Volume 46, Issue 7 - September 2007
In the news
by Carl Detering Jr., AMD immediate past president and president of The Detering Co. in Houston. Mr. Detering’s comments are solely his own and not necessarily those of this magazine.
Giving Distributors Insight into Working with Suppliers
A challenge to most of us involved in building material distribution, whether we are distributors or manufacturers, is the natural tension that exists among “partners” in the supply chain. Partnering is a concept frequently espoused and promoted in management articles but, from my experience, is easier said than done. The challenges of supplier/distributor relationships have recently been documented in a new book, Working at Cross Purposes: How Distributors and Manufacturers Can Manage Conflict Successfully, by Michael Marks, Tim Horan and Mike Emerson of the Indian River Consulting Group.
I recently had the opportunity to hear Michael Marks speak at the AMD Top Management Leadership Conference where he explained that it is natural for there to be channel conflict simply because distributors and manufacturers see things and approach circumstances from their own perspectives. Basically this boils down to, “How can I make the most money out of this relationship?” This does not create, however, a hopelessly cataclysmic relationship, but one that has to be managed.
There’s No Win-Win
The authors cite two “laws” that recurred consistently in their research for this book. The first is “The Law of Legitimate Cross-Purposes.” According to this law, win-win is dead, if it ever existed. Distributors and manufacturers have different ways of making money and sometimes these are in conflict. Inventory levels, training, pricing, investment in sales and marketing, product defects/warranties, territories and access to customers are all areas of potential conflict. It is in everyone’s best interest to have an understanding going into a relationship of what is expected and, once a conflict exists, to address the issue before it festers and becomes malignant.
The second law cited is (The Law of Perpetual Change). Another major cause of problems is that, just like in a marriage, stuff happens. We start off in the supplier/distributor relationship “in love” and then things change (i.e., the economy, the market, sales versus projections, products, competitors, consolidation, personnel, etc.). It is human nature to enjoy the positive changes and suffer through the negative ones, avoiding confrontation. As Mr. Marks points out, dealing with negative issues as they arise, even at the risk of short-term revenue, is preferable to the “major surgery” that may be required to fix a severely dysfunctional chain. My father used to say, “I am not spanking you for what you just did but for all those things that you did leading up to this.”
A Little Respect
I feel liberated by this tome on cross purposes. While I believe we need to treat our suppliers with the same respect and attention that we show our customers, I have always had this guilt about not understanding and fully embracing the concept of partnership. I feel that if we do a good job as distributors (and this can be very subjective), our manufacturers will probably be happy and the relationship will continue. Yet, sometimes there is this sneaking feeling that maybe there is something going on that I don’t know about and I will wake up and find someone else selling the product, or get a letter saying that I can’t sell the product.
Not giving in to paranoia, from my perspective, a strong distributor/manufacturer relationship can be developed and managed. The keys are a good understanding of expectations, mutual profitability, active two-way communication and honesty leading to trust and competency in doing the job that is expected (hopefully we know what that is). In essence: the Golden Rule. Additionally, don’t let the company get in a box by relying too much on one partner, and when the supplier/distributor relationship does not work for both, move on.
© Copyright 2007 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.