The relationship between distributors and manufacturers can be complicated. It requires constant care, feeding and adaptation in a rapidly changing environment – and manufacturers may be damaging it by failing to recognize common pitfalls. Through years of experience working with both distributors and manufacturers, we’ve identified some simple ways to strengthen partnerships and identify missteps to avoid.
Understanding what your distributors need from the relationship is a critical piece of the puzzle. Manufacturers do many things to help distributors sell product and enhance the relationship. We’ve identified some common best practices distributors would like to see more of from manufacturers:
Maintain a Plan for Distribution
The best manufacturer-distributor relationships have clear rules of engagement from the get-go. These rules help establish expectations for the partnership and provide opportunities to identify situations that might require a different tack. These rules of engagement are not a static set of guidelines. Face it: Uncertainty is a constant part of the supply chain these days. Therefore, include considerations such as how business will be handled when exceptions arise and how the distributor will be compensated for these exceptions. Having these policies in place at the outset builds a foundation of trust in the partnership. The foundation of trust increases a distributor’s willingness to invest in growing the supplier’s product line.
Consistent, Predictable Fill Rates and Lead Times
When distributors can anticipate fill rates and lead times, they can keep their customers happy and their reputation golden. However, the supply chain disruption the industry is experiencing today has made consistency challenging. That’s not an excuse to not try. Instead, it’s an example of how critical communication is in the manufacturer-distributor relationship.
No one likes to deliver bad news, but communicate delays to your distributor partners as soon as you’re aware of them and be proactive. Suggest substitutes, if possible. Consider drop-shipping parts at your expense, especially if it’s a valued client. It’s the surprise factor that irritates distributors (and their customers) most, so do your part to eliminate or mitigate it.
Support for Technology
Today’s supply chains rely on technology more than ever before, which provides a whole new set of challenges and opportunities. You, as the manufacturer, can use this technology to help strengthen the relationship with your distributors by:
- Notifying distributors quickly of part number changes.
- Keeping inventory and pricing information up to date.
- Highlighing minimum buy requirements clearly, and have a tool for PO consolidation.
- Creating a portal for easy rebate and POS reporting.
- Providing clean and consistent product data that can be uploaded to their systems with minimal effort, especially for pricing updates, new items and new product groups.
The opportunities to build your relationship through technology are nearly boundless, but you don’t have to do them all. Identify which areas will most help your distributors by working with them directly to create a plan. Many manufacturers are discovering that their distributors are further along the digitization path that has been driven by their customers. Don’t be left behind.
Support Trade Associations
Trade associations have a lot more to offer manufacturers than a booth at a trade show. Participation allows manufacturer reps to get to know distributor partners at a more intimate level and learn about the pressures they’re facing. As industry disruption continues, association participation is the most cost effective way to learn about competitor practices in channel design, emerging business models, and digital integrations. Participating in a council or committee provides you with a voice to support continued channel vitality.
4 Worst Practices of Manufacturers
Strengthening a relationship is one thing; not souring it is another. Here are four things manufacturers should avoid doing to maintain a strong relationship with their distributors.
- The lack of a clear policy that removes uncertainty with channel partners. When building the plan for distribution, it’s easy to think that treating every partner the same is the best way to go. In reality, that can diminish the value of the partnership for the most committed and engaged distributors. A foundational principle in channel; design to to treat distributors based on their commitment to you, their supplier. In essence, think dating, engaged, or married. Not having a clear policy can also muddy the relationship waters by creating a communication void when you commit to another distributor. You likely have reasons, but your partners won’t know what they are if you don’t tell them. Manufacturers often struggle with identifying what the right number of distributors is for a territory. The goal is to give distributors enough confidence to invest in growing your lines because they know that the rug won’t be yanked from underneath them.
- Provide inconsistent website information and product data. Two-thirds of a buyer's journey is digital. This isn’t solely B2C. It also applies to B2B clients. In today’s world, buyers want information at the touch of a button, or you won’t be considered. Nothing frustrates buyers and distributors more than manufacturers who change part numbers regularly, then fail to update their websites. These kinds of blunders will end up costing both sides of the partnership.
- Don’t provide adequate support and training for sales reps. Many of the decisions and recommendations made on behalf of your company are done by new sales reps who might have little training. That’s on you, the manufacturer. If you’re not providing your sales reps with the adequate tools and knowledge to train a distributor’s sales team on your products, distributors won’t be able to adequately support your product line. Either employ quality and experienced sales reps who understand distribution already or take the time to create a robust training program for new sales. The progress on digital online learning platforms has made this a fixable challenge. Many manufacturers link incentives and rewards for online certifications, like launching a new product.
- Launch new products without the support to deliver them. We’ve all heard the question about a tree falling in the woods. But how about this one: If you introduce a new product and there’s no one to sell it, does it matter? Communicate with your channel partners BEFORE you introduce products to make sure those products get the attention needed to justify your R&D. But the need for support goes both ways. If your distributors are doing their jobs and creating demand for your new product, do you have the mechanisms in place to ramp up production to meet that demand? If you can’t and it results in long stockouts, your partners will view you as unreliable.
Relationships are valuable but challenging. They take time to create and foster, but they can be irreparably damaged in an instant. Take steps now to ensure that you’re strengthening – not weakening – your partnerships.
Mike Marks is the Founding Partner of the Indian River Consulting Group.
