Besides your staff, your relationships with distributors are arguably the most critical to the success of your business. They get you the products you need when you need them and keep you in touch with the forest beyond your own thicket of trees. Most will bend over backwards to keep you happy. You’re the customer and the customer is king. But you, your majesty, can also drive your distributor nuts. Certain actions routinely strain the relationship and ultimately add to supply chain costs. Many operators do treat their distributors like partners and strive to understand their business but many more, well, don’t. This story is for you.
Their number 1 gripe: operators who treat distributors like lending institutions.
“We work on razor-thin margins—1 percent to 2 percent is considered pretty good. In this economy, in particular, we can’t afford to keep extending credit and never get paid,” says one southeast distribution executive. “We want your business and we’ll do what we can to reach financial terms that work for both of us, but we can’t keep delivering without getting paid. It just doesn’t work that way.”
Not holding up your end of the bargain by making excuses, dodging calls, avoiding your DSR and/or badgering him or her for more time means the DSR, the sales manager and the credit manager, at a minimum, must devote extra time and resources trying to get you to pay what’s owed. And in many distribution companies, DSRs don’t get their commissions until the company gets paid.
“Almost everyone has times when they have trouble making payments,” says Dave Miesse, a former star DSR who now heads up the Association for Distributor Sales Representatives and co-hosts the DSR Live podcasts. “Most distributors try to be flexible for good customers, but when they start feeling abused it becomes a problem. And it puts the DSR in a really tough spot when they have to beg customers for checks every week or put them on credit hold. If you know you’re going to have trouble making a payment, it’s far better to man up and contact the credit manager directly to work something out.”
Other reasons your distributor hates you:
Ordering the wrong product or forgetting to add needed items to the order causes a lot of headaches and extra cost and makes your distributor hate you. “I know some DSRs who deliver more to some customers in their cars than on the truck,” Miesse says, referring to emergency deliveries made to cover mistakes or forgotten items. While he largely blames DSRs in such cases for not training customers to order correctly, he notes, “Operators who don’t know how to order right and don’t effectively manage their inventory do cause a lot of headaches. Returns and adjustments are very costly for the distributor. The driver has to do extra handling of the product to bring it back—and they get paid on cases delivered, not cases returned. Returned cases often get dented and can’t be re-sold and/or there’s labor involved to get them back into inventory and have invoices adjusted.”
Smart operators, he says, sit down with their DSRs once a month and go over their order guide, making sure it’s kept up-to-date with new items added and old items removed to reduce the chance of mistakes being made. “You want only the exact items you’re currently buying on that main guide. If there are options, it’s inevitable that the wrong item will be ordered. Have back-up specs, yes, but not on your primary order guide.”
Many operators’ total lack of understanding of how the distribution process works, what the cost structures are and how distributors make money is another source of frustration. Plus the total lack of understanding that this all makes your distributor hate you. “For some, their knowledge of the industry really stops at their back door,” says one Midwest distribution exec. “They have no clue or regard for how the supply chain works or for the many links in the chain that impact distributor profitability. They want the lowest price and the most service, but don’t recognize the costs involved in providing that. Those who do work as true partners with their distributors realize that both sides have to be profitable. A distributor making no profit goes out of business, and that’s not good for either party.”
Distributors suggest operators open up to becoming educated about distributor operations, about how the warehouse slotting and routing systems work, about redistribution and the opportunities it affords, about brokers and manufacturer representative and how they work.
What's your price on...?
The age-old operator practice of cherry picking, or excessive price shopping, endures in some markets—where distributors hate you—albeit less than in days gone by, Miesse says. “Order minimums have risen to the point that most operators have had to narrow their supplier base down to one or two in order to be able to meet those minimums,” he says. “But you still have some who play one distributor off another on key items every week. They don’t get that you don’t make your money on the buy, you make it on the sell. The $50 they may save per week by spending an hour price shopping is nothing in the scheme of things. Better to establish a relationship based on trust in a primary distributor who will give you a fair deal over the long haul versus nickel and diming them on a case of this and a case of that.”
Not watching the markets
Unless you’re a chain with contracted pricing, prices will fluctuate. That’s particularly true with commodities, so before ranting and accusing your distributor of trying to rip you off—and making him hate you—take a look at what’s going on in the commodity markets. “The truckload that the distributor bought three weeks ago at a lower price now has to be replenished at a higher market price. He has to pass that price increase on,” Miesse says. “It doesn’t mean he’s trying to rip you off.”