Improving Distributor – Manufacturer Relationships (September 01, 2004)

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 Tony S Hood, vice-president, sales and marketing, WEG Motors and Drives, Suwanee, Ga., as he discusses the company’s best practice, “Demonstrate the Value You Add.”

Distributors often worry about manufacturers taking business direct. We prefer dealing with distributors and feel that the value they provide is worth the extra margin.

At WEG, we’ve traditionally dealt with electrical motor shops; power transmission (PT) houses are a relatively new channel for us. And what we see is that the two are always throwing rocks at each other. But it’s really the same rock they’re throwing back and forth: price.

If each type of shop would only play to their strengths, rather than worrying about the cost of a single motor, we’d all benefit. EASA (Electrical Apparatus Service Association) shops may have product experience, service and repair capabilities, but PT distributors have added components; not only can you buy the motor you need, but also the gear box, sheave and starter to go with it. As customers focus on getting more stuff from fewer reliable suppliers, that’s a real asset.

So many customers have downsized their maintenance departments; they’re really relying on their distributors for the support that they used to handle themselves. But distributors are so focused on making sales and handling daily crises they sometimes forget to take the time to educate their customers about all they can do for them. Or they have the resources, but don’t realize just how valuable this could be to their customers.

Take predictive maintenance. Just like you know when to change the oil in your car, we can predict when a customer’s system will fail by using vibration practices and infrared performance technology.

Aggregate producers are our largest customer base. When they’re not crushing rocks, they have a huge hourly downtime cost; if they’re not producing output, it’s a real problem. When a motor goes down, if a PT distributor has the product in stock and can get the line back up quickly, he’ll get that business. If not, the customer will go to a repair shop and have the motor rewound. Chances are, the repaired unit won’t last as long the new one would have and both the distributor and WEG lose out on that potential sale. As well, the customer who accepts an older repaired unit instead of a new one also loses.

Too often, distributors who service these customers are in a continual uproar when a motor goes out. If the distributor had done a plant survey, he’d know which items were critical and could keep them in inventory. Instead, he doesn’t know what’s needed until it fails and then likely doesn’t have it on the shelf.

If the distributor has done his homework, he knows what his customers’ needs are; he understands what products they can wait for and what they need immediately. Unlike industries with a backup system where they can probably wait 24 hours to get up and running, for most aggregate producers, 24 hours is far too long. If the distributor knows what motors the five aggregate producers in the area are using, he can stock them. And odds are at least three of them are using the same motor, so he can keep one on the shelf and effectively service more than one customer.

If the PT distributor doesn’t have the right motor on the shelf when an opportunity knocks, he’ll probably lose that business to a motor repair shop and may lose potential future sales as well. Customer expectations are shaped the same way in our industry as when they’re shopping retail. If you go to Best Buy and they don’t have what you want — and you go to another store and they do have it — odds are good that next time you’ll start shopping at that other store. If a distributor doesn’t have what the customer needs, next time he’ll go to the alternate supplier first, eroding both the distributor’s and our brand equity.

And that may have real financial implications in that both of us risk losing that business. If the distributor loses out to another distributor, we can only hope that the new supplier has the WEG line. But too often, we’ve lost the business altogether. And sometimes, the first time we discover that there’s a problem is when the business disappears.

When our distributors fail to provide value to our joint customers, it reflects badly on WEG as the ultimate supplier. For example, we just had an evaluation session with our biggest customer. All of their complaints were really about the distributor, but in the customer’s mind, we’re at fault. To the customer, if our distributor is dropping the ball, then we’re dropping the ball. This is a true partnership, and we win or lose together.

As a relatively new brand to the North American market, WEG relies on our distributors to educate potential customers about our product, performance and reliability. We hope that as distributors are demonstrating their value, they also are demonstrating WEG’s, by outlining in very clear terms what we bring to the table for the customer, both individually and together.

The bottom line is this: If all you have to sell is price, you’re only as good as the next guy who walks in the door. We want our distributors to have a real technical understanding of the products they sell and a full roster of value-added services so they can get out of the price arena.

Tony S. Hood is vice-president, sales & marketing of WEG Motors and Drives, 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 on the Distributor-Manufacturer Best Practice project and a complete list of best practices, visit www.ptda.org, tel. 312-876-9461 or e-mail ptda@ptda.org.