Friday, May 9, 2014

Bite your tongue for saying “free”….

I just had a conversation with an old friend; somebody I worked with back in the 70s.  We were both young Turks on the training program of a major manufacturer. Armed with freshly minted engineering degrees and lots of ambition, we felt we were poster children for “manifest destiny” or at least something like that.  Early on we kept in contact, but then life happened.  And now, after all these years, thanks to the good folks at LinkedIn and unusual last names, we reconnected.

Did someone say FREE SUPPORT?
It turns out we both ended up in distribution.  I asked him to tell me about his business.   Somewhere midway through the description he said, “We are a high service distributor in our market.  We have engineers, highly trained sales people and we provide tons of free support for our customers…”

With mass quantities Starbucks caffeine already surging through my veins, my blood pressure did a flip-flop.  My muscles tightened, the fight or flight instinct kicked, my throat tightened.  I asked if he had seen the title of my new book.  Upon hearing his response to the negative, I gave him a short book review.  Here’s what I said…

For distributors who service the manufacturing and Institutional sector, the landscape has changed dramatically (and continues to change) since we were young pups and the current distribution model was evolving.   Customer companies have downsized, right sized and re-engineered their organizations to run without people.  Over time we distributors have filled the void by providing everything from training and technical support to kitting and JIT inventory services.

In the old days, the gross margin generated from the sale covered the costs of all our “free service.” But forces of technologies have done three things:
1) driven the price of everything down
2) increased the complexity of even low end products
3) provided products that last much longer.

At the same time, the cost of people (60% of the distributor’s budget) has escalated.  Brand new engineers out of school get a median salary of $60,000 (if we use 1977 dollars when we started as a benchmark, engineer salaries have grown 25-30% more than the economy), and they still need to go through the same lengthy training programs we did to be effective.  Exacerbating the situation, the distributor’s supply partners have “pared down and dumbed down” their sales effort relying on distributors to pick up the slack.

This puts our world as distributors on a collision course with catastrophe.

This is not a “how to” book; my experience dictates every
distributor needs to do things just a little differently.  Instead it is a “why you need to change” book; a manifesto.  Like the disheveled and bearded voices from the wilderness before me, I felt compelled to compile my thoughts (and broadcast them to the world).  If you are part of the knowledge-based channel, it’s an easy read.  The kind of book you can pretty much digest on the Delta Flight between Orlando and Orange County.  What’s more, the nice people at Amazon (who may or may not want to put distributors out of business,) will give you a discount on a copy.

Oops, long winded again. I guess it comes from early morning meetings and too much caffeine.

I hope he reads the book. I am pretty sure he will read this blog.  I hope all is well down south.

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