in exclusive or selective territories that required simply answering the device to obtain rich. Some of these distributors have didn’t reinvest in their business, putting personal needs ahead of business needs. When the finish of the item life cycle nears and leading edge distribution is needed for new service introduction and support, the commitment, desire and competence on the distributor level is often lacking. These circumstances just fuel the fire of manufacturers’ low opinion of distribution. Fortunately we believe these scenarios make-up just a small minority, so we have to work to change any negative generalizations.
We must recognize that there surely is a different business mindset between the distributor and the manufacturer. By understanding both perspectives better, each party can perhaps work toward a better partnership relationship. The manufacturer prefers to have a contract with point-of-sales information. Their contract would state, you is going to do “this,” and in the event that you don’t, “these” are the effects, and by the way, our deal could be cancelled with a thirty-day notice. On another hand, the distributor prefers a partnership covenant that says if you do “this,” we is going to do “that,” and together we will grow market share.
Naively, throughout much of my distribution career, I believed that I was a customer of the manufacturer. I bought their product and resold it. I did not comprehend the concept of not being their customer until 1998. I was two months on the job as COO of a $400 million distributor. The very first time I met our major supplier, a supplier of pumps, it was at a cocktail party. I was conversing with their Vice President of sales. I’d done my homework and knew our company was on the top ten account list as we had purchased over $45 million dollars of product from their store the entire year before. I made a comment to this Vice President about our company taking pride in being one of their top ten customers. I expected at the least a look, kudos, or simply a grateful nod. He viewed me in disbelief and with an extremely firm, arrogant voice said, “Rick, you’re not really a customer-you are a vendor!”
At the time I was offended by his attitude but have since come to realize that in the eyes of producer, distributors are not customers. They are just a link in the supply chain. Ideally, they’re channel partners. Manufacturers have huge capital demands to cover high fixed costs. Their call to continually increase market share is vital, yet distributors sometimes get frustrated with the volume-driven needs of these manufacturers.
Increasingly, manufacturers have little choice but to explore all opportunities to recapture market share, and distributors can become just one single vehicle in the supply chain. Many manufacturers even seek out the opportunity to service some major customers direct. Transactional the websites on the Internet are playing an ever-increasing role in the supply chain. Add manufacturers’ reps, integrators and catalog houses, and you begin to know the confusion and noise that may exist due to the numerous channels. This could and often does frustrate distributors. They rely on themselves and prefer market exclusivity – a phenomenon that is dying off in most industries.
What keeps the Distributor up through the night?
Distributor rationalization has become a warm topic in many manufacturer executive staff meetings across North America. Most manufacturers believe they’ve way too many distributors. Mass retail complicates this case and working with the service demands of the big box retailers is still an important headache for the manufacturer. If a supplier sat down today and designed his distribution model from scratch, odds are quite high that few would retain their existing channel structure. Distributors know this and often feel threatened by it.
However, in the same way profit covers many sins, performance covers most frustrations. Manufacturers like big purchase orders, increased sales and market share growth. 토토총판 Distributors like exclusivity, rebates, co-op funding, tech support team and innovative, creative manufacturing partners. When both partners get what they want, it’s a match produced in heaven, and matches like this do exist. However, a lot more require constant nurturing. Both partners need certainly to just work at it.
Distributors and manufacturers often disagree on what is important to the customer. Distributors believe producer is out of touch and producer believes the distributor is not providing adequate coverage and developing market intelligence. Manufacturers believe the intelligence that distribution does gather is highly biased.
Manufacturers notice that channel rationalization can be quite a a valuable thing due to their long-term relationships with distributors that are willing to be true partners and operate within the bounds of what is wonderful for both. A garden can’t flourish without pulling the weeds. The trick would be to catch the “catfish” in the rationalization process, rather than the productive distributor partner.