Are we better together or apart?
In order for the material handling distributor/manufacturer relationship to work at optimum level, each must be aware of the other’s values and, even more important, share the same value system as it relates to the end-user customer. There must be some measure of commonality in how their values frame their behavior, an understanding of how each brings value to the marketplace, an understanding of what is of value to the end-user, and an understanding of what value is in the marketplace today and what value will be evidenced in the future.
Whether formally stated or not, each company has a corporate value system. At Modern Group Ltd., we practice a value system which incorporates:
- Outstanding customer service,
- High ethical and legal standards,
- Teamwork and partnership between our customers, suppliers and employees,
- Continuous improvement and innovation,
- Respect for the individual, family and community,
- Growth through performance and acquisition.
It is critical that our suppliers share and support our corporate values. To that end, we continually communicate with each other, assuring a long-term relationship.
The classic tension between the distributor and the manufacturer occurs when both have two different approaches to successfully generating profits. Most manufacturers look to increase market share, assuming that increased volume will protect profit margins. And if the numbers are structured appropriately, the formula works.
The distributor, frankly, has more interest in the overall profit relationship. Yes, we will sell trucks. But we will make the bulk of our profits in rentals, service and parts which are independent of brand and almost completely dependent on the relationship we enjoy with our customer. There is a potential difference (which creates the tension) in the value equation between the customer, distributor and manufacturer.
If the distributor is getting good acceptance at a fair price for a product in the marketplace, and he enjoys consistent support from the OEM, there will be a value change that affords the manufacturer an opportunity to realize profits, allows the distributor to make money, and allows the customer to accomplish his objectives as a result of using the product. If any one of these elements is out of balance with the other, the relationship between the manufacturer and distributor is impacted.
In order to overcome the inevitable hiccups, the relationship between distributor and manufacturer must be supported by agreed-upon rules and open communications. The rules are as follows:
Communication: Is there a dealer council and are there regularly scheduled meetings? Is there a consistent, trustworthy form of communication? Is there a protocol for when hiccups do occur?
Are there processes that are reliable for warranty and troubleshooting and ordering configuration?
Is there product support? The dialog between both parties must be open, honest, and forthright.
Agreed-Upon Terms: Is the way you do business clearly understood? Does the way you do business respond to both the distributor and manufacturer needs for market share and profit?
Agreed-Upon Definitions: Do you speak the same language? Do the terms national account, customer, territory commission and profit mean the same thing to both the distributor and the manufacturer? Do you share the same expectations of service and performance?
Understanding the Real Value Chain: What tools will the manufacturer contribute in order to better market his product? Is there an infrastructure which will support the product through its life cycle? Is there appropriate training?
Leadership: Is there a vision and an ability to move an organization to that vision while maintaining values consistently?
Mutual Benefit: Do you know the value you bring to the market place? How responsive are you? More important, do you respond better than any other options the customer may have? Is there respect and understanding between partners? Do you both have an opportunity to make a living? Are you better together or apart?
It Takes Two
If the distributor is not doing his job, his sales will be poor. If the OEM is not doing his job, all of their distributors’ performance will be impacted. In order to assure a profitable future, all of us must continually communicate. The distributor’s responsibility in this equation is to understand the needs of his territory and to communicate those needs to the manufacturer.
As the material handling distributor and the OEM practice better partnering, their shared values will come more and more into the forefront, creating more long-term benefits for the end-user, the distributor and the OEM, guaranteeing our future success.
|Meet the Author
David E. Griffith is Treasurer of MHEDA and is President & CEO of Modern Group Ltd. in Bristol, Pennsylvania.