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March 2003

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The Big Question
Just Whose Supply Chain is It Anyway?
by George W. Lorenz

Manufacturers, distributors, dealers and builders are struggling with this question and find the answer to be very elusive. The changing landscape in the way millwork gets to the end user requires each of us in distribution to examine how we look at and define our businesses.

Major Retail Chains
Major retail chains want the ability to deal directly with the manufacturer to gain the benefit of simplifying purchasing and logistics. The necessary electronic systems, levels of service and total commitment have led some manufacturers to provide the entire order fulfillment process themselves. They accomplish it by having their own distribution facilities that focus on each customerís specific requirements. Traditional distributors are asked to step aside and redirect their efforts to provide the non-stock and special order needs of the stores located in their markets. As a result, some distributors have decided to exit that particular business and concentrate on other distribution opportunities that better fit what they have to offer.

The Dealerís Relationship
Some dealers are working to develop a direct relationship with the manufacturer while keeping their local distributors available to meet needs the manufacturer is unable or unwilling to provide. This situation is often very awkward and causes other problems that tend to erode relationships both up and down the supply chain. There is no good answer to this arrangement.

Large-volume builders look to leverage their size to encourage changes in the current, more 
traditional methods of purchasing and delivery. They seek to lower costs and gain more efficient and effective building processes. Manufacturers are working on developing various sales approaches to answer this request. Strategic alliances among traditional distributors and manufacturers have begun to make progress in meeting the needs of some of the builders in this 
category.

The Big Builder
The pressure to lower the cost of doing business has never been greater. Looking to the supply chain for cost reductions seems to be everyoneís priority. What can be eliminated? What can best be done by others? What should continue to be done as it is now? 

In todayís environment, the best answer is not to weaken or destroy the current supply chain, but to redesign it where appropriate. The speed of change no longer allows any of us to sit in the wings 
and wait.

Distributors have often been referred to as the middleman. Just eliminate the middleman and your costs will be reduced. This is not necessarily true. Often these costs are just transferred and the new process may or may not be as efficient or as cost-effective as what it replaced. It has been said that perception is reality. How does the rest of the supply chain perceive the value provided by the distributor? It is the distributorís responsibility to make certain that he is bringing real value to the process. Then distributors must educate their customers to understand what value they actually provide, so customers are willing to pay distributors to provide it.

Examine Your Marketís Needs
You as a distributor must examine the needs in each segment of your particular market. This will help you discover the answer as to how to move forward in establishing a successful business model. Focus on the customer who finds value in what you are capable of providing. If he is unwilling to pay for what you do, reexamine your offering; perhaps you are doing the wrong things. 

Examine whether you provide the products and services that are required to even be considered as a viable source for millwork in your market. Think of this exercise as continuing to reinvent your business. Those distributors, who have well-thought-out strategic plans and have made a commitment to implement them, will continue to prosper.

The Answer
So, ďJust whose supply chain is it anyway?Ē The answer is, the supply chain belongs to and is dictated by the market. We all participate, but the constantly changing market will always demand that we be prepared to adjust to meet its specific needs. There is a place for the distributor in the current supply chain. Itís up to each one of us to find our place in the supply chain and continue to offer what the market considers important. 

 

 


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