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October 2003

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    In the news

“Supply Chain” or “Demand Chain?”
Distributors and Manufacturers as Partners

by George W. Lorenz

I just finished reading an article titled, “It was the worst of times … ” by Jack Keough. It gave the results of the 57th Annual Survey of Distributor Operations, compiled by “Industrial Distribution” magazine.

I found two statistics in the survey very worrisome. When asked how suppliers’ loyalty to distributors has changed compared to five years ago, 63 percent of the respondents said suppliers’ loyalty to distributors had “worsened somewhat or significantly.” Only 20 percent of the respondents said the relationship had improved.
When distributors were asked how many of their manufacturers could be considered true partners, 63 percent said they considered fewer than five as true partners. And when distributors were asked about their loyalty to manufacturers, 47 percent said it had worsened.

I looked up the words partner and partnership in The American Heritage Dictionary, and this is what I found. Partner is defined as two parties who cooperate in a venture, occupation or challenge, each having equal status and a certain independence, but also implicit or formal obligation to the other. Partnership is defined as the state of being a partner; an association of partners.

Do distributors and manufacturers really have a partnership? Mark Dancer, vice president of Pembroke Consulting, a company that studies the distribution channel, stated in the article that the friction indicated in the survey has always been in place. 
“Distributors equate partnership with protection of their territories,” he said.
 
Dancer said the best way for both groups to work together is to focus on what’s best for the customer (not necessarily the company’s own business), examine ways to improve service levels and take costs out of the supply chain.

This reminds me of two quotes made by Walt Kelly’s comical character, Pogo, who said, “We are confronted with insurmountable opportunities” and “We have met the enemy and they are us!”

Business can be challenging even when everything is in line and working well.
Why do we find ourselves losing ground and the distributor and manufacturers’ relationship being called tenuous and not improving? Is it that we have lost our customer focus?

In some circles, the term “supply chain” is being replaced with the term “demand chain.” This view is not just a subtle difference in semantics. The customer establishes what products and services they are willing to purchase. It is up to the manufacturer and distributor to recognize these needs and fill them. The strategic plans of distributors and manufacturers must not only be customer-focused, but also include input from each other as to what each party will be responsible for achieving and how they will hold each other accountable. We all must have the same objective—a satisfied customer. The rest of our success will come as a result of reaching that goal.
This declining relationship between distribution and manufacturing must be reversed. As Pogo would say, “Now is the time for all good men to come to.” 


  George W. Lorenz is the 2003 president of the National Sash & Door George Lorenz Jobbers Association, based in New Port Richey, Fla., and the co-chairperson of the board and ESOP trustee for Western Building Products Inc. of Milwaukee.

 


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