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Working With Distributor Management

A supplier’s rep knows your type.

Throughout my many years as a material handling manufacturer and a representative of manufacturers in the material handling industry, I’ve dealt with lots of material handling distributors. Material handling distributor management, I’ve noticed, tends to behave differently depending on how the person is related to the company.

Let me explain. Over the years, I have worked with a range of dealer management. I would break them down into three categories: Start- up Entrepreneur (SE), 2nd Generation Entrepreneur (2GE) and Hired Manager (HM). SEs are the visionary founders of companies, 2GEs are children of the SEs and HMs are executives brought in from outside to manage the company.

Startup Entrepreneurs
It has been my experience that an SE typically starts his or her business out of a vision and a passion for the business or out of necessity (they were fired, laid off or poorly managed by their former employer). The SE’s success initially relies on their sales ability and having good supplier support to launch their business. The successful SE has a strong customer focus, an excellent work ethic and relies on good relations with key suppliers. In the early years, the SE doesn’t have a lot of time for management because they are in “survival mode.”

SE     Starup Entrepreneur
2GE     Second-Generation Entrepreneur
HM     Hired Manager

Initially there can be a lot of turnover of the sales force as the SE doesn’t have the proper time to work with the new salespeople. This is where a supplier can be of help to the SE. By focusing some of their sales personnel time on product and sales training, they can help the SE with sales employee retention and performance. SEs should ask their key suppliers for help in all facets of their business while they are in this first stage of the business. A good supplier can be a free consultant for the SE and play an important role in an SE’s success. If the company is successful, it is most likely because the SE surrounded themselves with good people and was willing to listen and learn.

The SE values relationships with employees, suppliers and customers and will demonstrate a high degree of loyalty to those who help them get their business going. They are also quick to turn if they don’t get loyalty in return. The SE looks to the supplier to keep them competitive and supply a quality product that allows them to maintain a good relationship with their customer. They also look to their suppliers to keep up with new product trends in the industry.

Hired Managers can be tough on suppliers because there is not a relationship history. Suppliers may be replaced or the supplier may decide to find a new distributor if the Hired Manager is unreasonable.

As the SE’s business grows, they require less financial support from their suppliers but more sales and technical support to keep the business growing and to support the product in the field. In this phase, the SE should look to their supplier to have their sales and marketing team target new customers and create new opportunities for the SE.

Proper installation is critical to customer satisfaction as well. All too often, more attention is paid to getting the sale and less to getting it installed properly. The SE should use their suppliers to make sure their installation personnel are properly trained and encourage the supplier to visit installation sites to ensure that installations are done properly. This is a huge liability issue for SEs and needs to be taken seriously.

The SE typically has a high level of expectation for their suppliers to respond to their customers needs. For example, if an opportunity is presented that requires a fast delivery, the SE expects the manufacturer to perform. If there is a warranty problem, the SE expects the manufacturer to correct it quickly. If there is a problem getting a product installed, the SE expects fast and accurate technical support. They expect performance from their manufacturers because their customers expect it from them—that is how an SE builds a successful business. The ideal situation for the SE is to be associated with a manufacturer that is also in a growth mode. Then both are more likely to have that “make it happen” attitude.

As a supplier to an SE, I always enjoy watching the growth and being part of their success. Most manufacturers who are not in the number one position are always on the lookout for these SE opportunities because it provides them with a sales-focused company that will promote the manufacturer’s products. One success that comes to mind is an SE who built up a great company over the last 15 years. He now has three facilities in three states and to this day is still up at 5:30 a.m. and making sales calls every day. I have also seen a number of fast-growing manufacturing companies that have created great opportunities for SEs to start their businesses.

Startup Entrepreneurs should ask their key suppliers for help in all facets of their business in the early stages. A good supplier can be a free consultant and play an important role in a company’s success.

Second-Generation Entrepreneurs
When an SE finds a 2GE within the family, he or she is very fortunate. In many cases, these 2GEs have the ability to take the business to the next level. They may have an advanced business degree or have been brought up in the business and developed the experience. Often, these 2GEs are more computer-savvy, and they apply this knowledge to improve all facets of the business, such as marketing, customer relationship management, cash management, inventory and/or service.

Most of the time, these 2GEs have spent some time in the business before they take over and have had time to develop relationships with key suppliers as well. The relationships with some suppliers change as the vision of the 2GE is implemented. For example, it may be the intention of the 2GE to focus the company in a different segment of the industry. If so, how is that going to affect relationships with the current suppliers? It’s important that suppliers maintain open communication and listen to the 2GE for changes in direction or expectation from the distributor.

Sometimes suppliers find themselves in the middle of internal struggles between the SE and the 2GE during the transition. That can be a very tricky time for a supplier and very important that the supplier tread carefully through this transition period. If a supplier agrees with the 2GE, then it is important to communicate that support to the SE; conversely, the supplier should communicate when they disagree as well.

On the occasions when second-generation management or ownership fails, it is typically because they either are not qualified or don’t have as much experience to run the business as would an experienced Hired Manager. Often, the 2GE does not have the entrepreneurial desire like the founder, and therefore doesn’t exhibit the same traits that made the business successful to start.

Hired Managers
Hired Managers are brought in to manage the business. Their performance is measured in terms of goals and results. Therefore, a supplier needs to recognize that difference and assist the HM in achieving those results. For example, if the HM mandate is to increase sales, then a supplier may look at what kind of sales and marketing support they can offer to help them achieve that goal. If they need to increase profitability, perhaps the supplier can show them ways to sell at higher profit levels, reduce freight costs or turn inventory faster.

As the vision of the second-generation entrepreneur is implemented, suppliers should maintain open communication and listen for changes in direction or expectations from their distributors.

It’s also important that the SE provides a clear set of goals and expectations on how the business is to be managed. Selecting the correct style of management for the company is critical, as is giving the HM the decision-making responsibilities to achieve those goals. If SEs are not willing to support the HM, it can cause disruption in the business, morale problems and/or employee turnover. I have frequently seen the SE being drawn into the day-to-day operations and undermining the HM’s authority with em- ployees, suppliers and customers because their style of management does not fit the company.

Hired Managers can be tougher on suppliers than SEs because there is not a relationship history. In addition, HM’s must perform and, therefore, may put pressure on their suppliers to help achieve those goals. Suppliers who don’t respond may be replaced or the supplier may decide to find a new distributor if the HM is unreasonable. Thus, it is important that the supplier develops a relationship with the HM and that both parties communicate their expectations. For either a supplier to lose a large dealer or a dealer to lose a big supplier can have a negative effect on both businesses.

The SEs decision as to whether to turn over the management to a 2GE or HM is clearly a critical decision for the company. Sometimes the best solution is to hand the reins directly to the 2GE; sometimes the best decision is to hire a HM to mentor the 2GE until he or she is ready to successfully manage the business. Either way, an SE should search out opinions before making that decision, and their good suppliers can be a valuable source that should not be overlooked.

At the end of the day, the most important component for a strong distributor-manufacturer relationship in the material handling industry is performance by both parties.

Material Handling Equipment Distributors Association
Michael Boyle Meet the Author
Michael J. Boyle is an independent sales representative for MJ Boyle LLC, who currently represents Pentalift Equipment Corporation. He is based in Pittsburgh, Pennsylvania.

 

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