e-Vent The Value of Distribution:

Edition: April 2000 - Vol 8 Number 04
Article#: 281
Author: Repertoire

In their heart of hearts, very few supply chain players doubt the value of distribution. But manufacturers, providers and distributors themselves debate how effective distributors have been in moving market share, and whether the rep or the company behind him or her is the most important deciding factor. This monthís E-Vent shows the differences in opinion.

1. Conventional wisdom says that distributors have done a poor job in proving their value to manufacturers and customers. Do you agree? Why or why not?

Distributor Responses

  • The problem is often not proving value, but [identifying] distributor responsibilities in the supply chain. Customers and manufacturers have different interpretations, and thus expectations, of those responsibilities...

  • Yes. Distributors in general have made themselves unavailable to our manufacturing partners and as such have let this occur. When you put up roadblocks to business conversations, you invite manufacturers to find other ways to distribute their products.

  • ...My experience demonstrates that the art of selling is fast going the way of the mastadon and dodo bird at the distribution level.

  • Disagree. Distributor reps are and should be the driving force behind product movement. A good distribution rep should be controlling the business going into his or her accounts...

  • Manufacturer Responses

  • There are a great number of distributors who perform as nothing more than "order-takers." However, there are many who do steer business toward certain products....In terms of general logistical value, distributors save us a tremendous amount of money. They drastically cut down the number of POs we process, reduce the number of shipments we make, increase the average order we ship, and simplify our cash flow. However, even some of the larger distributors will try to utilize us as their order-taker. They place frequent, small orders that match their customerís order. In those circumstances, our efficiencies are greatly reduced.

  • Yes, distributors have done a poor job of showing their worth. Many facilities still request direct pricing. The service levels and pricing in some instances are not equivalent to what they can get direct. Because of this, facilities are unwilling to pay more just to have the product delivered by one company over another.

Other Responses

  • I disagree with this statement... Distributors have been the mainstay in keeping the medical industry supplied with products and information. E-commerce developments may change the role of the distributor from an order taker to a resource supplier of information that is continually flowing from the manufacturers to the customers in addition to product delivery....

2. Which of the following most impresses an end user customer about a distributor? Lowest price. Lines/products available. Sales/customer service responsiveness. Order fill rate. Order turnaround time. E-commerce availability.

Distributor Responses

  • Customers are greatly impressed by a combination of responsiveness from sales and customer service, order turn around time and fill rate. Pricing is not an issue if the goods and services are not available...

  • [In order of importance:] 1.) Lines/products available. 2.) Sales/customer service responsiveness. 3.) Order turnaround time. 4.) Order fill rate. 5.) E-commerce availability.

  • [In order:] 1.) Sales/customer service responsiveness. 2.) Order fill rate. 3.) Lines/products available. 4.) Lowest price. 5.) E-commerce availability.

  • Price talks but people walk if you do not have good customer service so that customers get accurate, truthful and helpful information...

  • There still is no substitute for good quality sales representation, customer service and delivering the right product at the right price in good condition plus being invoiced correctly.

  • Our customers are impressed by our moxy to go up against national companies and be just as competitive on price, better on service and our ability to respond -- positive or negative -- to a customer inquiry...

Manufacturer Responses

  • Order fill rate, turnaround time, customer service responsiveness.

  • The most important attribute of a good distributor is sales/customer service responsiveness. If a distributor is responsive to the customerís needs, they will be in a position to know what it important to each customer and ultimately be able to meet all their needs.

  • The three most important factors are price and service and fill rates. If they are strong on fill rates and service, then pricing is usually not an issue...

  • E-commerce availability... is the future for distributors. If not, the GPO/IDN industry will establish their own e-commerce systems.

Other Responses

  • [From a physician office]: Low prices are a #1 necessity. It is no longer optional to tolerate higher prices just because a salesman provides what he/she considers "added service". (We can change our own batteries.) Really good pricing is proactive, not reactive. Good prices donít creep up on the invoice after two orders....A broad product line is important, but a good line of quality, competitively priced generics is great. Specialty products will probably come from the specialty distributor anyway. Good prices without good turnaround time, correct orders the first time, easy to read invoices, and customer support are not good prices...

  • The number one thing that impresses an end user customer is responsiveness. We live in a society of immediate gratification. Those sales reps and customer service reps who respond the quickest, receive the order. Answering your voice mail messages and responding quickly will separate the top sellers from the rest.

3. Do you agree with this statement: "In the customerís eye, the most important differentiating factor between distributors is the quality of their sales reps." Why or why not?

Distributor Responses

  • The representation usually opens the door and keeps it open for the distributor... If the rep is doing his or her job properly, the customer service area should only be a last resort catchall.

  • Agreed, if sales rep can also include quality of distributor customer service. In other words, the most differentiating factor is the quality of the distributor service manifested by the two most important points of contact (I call them where we touch our customers): salesperson and customer service.

  • Absolutely. There are too damn many uneducated order takers out there.

  • I strongly agree. The medical industry demands service. I have seen so many times when a hospital or buying group has signed contracts with others but continues to call on the rep who really knows how to solve their problems...

Manufacturer Responses

  • I agree. The sales reps are the first impression a potential customer has of the distributor. No matter what the customer has read or heard about a distributor, if they donít believe in the repís ability, character and commitment, then you can forget about everything else.

  • No, because contracts and cost are driving todayís business decisions. The rep is still important but they have to have the contract and price too.

  • No, I donít agree. Todayís marketplace is looking for a distributor that has the infrastructure that can provide information and product on a timely basis....

  • Yes, a quality sales rep can be a tremendous asset to any distributor organization. Typically, it is the sales rep who is on their hands and knees preserving business during operational difficulties/problems. Without solid customer relationships via quality field representation, your business is always on the scale...at risk. A good sales rep minimizes your exposure to risk either through competitive threat or difficult times. All things being equal, a quality rep is the best tool for delivering value to any customer.

Other Responses

  • Yes, They are the people the customer deals with on a personal basis. If the rep is "bad," the company is bad. If their rep is "good," the perception is the distributor is "good."

  • Absolutely! If the minimum standards are to get the correct box from point A to their door -- in the agreed-upon time frame, at the price they expected, and in undamaged condition, then the variable is having a smiling solution walk through their door to find ways to make their life easier, or more pleasant.

4. What is the single most important way a distributor can help make manufacturers more efficient?

Distributor Responses

  • We have failed...to utilize the information stored in our systems. As a manufacturer grows in size and increases its scope of products, it must become [more] difficult to understand the demographics of your total market. On the manufacturersí side, the information slowly rolls uphill. Who knows more about a customerís buying patterns then a distributor?

  • From what manufacturers tell me, the number one thing they want is access to the distributor sales force for sales meetings and to mutually call on customers.

  • Distributors cannot help make manufacturers more efficient until they can promptly, correctly and at one time fill an order complete!...

  • By scheduling good sales calls with them, and keeping their word and their appointments. By keeping complaints specific and germane.

Manufacturer Responses

  • Consolidate their orders.

  • By making the manufacturer understand their value and role in their business.

  • Sell their product, not just take orders!

  • Provide accurate sales tracings on a timely basis.

  • Provide detailed demand projections by product to drive the manufacturing plan.

  • Inventory status reports.

  • Return phone calls within a week would be exceptional, and appreciated.

  • Know thy customer! Speak up! Stay current!

Other Responses

  • In a word, itís feedback. Manufacturers work hard to design their products with the best intentions possible, using a pool of talent and trial sites to test their products. Many products get onto the market lacking some feature that failed to take into consideration all situations possible. Report all variances to the manufacturer as soon as possible -- in person -- so you donít lose the essence of the problem in translation. One more thing. Take note of what went right with the new product too. Reporting this to the manufacturersí rep keeps them "on-track" with future designs, and helps you to make a better choice on what new product to show your client next.

5. What is the single most important way a distributor can help make its customers more efficient?

Distributor Responses

  • Sharing the wealth of information on product purchase history, utilization and logistics that many distributors have.

  • By providing accurate complete information on their orders when they are placed.

  • Providing the newest technology. Many of our physicians are using 10- to 12- to 15-year-old (and older) technology to treat and/or diagnose their patients. A smart distributor rep is observant and questioning. He or she picks up on what is in use in their accounts and is quick to suggest the newest, latest and most modern technology. Reps who do not observe and question seem to wake up one morning to find that their competitor, dealer X down the street, has sold their best account a new "widget" or "thing-a-me-bob" at list price or even more.

Manufacturersí Responses

  • Timely order fulfillment.

  • Help consolidate their order patterns and streamline their product formulary.

  • As Stephen Covey so simply put it, "Seek first to understand, then to be understood."

  • Donít go in to sell a product. Listen to your customer and then use the products you sell to help solve their problems.

Other Responses

  • Save them time by adding value in decision making and provide great service to keep them running smoothly.

Once again, the distribution systems need to understand that unique portals of e-commerce for supply procurement will only frustrate the customer by having to log on and learn multiple sites and software applications. This is simply not a reasonable decision for the industry... The distribution system would benefit the customers by working with the current e-commerce purchase order entry systems that provide more than just the distributor inventories.

  • Consistent fill rates and invoicing that matches.

  • Once again, it is feedback. Take for instance, the monthly and yearly item usage reports that you can supply to your client. They can use that to audit their reimbursement reports, to make sure they were paid for all those wrist braces they bought last year. Or how about rolling up the data to show the most proficient way to take advantage of prices and pre-paid shipping, where it might have been missed before by your predecessor?