Taking Unfair Share in 2023 with improved Distributor-Manufacturer Analytic Partnerships
By John Gunderson, Senior Consultant
This article was originally published by Modern Distribution Management (MDM) and is used here with permission. For more than 50 years MDM has provided industry leading content for B2B Manufacturers and Distributors. We highly recommend becoming an MDM Premium subscriber.
In my career as a distributor leader negotiating our annual agreements and getting ready for Annual Distributor-Manufacturer Planning meetings took a lot of effort. It was a season with feelings that often ranged from pure excitement to occasional dread.
The planning season was dominated by an established process and company habit. Often the supplier meeting scorecards and planning we did year after year had the same tried and true metrics that we probably had not changed since about 1919. Most manufacturers and distributors crave process and consistency, and if isn’t broke don’t fix it.
That standard 1919 thru 2019 distributor-supplier meeting playbook almost always included 4 key elements.
- Review last year’s sales and projected sales for the upcoming year — You often start with the high-level overall sales data with the ability to share by branch, by region, product type or class. It’s a history report with a hopeful future anticipated gains discussion. When Business is good like it has been the past couple of years, this is the part of the meeting where you tell each other what great Win-Win partners you are to each other.
- A discussion or examination of some data on the largest end user accounts you share — This part of the meeting is often the poker game where the distributor would never share POS, and the manufacturer won’t share key data on whom they support in the market. This is also the part of the planning session where you often plan phantom joint sales calls. You put it on paper and shake hands, but if you are honest with yourself both parties rarely actually make the joint sales calls happen as effectively as planned.
- Move to negotiating terms and conditions, marketing funds, new products, Return Goods Authorizations, etc. — This is the part of the meeting the operational leaders live for. It’s all about the important pick, pack, ship and profitability metrics. A lot of great work can get done here, but it is often just reporting what happened and not really affecting future performance.
- The Rebate/Backside (or preferred first cost concessions) — For many of the distributors I worked for, and work with today this rebate/first cost advantage can be a staggering 25%-70% of your total profitability. It is considered pocket profit that goes straight to the bottom line. Your CFO spends almost every night dreaming and accruing for this pocket profit while they sleep.
.The rebate/first cost advantage is the meetings main course. In the past few years with inflation and favorable market conditions this rebate/backside/first cost advantage has been bountiful for most distributors, and gladly paid by the manufacturers for the great growth.
The economic forecast 2023 makes rolling out your annual planning playbook (the one that you may not have changed since 1919) very dangerous to your business. In my opinion, I think it’s time for you to consider some changes.
The rising price tide has raised all manufacturer and distributor boats and allowed many of us to have the false sense of confidence that the same old Manufacturer & Distributor approach will work in 2023.
As reminder, in 2012 your customers did not have an iPhone in their pocket. Your mutual end customers have changed how and why they buy, and that change is not going away. Your belly-to-belly sales team is less effective, it’s not really their fault, but it is the truth.
I wish it was still all about making more face-to-face calls and relationship selling. It was hard for your team to relationship sell from their PC on the kitchen table during the pandemic. Now that your team is back on the street you may be hoping the pendulum going to swing all the way back to the “we have a free afternoon lets go golfing days”. Unfortunately, that ship has sailed.
If you think it might be time to examine other options and learn best practice from others. I would encourage you to attend MDM’s upcoming Shift conference.
The session we have on how to take unfair share with improved Distributor -Manufacturer Partnerships is not a theoretical session.
It’s about strategy and tactics. The session will give manufacturers and distributors in the room stronger tools and case studies from both perspectives.
You will learn how others are using programs like metro-level territory coverage, programs to increase market and mindshare with key supplier partners, and Special Pricing (SPA)/Contract Agreement analytics to drive expansion at the account and local-market level.
It’s a real-world working session in a room of distributors and manufacturers with presenters who have implemented the programs you will be shown.
It is one of the few places where you can see what other distributors and manufacturers have done to develop new analytics and scorecards. These programs and approaches are actually creating the mutual Win-Wins you probably have spent years talking about in planning meetings.
It is an exciting time for those that embrace the new reality. 2023 is going to be the best year for distributors and manufacturers to take share from the competition that does the same old approach with your improved programs and processes.
It is a huge opportunity to take share from the competition and then NEVER EVER give it back.
John Gunderson is a senior leader at Dorn Group with more than 20+ years experience leading category management, sales, marketing, pricing, analytics, and ebusiness with companies such as Crescent Electric Supply Company, HD Supply Power Solutions, White Cap Construction Supply, Anixter/WESCO, Modern Distribution Management, and EIS-INC. You can reach John at john.gunderson@dorngroup.com