December 3, 2022

Hey there Mr. Manufacturer– Distributors Are certainly not Catfish

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 feed on algae and prefer “dead stinky bait” rather than better, live alternatives. They feed through the night and can be predators. Most are sleek and quick, however, many have now been proven to grow over 50 pounds. Catfish known as Bull Heads are even more of a scavenger and feed on decaying organic matter. Bull Heads aren’t the fighters that Channel Catfish are and become a simpler catch.

Some manufacturers may think of their distributors in the same vernacular. They may believe distributors are slick, quick, and eager to feed on the almighty dollar. They say distributors “bottom-feed” on rebates, discounts and special promotions, preferring lowered prices (i.e., dead stinky bait) rather than the work of selling value. Manufacturers believe some distributors have cultivated large and lazy, demonstrating the “Cadillac and Boat” syndrome. “I’ve all I need, a Cadillac and my bass boat, so just why break my neck trying to recapture even more market share?”

After spending a lot more than 35 years in the distribution business, I must admit that I’ve encounter several distributors who fit that description. But they are the exception, not the rule. Most distributors work very hard, and are honest and loyal for their manufacturer. They recognize that they’re only just like the support they receive from their manufacturer. But additionally they recognize the reciprocal nature of the relationship. Quite simply, the more support that distributors give manufacturers through investments in market share growth, then your more support they’ll receive from the manufacturer.

Distributors provide tremendous value. Most manufacturers understand why and will openly admit it, however some do this begrudgingly. Manufacturers who truly operate in a partnership relationship not just acknowledge the distribution value, but they seek to leverage that value at every opportunity. What value does distribution provide? The worthiness may vary by industry and product, but it contains some if not all of the following:

Some manufacturers don’t acknowledge this value openly and reside in a “Love-Hate” relationship using their distributors. They can’t live with ’em and they can’t live without ’em. Obviously it’s true that a few distributors deserve this negative opinion. There are those who have made fortunes simply because they had products with exceptional brand equity in exclusive or selective territories that required nothing more than answering the telephone to have rich. Many of these distributors have failed to reinvest inside their business, putting personal needs in front of business needs. Then when the conclusion of the item life cycle nears and cutting edge distribution is necessary for new product introduction and support, the commitment, desire and competence on the distributor level is usually lacking. These circumstances just fuel the fire of manufacturers’ low opinion of distribution. Fortunately we believe these scenarios make up merely a small minority, so we have to work to alter any negative generalizations.

Different Perspectives

We should recognize that there is a different business mindset between the distributor and the manufacturer. By understanding both perspectives better, each party can work toward an improved partnership relationship. Producer prefers to truly have a contract with point-of-sales information. Their contract would state, you can do “this,” and if you don’t, “these” are the effects, and by the way, our deal can be cancelled with a thirty-day notice. On one other hand, the distributor prefers a partnership covenant that says should you choose “this,” we can do “that,” and together we shall grow market share.

Naively, throughout a lot of my distribution career, I thought that I was a customer of the manufacturer. I bought their product and resold it. I did not comprehend the idea of not being their customer until 1998. I was 8 weeks on the task as COO of a $400 million distributor. Initially I met our major supplier, a manufacturer of pumps, it absolutely 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 them the entire year before. I made a review to the Vice President about our company taking pride in being among their top ten customers. I expected at the very least a smile, kudos, or perhaps a grateful nod. He looked over me in disbelief and with a rather firm, arrogant voice said, “Rick, you are not a customer-you are a provider!”

At the time I was offended by his attitude but have since come to appreciate that in the eyes of producer, distributors aren’t customers. They are just a link in the supply chain. Ideally, they are channel partners. Manufacturers have huge capital demands to cover high fixed costs. Their call to continually increase market share is essential, yet distributors sometimes get frustrated with the volume-driven needs of the manufacturers.

Increasingly, manufacturers have little choice but to explore all opportunities to recapture market share, and distributors can be just one single vehicle in the supply chain. Many manufacturers even seek out the opportunity to service some major customers direct. 총판구인구직  Transactional web sites on the Internet are playing an ever-increasing role in the supply chain. Add in manufacturers’ reps, integrators and catalog houses, and you begin to know the confusion and noise that will exist because of the numerous channels. This could and often does frustrate distributors. They believe in themselves and prefer market exclusivity – a phenomenon that’s dying off generally in most industries.

What keeps the Distributor up through the night?

Distributor rationalization has become a warm topic in several manufacturer executive staff meetings across North America. Most manufacturers believe they have a lot of distributors. Mass retail complicates this situation and working with the service demands of the big box retailers is still a major headache for the manufacturer. If a manufacturer 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. Distributors like exclusivity, rebates, co-op funding, tech support team and innovative, creative manufacturing partners. When both partners get what they need, it’s a fit manufactured in heaven, and matches such as this do exist. However, additional require constant nurturing. Both partners have to just work at it.

Distributors and manufacturers often disagree on what’s very important to the customer. Distributors believe producer is going of touch and producer believes the distributor isn’t providing adequate coverage and developing market intelligence. Manufacturers believe the intelligence that distribution does gather is highly biased.

Manufacturers understand that channel rationalization could be a good thing due to their long-term relationships with distributors that are willing to be true partners and operate within the bounds of what is good for both. A garden can’t flourish without pulling the weeds. The secret is always to catch the “catfish” in the rationalization process, as opposed to the productive distributor partner.