MHEDA suppliers speak out on their partnerships with distributors.
As the saying goes, it takes two to tango. And when it comes to the manufacturer-distributor partnership in material handling, it takes cooperation from both sides for the dance to go smoothly. The MHEDA Journal spoke with individuals involved with distributor relations at five material handling manufacturing companies: Brad Grindstaff, director of channel development at Fairbanks Scales; Steve Ache, vice president of sales and marketing at PowerDesigners; Hank Durica, national sales manager at RICO Equipment; Peter Comeau, president/CEO of RWM Casters; and Brian Boals, director of distributor sales at UNARCO Material Handling.
The five discuss what makes for a best-in-class manufacturer-distributor relationship, the obstacles facing both sides, and what manufacturers expect from their distributors to achieve long-term success. In the end, though, just as in any dance, the secret to a successful partnership lies in two things: trust and communication.
TMJ: What makes a best-in-class relationship between suppliers and distributors?
Brian Boals: Good, open communication and a strong working relationship built on that communication.
Brad Grindstaff: Both parties must become logical extensions of each other. They are co-dependent—shared success and shared failure.
Peter Comeau: When it works, it’s a partnership where each party truly respects the other’s role.
Steve Ache: Exactly. It’s a two-way street.
Hank Durica: It comes down to trust. The manufacturer wants to supply dealers with as much information as possible so they have confidence when they go in front of their customers.
Do you go to market exclusively through distributors?
Brian Boals: Not exclusively, but UNARCO has a strong emphasis on the distribution side of the business.
Steve Ache: PowerDesigners has a private-label program with a battery OEM, some direct national accounts and dealers. The national accounts request and require a direct relationship with the manufacturer.
Hank Durica: RICO sells to all the major equipment manufacturers as well as the mom-and-pop shops. Even if an end-user calls us direct, we try to push them in the direction of their servicing dealer.
Brad Grindstaff: Fairbanks Scales primarily goes to the material handling market through dealers.
Peter Comeau: Only where we do not have a distributor in a specific geographical region do we take an MRO sale directly. Where we can, we like to keep the distributor participating in the process.
It sounds like the answer is “no.” What percent of your sales go through distribution?
Brad Grindstaff: Not sure exactly, but a very high percentage of Fairbanks sales go through dealers.
Steve Ache: PowerDesigners’ biggest customer is a direct contract, so 50 percent is fair to say.
Hank Durica: Probably 95 percent of RICO orders go through the end-user’s servicing dealer.
Peter Comeau: Over 84 percent of RWM’s total sales are sold through distribution.
Why do you choose to go to market through distribution when many suppliers don’t?
Hank Durica: Distributors are in the customer’s back yard doing service to other equipment, and they can be there if something happens to ours.
Steve Ache: Quite honestly, I don’t know any other way. Otherwise, we’d be looking for a short-term relationship and a revolving door of dealers, which doesn’t give us or our product any stability.
Brad Grindstaff: In general, buyers call the people they trust, and material handling dealers are the people they trust. It’s in Fairbanks’ best interest to work with them because they’re the ones end-users are most likely to contact.
Brian Boals: UNARCO understands the value that distributors and integrators bring to the equation and that allows us to focus on what we do best—manufacture storage racking.
Brad Grindstaff: Dealers are in end-user facilities every single day. Because we sell one piece of equipment, if we were to go direct, we would only get to contact or touch that end-user when they needed weighing equipment. As a result of that, we are less familiar to them.
Hank Durica: Right. The dealers hear all these deals. They’re a sales force out in the field.
Brad Grindstaff: I describe it as feet on the street. Effectively reaching all the material handling end-users would require a very large sales force, the cost of which would be huge. Appealing to material handling equipment dealers across the country gives us a much larger sales force.
Peter Comeau: Distributors can provide a lot, if not all, of what factory support can be, except they’re closer and they enjoy a closer relationship with the end-user.
Brad Grindstaff: Each Fairbanks salesperson has a huge territory, and also sells in markets outside material handling, so the dealer network is critical to being able to cover the ground.
What traits do you look for in a distributor?
Steve Ache: We look for somebody excited about technology, people who are innovative by nature.
Peter Comeau: Stable ownership, solid financial re-sources, reliable experienced staff, a proven track record demonstrating consistent growth and an excellent reputation within the segment that they serve.
Brian Boals: Engineering capabilities, in particular their understanding of the rack and systems side of the business. We also look at market position and the experience level of ownership and sales staff.
Brad Grindstaff: Although we don’t have exclusive relationships with each distributor, we try to associate with companies that have a longstanding tenure and reputation as one of the top three within the local marketplace.
Steve Ache: They must have a strong team that understands sales and marketing and how to promote our product effectively. It can’t just be something on a menu.
Brad Grindstaff: Good point. We want our products to match with the existing products that a dealer already takes to market. We want a natural fit.
What else do you expect from a distributor?
Brad Grindstaff: I don’t expect them to undertake sort of a big venture outside of what they normally do in their everyday business. I don’t like to ask them to participate in an unnatural act.
Steve Ache: We certainly want a distributor that shares in the same company philosophies that we do in regard to ethics and hard work—the most professional and polished distributors out there.
Peter Comeau: Our products should be a key, profitable part of their business, not just another name on the scorecard. Then we can start sharing mutually beneficial information with each other.
Hank Durica: Because of the specialty nature of the trucks we design, the distributor really needs to gather as much information from the end-user as they can. That takes a lot of our headaches away.
Steve Ache: We expect distributors to share in costs associated with promotional programs, especially for demo equipment. There’s a cost associated with setting up and managing a product demonstration.
Brian Boals: There has to be communication. Deals are still struck on relationships in this business. If you have a well-established relationship founded in solid communication, you have a winning combo.
Steve Ache: We’re selling value-added products with financial implications, not commodities. We need distributors who understand how to sell value-added products, ROI and cost of ownership.
What one aspect of the distributor-manufacturer relationship is most important?
Peter Comeau: Active owner participation. There’s a better chance of success when the owner is invested, rather than having someone report to the owner.
Brad Grindstaff: Making it clear to distributors that they are our customer base, not the end-user, that we are there to help and support their business as opposed to compete against them.
Steve Ache: There must be trust between the manufacturer and the distributor that things will be done in the most ethical fashion, not only between each other, but in the way we interact with the end-user.
Brad Grindstaff: Exactly. There is always the underlying fear that a manufacturer will learn the marketplace and then cut distributors out of the picture. Overcoming that is a constant challenge.
Hank Durica: I would agree. Trust.
Brian Boals: I don’t think you can over-communicate, even when you’re delivering unfavorable news. It’s important to say that as early as possible so we can make a smart decision.
How do you communicate with dealers?
Peter Comeau: I travel extensively, making sure I spend a lot of time—and it’s never enough time—with our top distributors.
Brad Grindstaff: Fairbanks has regular updates to catalogs and other literature, which are relayed through the sales force. We make our salespeople available for joint sales calls.
Steve Ache: About 80 percent of PowerDesigners’ business comes from 20 percent of our dealers, so we try to spend our time accordingly with those 20 percent of dealers. Field people are required to provide call logs with minimal contact requirements, whether that be phone, e-mail or visits.
Hank Durica: RICO sends out mass-blast e-mails. Many dealer salespeople are bound by what they see in the manuals or catalogs, but we want to help them know an opportunity when they see one.
Brian Boals: At UNARCO, we try to deliver as many productivity tools in the way of pricing tools, Web-enabled tools, Web-sourced communication tools. We’re really utilizing our Web site as one point of contact.
Peter Comeau: Nothing can ever replace face-to-face communication. It’s the best way to truly determine the level of sincerity and respect that each partner holds for the other.
What other support do you provide for distributors?
Peter Comeau: Quality products, on time, at competitive prices. RWM also provides domestic manufacturing, in-house technical support and engineering services, product testing and a constant stream of new products.
Brad Grindstaff: Fairbanks offers regular promotional opportunities, particularly reduced pricing. We work very hard to maximize the spread between list price and price at which our network of dealers can buy so they have a little more flexibility in how they put their proposals together.
Peter Comeau: RWM also provides advertising, promotional marketing and field sales support to assist in the promotion of our products.
Steve Ache: PowerDesigners runs financial incentive programs for dealer salespeople. We also do joint marketing programs, such as sharing the expense and working the booth with them at a local trade show.
Brad Grindstaff: We customize training, depending on what a particular dealer asks for. We make ourselves available for local training events and joint sales calls.
Hank Durica: We’re proud that 95 percent of RICO’s parts ship same day. That’s definitely a major concern when people are buying specialty trucks.
Brian Boals: UNARCO’s recent acquisition of Kingway gives us a breadth of product that we can now deliver from multiple plant locations, something we weren’t able to do before.
What are the strongest bonds between you and your distributors?
Peter Comeau: At RWM, we strive to maintain relationships throughout both organizations. We all have roles to play to ensure that all levels within both companies are being satisfied. You can’t have the owner thinking everything is great and the customer service departments not talking to each other.
Steve Ache: Dealers stay with PowerDesigners for the long haul because we’re very fair with them. We’ll almost always side with our dealers if a question arises.
Hank Durica: Yes, exactly. They know they’ll be protected and that we’ll guide them through something that might be foreign to them. They’ll have a comfort level that the truck will show up on the job able to do everything that we told them it would do.
Steve Ache: Right. PowerDesigners expects its dealers to be fair. I think we’ve proven again and again that we’re fair, we honor warranty, and that they can rely on us to always be honest and ethical. We put that ahead of everything in our business.
Hank Durica: Trust is so important. If I know another manufacturer has a standard product for what they’re looking for, I won’t tell the dealer I’ll make it and quote an obscene price. There’s no point in trying to sell them a specialty truck. They know that we’re not just going to hand them a line of BS.
Brad Grindstaff: Really, it’s about building on the small successes. When someone has a positive experience, they’re more than likely going to try it again. It takes time to grow a trusting, profitable relationship, but one good experience will beget another.
Peter Comeau: Relationships should be measured during times of difficulty, not when all is running smoothly. The bottom line is, we’ll do everything in our power to support one of our top distributors, not just when it’s convenient to us.
What do you think is the #1 concern distributors have about their relationship with suppliers?
Steve Ache: Distributors want to be supported at the highest level in all aspects of selling and training.
Brad Grindstaff: Fairbanks has some direct salespeople, so there continues to be fear that we will cut the distributor out of the picture. Getting by that underlying trust issue is a challenge.
Hank Durica: Price shock. Everyone is so used to a standard, cookie-cutter type of truck that they assume the price of custom trucks will be the same.
Peter Comeau: Manufacturers establishing multiple distributors within the same geographical area. Also, many manufacturers are taking more direct end-user business.
Brian Boals: There’s always going to be a focus on as short a lead time and the best value as possible.
Conversely, what is your number one concern you have about distributors?
Brad Grindstaff: Having salespeople feel comfortable enough to include Fairbanks product as part of their normal bag of tricks. They’ve been successful up until now selling other pieces of equipment, and trying to convince them that there’s a real profit-making opportunity is not always easy.
Hank Durica: We must make sure that we get out to everyone and let them know RICO’s capabilities and what we can do so that they don’t miss an opportunity.
Peter Comeau: Distributors who no longer promote value, service or brand to their customers and rely strictly on price. This strategy reduces their margin and minimizes the value of service that distribution can provide their customers.
Brian Boals: Communicating projects as early as possible. There always seem to be projects, complicated systems, that come out of the woodwork at the last minute. Having visibility to projects as early as possible certainly helps everybody make smart business decisions.
Hank Durica: If we get as much information as possible up front, then we know we’re quoting the right truck the first go around. The last thing a customer wants to hear is, “I’ll get back to you.”
If you could change one thing, what would it be?
Peter Comeau: At one time, large distributors went to market with one, two or maybe three lines and truly worked them. The rest are just price erosion.
Brad Grindstaff: I would like to have enough resources to touch our distributors more frequently. We try to utilize as many resources in the organization as we can to do that, but it’s still not enough. Being able to stay in front of them as often as we like is a really big challenge.
Brian Boals: There’s not one universal answer for distributors in general. We have to look at specific needs. Distributor partners are not all created equal. Some are stronger than others.
Peter Comeau: The value of carrying and promoting a line has been eroded. Frankly, that’s often because of the lack of discipline by manufacturers who appoint anybody and everybody as distributors. I’d like to change that.
What can MHEDA do help enhance the relationship?
Hank Durica: We’re just starting to use MHEDA like we should. We need to put ourselves out there and make ourselves available to dealers, particularly new people, so they realize our capabilities and aren’t missing opportunities with their customers.
Brad Grindstaff: MHEDA really promotes the industry and the feeling that material handling dealers are “in it together.” I think that’s really positive.
Brian Boals: There’s a recognized need to focus on trying to cultivate the youth in the industry. MHEDA does a great job communicating on multiple levels and making training available to both suppliers and distributors.
Steve Ache: MHEDA already does a wonderful job bringing distributors and suppliers together. Continued education as to goings-on in the industry and specific segments of the market is invaluable.
Peter Comeau: I would like to see MHEDA come up with some type of recognition award for material handling manufacturers who continue to support distribution. If there was something saying a material handling company has a proven track record, recognized by a national body as being great for distribution, it would help material handling manufacturers continue to work through distribution.