The Distributor Channel

Yesterday, a new manufacturer asked me a straightforward question, “Why should I use a distributor?”  He bore no malice to the world of wholesale distribution, but, as he contemplated the company's future path to the market, he righteously wondered about the whole distributor model.  Clearly, the question demanded an answer.  Fortunately, there are a lot of answers.  The Old Answers There are a ton of old-school distributor justifications which are still tossed out.   For instance, I could have gone into the finances of the whole distributor thing.   Distributors pay their bills and most pay them on time.    This can be huge; however, in a world moving toward corporate credit cards and other financial instruments, the credit subject is getting a little worn out. Local inventory used to be a big deal.  Last week I blogged on the changing role of inventory in a world crowded with next day shipping capabilities.  While I still believe inventory is important, for this m

Over the years I have heard some pretty amazing things said about distributor inventories.   Let me share a few of these: A peddler can’t sell from an empty wagon and a distributor can’t sell without a full warehouse. It’s the distributor’s job to provide local inventory. If the distributor doesn’t stock your product and lots of it, you’ll never get its full commitment. We want distributors to prove their commitment to our company by placing a large stock order up front. The distributor’s stock provides a margin of error for logistics problems at its suppliers. While all of these probably made sense back in the day, those days are finito, over, dead and gone.  Or at least they are for the knowledge-based distributor.  Astonishingly, I still hear most of these words of wisdom bantered about; mostly by the sales teams of distributor supply partners.  What’s really bizarre is most of these folks never took the time to think seriously about their comments. Let’s shoot

It’s Thursday afternoon, I’m on the beach in Florida with my friends, and I’m energized.   Let me share… I just finished spending the afternoon with attendees of the Association of High Technology Distribution spring meeting where the topic of the day was driving more value from your ERP system.  But let me digress for a moment… During the course of the last couple of downturns, analytics have gone from the growth tool of a few progressive distributors with a technology bent, to a “must have” instrument for longer range survival. To be clear on this survival thing; I’m not saying lack of analytics will put you out of business today, next year or even over the next five, but I do believe companies with analytics are getting more sales during this year’s downturn.  They are also capturing customer “wallet share” today, which will grow when economic winds blow in a more favorable direction.  They are more productive in gross margin.  They are likely finding it easier to d