Improving distributor- manufacturer relationships

Serving today’s customer requires ever-closer collaboration between distributors and manufacturers in the power transmission/motion control industry. At the same time, long-held beliefs and mistrust between channel partners stand as a barrier to improving the levels of planning, communication and trust in distributor-manufacturer relationships.

As a result, the Power Transmission Distributors Association (PTDA) has developed a library of distributor-manufacturer relationship best practice case studies that are designed to provide inspiration and specific suggestions for those looking to work together to improve sales performance and profitability. In this issue’s featured case study, we read the thoughts of Scott D. Walsh, vice-president, sales and marketing, Diamond Chain Co., Indianapolis, Ind., as he discusses the Diamond Chain best practice of “Implementing an Effective Joint Planning Process.”

For more information on the Distributor-Manufacturer Best Practice project and a complete list of best practices, contact PTDA at 312-876-9461 or e-mail ptda@ptda.org.

As a manufacturer, unless you have a true joint planning process, there will never be any buy-in from your distributors. Sure, you can be a dictator with your sales force and set a goal that’s 10% over last year’s sales while ignoring market dynamics. The problem is that means you are underselling some opportunities and overselling others.

A good joint business plan identifies who the distributor is: his market positioning, historical growth, key targets, current key accounts and objectives. It also lays out how we’ll work together to achieve “operational excellence,” which may include training, improving communication effectiveness, standards implementation, sales blitzes, and marketing programs like trade shows or open houses.

An effective joint plan requires commitment at every level. While the owner or headquarters has to buy in to the plan, successful implementation requires lots of grassroots involvement at the street level.

Planning is an ongoing process. You can get from point A to B, but unless you have landmarks, it’s hard to know if you’re headed in the right direction. We regularly sit down and evaluate our progress and satisfaction, identify what’s not working and why, and ask whether we’re headed in the right direction.

Distributors may be reluctant to commit to an in-depth planning process, because they don’t want to share detailed information about their customers for fear that manufacturers will take the business direct. That’s why relationship development is a key facet of planning.

You can’t plan with every distributor. You have to pick and choose based on those who are doing a good job for you now and those who show a lot of potential. We see our commitment to planning as a differentiator for Diamond. When we talk to potential new partners, we emphasize our dedication to helping them grow their business with a formal plan.

We feel that training is a key part of effective joint planning. If you don’t know the nuances, it’s easy to think that a chain is a chain is a chain. But we know that’s not true … and we want our distributors to understand and communicate the “Diamond difference” too.

By putting a plan together and sticking to it, we can achieve greater sales and more efficient operations. Reducing our cost to do business ultimately benefits not only our own firms, but our customers as well.

Customers also benefit from joint planning when it pays off in better educated distributor salespeople, who can work with their customers to solve problems, decrease downtime, decrease cost and reduce the customer’s cost of doing business.

For example, a key component of the plan may be to conduct plant surveys for key customers. We go in together with our distributor to a specific customer and identify all of the applications that use our products, right down to machinery numbers for each piece of equipment.

The distributor can identify issues and have product ready almost before the customer needs it. At the same time, he can begin standardizing the products used by the customer, minimizing the variety in his plant and reducing the spectrum of needed inventory.

The distributor can anticipate the customer’s demands and carry inventory for critical applications. And when a customer calls and says Shaft 14 on Line One is down, the distributor knows what he needs to replace, even if the customer doesn’t have these specifics.

Before Diamond had a formal planning process, we’d sit down with a new distributor to discuss opportunities in the marketplace and how much inventory they’d stock. If the distributor wanted training, we’d provide it; if not, we’d just call on them occasionally. We had a signed agreement but no formal process to convey expectations or hold him accountable.

As a result, new distributors would cherry-pick us. They’d use a customer’s total buy with us as an example of opportunity, but their real rationale was to use one specific size of Diamond product to capture all of the customer’s business, while continuing to support other manufacturers. So suddenly, potential business with one customer worth $50,000 turns out to be only a $5,000 opportunity.

At a fundamental level, planning requires establishing a relationship and setting reasonable, achievable goals. Both parties really need to understand what the other is doing and his direction.

Scott D. Walsh is vice-president, sales and marketing of Diamond Chain Co., a member of the Power Transmission Distributors Association. PTDA is an association of industrial distributors and manufacturers dedicated to providing solutions to customer needs. A strong relationship between manufacturers and distributors, combined with focus on the customer, ensures high quality products and services that provide value. For more information, visit www.ptda.org.

Company snapshot

– Company: Diamond Chain Co., Indianapolis, Ind.

– Size: One production facility

– Year founded: 1890

– Key product: Roller chain