STAFDA STATE OF THE INDUSTRY – Jones: Decades Later The Distributor / Manufacturer Relationship Still Has Problems

John Wolz

Marshall Jones took Specialty Tools & Fasteners Distributors members through the 29 years of “State of the Industry” speeches and found the manufacturer/distributor relationship is a consistent industry problem.
Jones, the 2005 STAFDA president and son of 1982 president Dave Jones, noted that growing up in Marco Supply Co. in Roanoke, VA, made him aware of the issue.
“Being part of a family business gives you the opportunity for a different kind of dinner table conversation,” he noted. One regular topic was the relationship between manufacturers and distributors. Jones acknowledged he knew little at the time. “From the occasional chance to go to a STAFDA convention, I knew manufacturers threw great parties. I”m glad that hasn”t changed over the years.”
When he went to work at the family distributorship he learned “manufacturers were also good for a pizza once in a while for those of us in the warehouse.”
But as he rose in the distributorship, manufacturers became important as “the ones you blamed when a customer didn”t get his material on time.”
Jones recalled a college professor pronouncing the manufacturer/distributor relationship as “terrible.”
Jones noted that in 1984 STAFDA president John Philipps described the “State of the Industry” as having a “lack of communication.” Ten years later Rob Culgin quoted a survey reporting there has “never been a time where the manufacturer/distributor relationship has been more contentious.”
This summer Philipps told Jones the relationship has “gotten worse” since 1984.
Factors adding stress to the relationship over the years include manufacturers offering broader product lines and wanting one-stop-shopping. Existing suppliers feel jilted.
“A new reality is many of the manufacturers in our association manufacture very little,” Jones observed. “With the speed and low costs associated with producing in China or other foreign countries they have become “brand brokers.””
These manufacturers focus on marketing and product development instead of production. “This fuels the widening breadth in their lines because they don”t have many of the hurdles they once faced such as tooling costs to produce a new category of product.”
Jones also sees “a shift of power from the manufacturer to the distributor” as a tension.
“Prior to the 1990s, most often the manufacturer wrote the agreements, set the policies and told us what we had to stock,” Jones recalled. “For the most part the distributor went along with them.”
Excess production capacity and the Home Depot changed that, Jones suggested. “Home Depot basically rewrote the book” and “now even the small independent distributor takes advantage of the shift.”
Back then there was a “long courtship with plenty of hoops to jump through followed by a large stocking order,” Jones reminded the audience. “Today one of our inside salespeople can usually get us set up using the manufacturer”s customer service department and order just one item to be direct shipped to our customer. All this can be done within an hour,” Jones observed. “Products from manufacturers with stricter policies can be sourced through national wholesalers.”
Manufacturers” Changes
“The swing in power has forced the manufacturer to react over the last 15 years with new programs advertised as advantageous to the distributor, but perhaps designed to wrestle back some control,” Jones suggested. The first was vendor managed inventory which was sold as a way to reduce inventory investment. “I believe the major purpose of it was to put stocking control back in manufacturer”s hands,” Jones added.
Another change is the “pull through” end user work “designed to wrestle specification control from the distributor.” And “the mother of all programs designed to rebalance the relationship is the collection of point-of-sales information. The customers our people have worked to develop are the most important assets we possess. Selling them for a couple of points deeply concerns me.”
Jones suggested banning the term “partnering. What partnering really means is for manufacturers to wait to be paid until the distributor has been paid. I don”t see those terms on any of my vendor”s invoices. Partnering would be taking product back “just because.””
Partnering?
In 1992 STAFDA president Mike Nordberg mentioned Home Depot was asking suppliers to “work as partners.”
“Today when I hear a vendor describe their relationship with the Home Depot I seldom hear glowing remarks. Instead I am generally told, “We really enjoy dealing with STAFDA distributors much more than the big boxes.” That comment tends to worry me because I assume it just means we pay more and receive less than the Home Depot,” Jones surmised.
The bottom line is I don”t believe either the distributor or manufacturer really wants to be partners with each other.
Jones recalled his father”s 1982 speech, which noted “our jobs are different. Our functions are different. Our needs are different. What then can we do to get together?”
Jones recommended staring by “being open with one another so that all of us know where we stand” and communicate. Act as supplier and customer.
“While preparing this speech I was struck by the number of times I”ve been told by our employees or other distributors how difficult some manufacturers are to deal with,” Jones reflected.
Jones urged exhibitors to ask distributors “Are we treating you the way you want to be treated?”
“Let me warn you, it may sound a lot like whining” but you “might find ways to strengthen your relationships.”
“I”m not advocating that manufacturers treat all their distributors the same,” Jones explained. Manufacturers should have “strategic customers” who “do the heavy lifting.”
“These distributors may stock other lines but do not support your direct competitors with the same fervor.” The favored distributors should get price differentiation, extra rep support and protection from direct competitors, Jones urged.
Ask what is the best way to make strategic customers “want to do business with me?”
Manufacturers should treat independent reps like an employee. “This is the only way the rep can then act as a true extension of the manufacturer and treat the distributor as a customer,” Jones explained. “Too often the rep has to treat the manufacturer as the customer.”
Jones recalled STAFDA president Rick Thomas” observation that distributors have evolved from the “middle man to the key man.”
That is how 80% of the original 50 STAFDA distributor members have survived or become parts of distributorships.
Survival has been based on “adaptability,” Jones suggested. Don Carlson, the 1988 STAFDA president, said, “distributors should always outperform the economy, our mix of products and customers gives us a flexibility that is almost unique among hard goods distributors.”
Jones cited relationships as the key for distributor success. Recalling an early sales job, Jones developed “a rapport with a group of prospects. They already had accounts with people who could supply the products I did. I simply took an interest in a small area of their product needs, or told them a joke, or brought them donuts to create a spark that ignited a relationship.”
Jones also credited distributors” “entrepreneurial spirit. “Regardless of the generation, there is a common bond among STAFDA distributors hard to replicate in national chains and my father described it in his speech: “I believe the state of our economy, the state of our industry, and the state of our companies pretty much reflect our state of mind. I believe our own ability to be creative and look for opportunities is more important than the economic environment in which we operate. The rewards and benefits will accrue to those who accumulate the facts, study the trends, exhibit fortitude, discipline and creativity and most of all exercise good judgment.” \ �2005 FastenerNews.com