The supply chain has changed. Early in my sales career I learned the stock joke about sales people; they did the least and got the most. The same joke was told about the middleman wholesale distributor. Through the 1970s distributors were rewarded for whom they knew, for getting placement. This was because distributors could do the job (product placement and fulfillment) better than most manufacturers. Times were good; distributors were getting fat and happy.
During the 1980s the hint of change rustled through the distribution channel. Manufacturers started asking themselves, “Do we really need XYZ Distribution?” Most answered, “Yes.” But, some started making different decisions and went direct. I still remember when B&L went direct on the company for which I was a rep. I hated the >*#@%^*s. Times were changing and our country was becoming more national than regional. As the big box category busters came to life, distribution started to change. Distribution sacred cows went to the slaughterhouses because both manufacturers and users realized they had more choice than ever before.
As competition form offshore sources, global alliances and local partnering became apparent, many distributors were figuratively caught with their pants down. Many “fat and happy” distributors were enjoying the life, but not reinvesting in their business. Manufacturers were looking at world class manufacturing techniques but few distributors were doing the same in their area of the distribution channel. What does my little history lesson have to do with your life? Plenty!
Invest in Your Business
Over the last half decade I’ve researched and delivered alliance seminars to many distribution industry niches. The common thread I have seen is a general reluctance of distributors to invest in their own business. There are several reasons but it really doesn’t matter. In the end, if you can’t do it better than the manufacturer, who needs you? I know, you say, “What about loyalty?” Well, your manufacturers have been saying, “XYZ Distribution is not keeping up, we must not be important to them any more.” I realize I’m over simplifying a complex issue, and It’s not as complex as many want to make it.
Today, we are in the information age. I no longer have to get in my car and drive to the local library to get information. Now, I simply do a few magic clicks of my computer mouse and more information is available on my computer screen than is in hard copy at my library. I still need information, but I no longer need the library. Users still need what you sell, but do they need you? Think hard before you answer the question. If you are not adding value, they really do not need you.
My primary market as a keynote speaker is trade and professional associations. For associations wishing to survive, I continually tell them that they better deliver value. They must deliver more perceived value to each member than the members are spending on their membership. People have more choices than ever before. People will migrate to where they believe they are getting the best value for their money. As a distributor you must be clear on this idea.
Value in Your Eyes, or Theirs?
What are you doing to deliver value? Really now? Are you sure those services deliver value? How do you know they deliver value? Who have you asked? Have you discussed value with your manufacturers? How about with your customers? In “Developing Strategic Alliances” I included a value update form. If you have not yet had time to read the book, here is the basic idea: Write down on separate sheets of paper the value you are getting from the relationship with each of your manufacturers and then the value you think they are receiving from working with you. Have them do the same thing, then switch. What an eye opener. Use the same idea with each of your customers. Now you will get a glimpse of what your manufacturers and customers consider as valuable. Now you can really do something about adding value to your distribution channel.
Ed is the Founder and CEO of the 501(c)(3) non-profit public charity, Cigar PEG Philanthropy through Fun, and president at Rigsbee Research which conducts qualitative member ROI research and consulting for associations and societies. He has been called “the dynamite that broke up our log jam” by association executives—rarely politically correct and almost always provocative—and from a dozen years as a United States Soccer Federation referee, Ed calls it the way he sees it. Exceptional resources at www.rigsbee.com.