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What Makes A Best-In-Class Supplier

Distributors outline their expectations of top manufacturers.

Distributors and manufacturers in the material handling industry have worked for a long time to build stronger bonds between each other. In fact, in the material handling industry, the manufacturer-distributor relationship has been one of the driving forces behind MHEDA since its creation in 1954.

Back then, distributors of material handling equipment were riding the momentum generated by World War II, as lift trucks, conveyors, racking and related products were increasingly necessary to accommodate the swell of new goods produced by busy factories. Even so, many equipment dealers felt they could be doing even better, and they formed a national trade association to help combat issues such as low margins, lack of profits and high labor costs.

At the time, it was a controversial idea. Some manufacturers perceived the new group as a “pressure group” or a union. Some went so far as to forbid their distributors from joining the new group. That frosty relationship has warmed today, as manufacturers and distributors develop partnerships for each party’s mutual gain. Open communication between manufacturers and distributors remains one of MHEDA’s primary goals today, and longstanding, strong relationships are a hallmark of membership.

Both sides of the distributor-supplier relationship have made a great deal of progress in strengthening that relationship. Even so, distributors and suppliers agree that there is room for improvement. With trust, honesty, and a bit of give and take on both sides, distributors and manufacturers are building partnerships that will help the industry continue to flourish for decades to come.

First, the good news: The vast majority of distributors interviewed by The MHEDA Journal describe themselves as well-satisfied in their relationships with their manufacturers and suppliers. For the most part, distributors note that manufacturers and suppliers in the material handling industry produce a good product, are attentive to distributors’ needs, and are supportive of the distribution channel in general. However, many say there is still room for improvement.

Wayne Smith

“Small markets do hold a niche, but sometimes we’re lost in the mix with our manufacturers.”
Wayne Smith, Vice President/General Manager
Forklift Enterprises (Hobbs, NM)

Below, MHEDA distributors reflect on the building blocks necessary for a strong manufacturer-distributor relationship, the ways in which distributors and suppliers can work together to make each other’s jobs a little easier, and what manufacturers need to do in order to be assured of a distributor’s loyalty. Suppliers also give their perspective on these relationships.

The evidence indicates that the manufacturer-distributor relationship is strong among MHEDA members. With a little work, distributors believe it can be stronger yet. In pursuit of that aim, they identify top issues that are impacting the relationship. Taken together, manufacturers who focus on these concerns can become Best-In-Class Suppliers.

Quality Products at Competitive Prices
For most distributors, a quality product is an absolute necessity—the one element of the relationship that goes without saying. A Best-In-Class Supplier offers a best-in-class product, plain and simple. As one distributor mentions, “Manufacturers who continue finding what the newest, hottest things are and are able to make them work are the ones who drive our business.”

At Gray Lift (Fresno, CA), competitive pricing on quality products is a hot-button issue. “The marketplace is so competitive, and it’s only going to get more so,” says John Waugh Jr., president and general manager. “Manufacturers must keep up with the latest designs and continue to provide us with the tools to take their products to market. It’s going to be a challenge for both of us.”

Victor Perelmuter

“Be a partner on whom you can count. Keeping commitments on quality and delivery are paramount.”
Victor Perelmuter, President
Siggins Company (North Kansas City, MO)

Echoing that perspective is Dan Powers, vice president of Dunn/Powers Caster Corp. (Phoenix, AZ), who adds, “Our market is price-driven, so manufacturers need to continue to develop ways to stay competitive with price and yet still offer the same quality.”

On-Time Delivery
Part of that emphasis on quality is the practice of delivering what you promise. It seems like a basic business tenet, but more distributors cite concerns about this aspect of the distributor-manufacturer relationship than any other. When it comes to prompt, accurate delivery, distributors say some manufacturers struggle. A Best-In-Class Supplier delivers the right product at the right time.

Donald Betman, president of W&H Systems (Carlstadt, NJ), says manufacturers can’t sacrifice quality in their effort to get product delivered on schedule. “I need a quality product at a good price on time. Most important, on time,” he says. “If they promise it on a certain day, that’s the day I need it.”

The main reason that timeliness is so important, says Rich Mattern, president, Raymond Handling Solutions (Santa Fe Springs, CA), is because customers have schedules to adhere to as well. “I believe in dependability and timeliness. Manufacturers have to do what they say they’re going to do in the timeframe they promise so we can better serve the end-users and help them meet their schedules.”

Gary Ashley

“Manufacturers should be empathetic with the distributors. We try to align ourselves with suppliers who are willing to put themselves in our shoes and see what we’re up against.”
Gary Ashley, President
Conveyors & Drives (Atlanta, GA)

Randy Matthews, president and CEO of Preferred Material Handling (Oklahoma City, OK), takes it a step further. “I’m not sure the manufacturer always fully understands customer delivery schedules. At times, manufacturers are casual about delivery,” he says. “As we all know, there are many options available to the end-user; in today’s arena, it is a buyer’s market. When a customer is interested in your product but delivery is 16 to 20 weeks out, they will exercise their options.”

It isn’t just late deliveries that cause problems. Inaccuracies in orders are equally frustrating for distributors. “We struggle every day with materials not being shipped to us correctly,” says Brian Reaves, president, Integrated Warehouse Systems (Woodridge, IL). “That directly affects the timing of how we get paid and, therefore, the timing of how we pay our vendors. Their mistakes justify when we get paid and when they get paid.”

Understand the Distribution Business
Beyond the basics, distributors say that manufacturers and suppliers need to learn certain characteristics of a distributor’s business. What’s important to the distributor, they say, often isn’t as important to the manufacturer, and vice versa. Best-In-Class Suppliers realize that gap and understand the other side’s perspective, which goes a long way to maintaining a healthy relationship.

Richard Vandemark, president, VanLyn (Memphis, TN), says, “The most important thing a manufacturer can do is understand my business. A lot of times, it’s hard for them to see and understand the problems that we face with cash flow, personnel, and employee and customer loyalty,” he says. However, he is quick to qualify that by adding, “It’s not necessarily their fault, but working for a major U.S. corporation is not the same as running a small business.”

John Faulkner

“As industries consolidate, companies find their way to national account status and we don’t have the opportunities with customers that we once did.”
John Faulkner, President
FMH Material Handling Solutions
(Denver, CO)

Warner Specialty Products (Cheshire, CT) President Jack Norton agrees. “It’s hard for manufacturers to understand the customer themselves because they’re not always connected with the customer,” he says. That’s why it’s important for suppliers to defer to the distributor for getting through to the end-user. “Some manufacturers don’t understand the customer’s needs or what a certain customer wants from a product. They just have it manufactured a certain way and they’re not going to change it. But the ones we have our better relationships with come along with us to the customer site and see what’s needed.”

When Mark Juelich, director of American Warehouse Systems (Minneapolis, MN), talks to new suppliers, he stresses that his company is a niche company, something that they don’t always grasp right away because they’re not used to hearing it. “Most companies in our industry are local or regional and sell their products near where they’re located,” he says. “We’re on a global scale and sell very little in our local market.”

Even a general comprehension of the distribution business model would go a long way toward avoiding certain misunderstandings, says Gary Ashley, president, Conveyors & Drives (Atlanta, GA). “They need to realize that they’re selling to just a few customers—the distributors. But we have literally thousands of customers. If we don’t perform, or if we don’t have the right products or pricing, our customers can always go somewhere else. But as a distributor, we still call back our supplier tomorrow even if we lose a job. I’m not sure many manufacturers appreciate that.”

Top 10 Factors Impacting The D-M Relationship
  1. On-time, accurate delivery
2. Margins and profitability
3. Loyalty
4. Understanding the distributor’s business model
5. Open communication and partnership
6. Understanding of the local market
7. Selling direct
8. Quality of product
9. Promotion of product lines
10. Impact of national accounts

Understand the Local Market
Part of the key to understanding a distributor’s business is knowing who its customers are. Doing that requires the manufacturer to get to know each distributor’s local market. It’s in their best interest to do so, since distributors are a manufacturer’s best conduit to a specific local territory. To be Best-In-Class, do your homework.

John Waugh Jr.

“If forklift sales decline as predicted, the marketplace will get much more competitive. Our suppliers must provide us with the tools to compete.”
John Waugh Jr., President/General Manager
Gray Lift (Fresno, CA)

Independent Lift Truck of Alaska (Anchorage, AK) covers the entire state of Alaska, and President Wayne Dick says his manufacturers should take that into consideration when making some of their mandates. “It takes six hours for us to drive to Fairbanks, where we have a key account, but the manufacturer has a mandatory service time of four hours,” says Dick, who says his technicians even have to do a lot of flying to cover his territory. “If something breaks down in Dutch Harbor, that’s about 800 miles away and a $1,000 plane ticket. I’m not sure the manufacturer understands that.”

Wayne Smith, vice president and general manager of Forklift Enterprises (Hobbs, NM), has a similar issue to deal with. Hobbs, a town of roughly 30,000 people in the southeastern corner of New Mexico, is not near a large urban center. “Even though we’re not in a metro area, our immediate market is booming and expecting major population growth in the next three years,” Smith says. “Many of our manufacturers overlook us because they’re focused on major markets, but I guarantee that our profit margins exceed those for companies in larger areas.”

National Accounts
Some distributors are disenchanted with what one refers to as a “more corporate purchasing decision.” As manufacturers continue to embrace national account programs, distributors are beginning to feel left out of the loop. A Best-In-Class Supplier will take these feelings into consideration when managing its national account programs.

Randy Matthews

“Manufacturers need to put themselves in the dealer’s shoes and better understand what a dealer faces.”
Randy Matthews, President/CEO
Preferred Material Handling (Oklahoma City, OK)

As manufacturers get larger and do more direct sales, they are becoming less likely to treat distributors the way they once did, according to Colleen Wright, vice president of finance and administration, Quality Forklift Sales & Service (Shakopee, MN). “We’d like for our vendors to remember that we’re an individual customer, too, and to focus on how they treat us. Hopefully they’ll continue to maintain their customer service because we’re finding we tend to lose our individuality as a customer.” While she does view her suppliers as partners, she says it’s a lesson she pays attention to when dealing with her own customers. “When we service our own small customers, it’s important to remember that each has individual needs and look at the customer base that your customer is dealing with.”

A distributor who wished to remain unnamed has a more pointed opinion. “If distributors aren’t careful, manufacturers will suck up the customer base through national account programs. It’s going to come back and rear its ugly head at some point,” he says. This distributor also points to the not-always-apparent costs for distributors, who often are the ones who walk the deals through with customers even though the manufacturer often quotes a heavily discounted price. “The dealers themselves incur the same transaction cost as they would if they did the deal themselves. It’s getting out of control.”

Don Mays

“The biggest issue is still loyalty. Having multiple distributors in one area just lowers the margin and makes people not try to sell that manufacturer’s products.”
Don Mays, President
Craft Equipment (Tampa, FL)

Other distributors, such as John Faulkner, president, FMH Material Handling Solutions (Denver, CO), have resigned themselves to the national account situation. “The traditional material handling dealer is becoming more of a service point for the manufacturer based on their national account programs,” Faulkner says. “Our business has changed dramatically in that we don’t sell near the amount of prime product that we once sold because the manufacturers sell it through their national account programs.” Faulkner points to consolidation as one of the prime reasons. “Our prime-product sales are being erod-ed as more and more customers consolidate and they become eligible to become national accounts. I don’t have an issue with that; it’s just a fact of life.”

Demonstrate Loyalty
Related to the issue of national accounts is continued loyalty to the distribution channel. A Best-In-Class Supplier demonstrates the value it places on distribution by not selling in competition with distributors and by not selling through mega-retailers whose deep discounts reduce or eliminate distributors’ profit margins.

Multiple distributors say manufacturers need to realize that the distributor, not the end-user, is the customer and should therefore be treated like one. “We are the ones who are re-selling the product,” says Victor Perelmuter, president of Siggins Company (North Kansas City, MO).

Marilyn Tang

“Manufacturers ought to pick just one good distributor in a territory rather than having everyone in the world sell their product.”
Marilyn Tang, President
Certified Handling Systems (Salt Lake City, UT)

Marilyn Tang, president of Certified Material Handling (Salt Lake City, UT), is another who feels this way. She says, “We’re out there in the trenches trying to sell their product. Manufacturers should realize the good distributors that are doing good business and work more closely with those distributors. Some factories sell to just about anybody.” She suggests communicating better and offering more discounts as ways that manufacturers could show more loyalty to select distributors.

Tang’s sentiments are echoed by Don Mays, president, Craft Equipment Company (Tampa, FL), who says, “Manufacturers have to be loyal to their distributors. They should limit their distribution and support the distributors they have, versus adding distributors just to increase volume.” Mays says that an overabundance of distributors in one area forces distributors to sell on price and diminishes profit margins.

Help Distributor Profitability
There’s that phrase again—“profit margins.” Many distributors pointed to the downward margin pressure in recent years as their top concern. They say manufacturers are more concerned about market share at any price, which directly impacts a distributor’s profit structure and cash flow. It’s up to a Best-In-Class Supplier to deal with these profitability concerns.

George Pimpl

“A lot of dealerships cry wolf when they shouldn’t; they’re making pretty good profit already. It’s sometimes unfair to make more profit than the supplier on the same deal.”
George Pimpl, President
Reno Forklift (Reno, NV)

ConveyorMan (Memphis, TN) President John Williams is one distributor who stresses the importance of margins. “Some manufacturers need to have a better understanding of profitability,” he says. “They sometimes do things in a way that hurts our profitability and then don’t understand why we don’t give them as much business.” He sometimes feels as if suppliers aren’t sensitive enough to a dealer’s needs. “They should realize that if it’s a problem for us, then it’s eventually going to be a problem for them.”

“We don’t need to get every deal,” says George Pimpl, president of Reno Forklift (Reno, NV). “The way I look at it, we’re not going to sacrifice our customer-motivated service goals to offer the lowest price. I’d rather lose a customer than go with that Wal-Mart philosophy.” Pimpl says the biggest problem with the material handling industry today that people still don’t get is that distributors require a minimum profit structure. Deals below that shouldn’t get made. “If you can’t make money, then you might as well close your doors.” However, Pimpl is also quick to blame his fellow distributors. “A lot of dealerships will cry wolf when they shouldn’t. If the factory’s only making 10 percent or 15 percent on the equipment, but the dealership is trying to get 20 percent, then that’s unfair.”

Richard Vandemark

“The most important thing a manufacturer can do is understand my business and the problems we face as a distributor.”
Richard Vandemark, President
VanLyn (Memphis, TN)

Michael Talis, president of Ludlow Sales & Service (Columbus, OH), also understands where the manufacturers’ mentality comes from. “The pressures on them are much greater than they were ten years ago,” he says, pointing to the high costs of steel and maintaining inventory. However, that doesn’t mean he’s thrilled with it. “The days of high markups are long gone, as well as high profits for their end, but they need to not view it as a one-way street. This is a partnership! We need to develop strategies to make it successful for both of us,” he says.

It’s a Partnership
Of course, communication is the key to any successful relationship. Both sides must be willing and able to let the other know what it is thinking, how it is feeling and what it expects from the other. The first step is realizing that it is truly a partnership.

For Bob Bond, president of Tri-Lift NC (Greensboro, NC), this is a critical point. “The most important thing manufacturers need to know is that the distributor is an independent entity looking to survive in a marketplace that requires quick decisions, flexibility, the ability to make money, the ability to attract new customers, and a product that’s competitive and cutting-edge in comparison to the other products on the market,” he says. “We want to do business with material handling manufacturers who really want to partner with the distribution network, not just dictate what needs to be done.”

Partnership. That’s what it’s all about.

How To Be A Best-In-Class Supplier

  • Give distributors access to national accounts.
• Understand distributors’ local markets.
• Stop selling direct.
• Understand distributors’ business model and profit structure.
• Help distributors promote your product.
• Offer competitive pricing.
• Deliver product when promised.
• Exchange both good news and bad news freely.
• Handle warranty claims quickly.
• Train distributors on new technology.
• Focus on distributor profitability rather than market share.
• Remain loyal to distributors who sell your product.
• Don’t sacrifice quality for price.

Material Handling Equipment Distributors Association

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