Teaching the supplier rep a thing or two

by Timothy P. Horan

I was speaking to a colleague about research in the book published by NAW/DREF called Working at Cross-Purposes: How Distributors and Manufacturers Can Manage Conflict Successfully. He said, “This book should be part of every factory or supplier rep’s training program.” When I asked why, he talked about the lack of understanding of how distribution works. “Supplier reps don’t understand what goes into the day-to-day running of a distributorship.”

Our study indicated that the supplier rep is a critical cog in the ongoing supplier/distributor relationship. In fact, the tone for that relationship is set by how the supplier rep or the supplier rep’s employer views the distributor’s role in managing the channel. If the supplier rep sees the distributor as an extension of the supplier’s sales force, he or she is not likely to spend much time learning about the distributor’s business. Conversely, if the supplier rep sees the distributor as a legitimate channel partner, he or she is likely to learn about what makes the channel partner successful. If the distributor is successful, the supplier has a better chance of being successful.

As you might expect, many of our research subjects thought it would be nice if the supplier rep were better prepared to manage the relationship effectively. Unfortunately, the executives we interviewed felt most supplier reps weren’t well prepared. In this article, I will talk about the importance of understanding distribution as a business and will focus on means for successfully managing the relationship. If the local supplier rep understands these key points, he or she will be more effective on the job. In addition, if the local supplier rep is more effective, the distributor will sell more products. Effectively managing the relationship is the quickest way to improving distributor productivity. The key to understanding and improving effectiveness is understanding the distribution business.

Understanding the distribution business. This is the key factor. All others flow from it. Understanding the distributor’s business will help the supplier rep create a relationship that can overcome cross-purposes and MBAs (Minor But Aggravating) issues that come up in any business relationship and are typically associated with the supplier/distributor relationship.

With that knowledge, the supplier rep will be able to:

• Help the distributor be more successful across the business

• Manage the fact that, often, the supplier rep’s priorities and the distributor executive’s priorities are at cross purposes

• Understand how irritating MBA requests are and learn how to minimize their impact

• Become more respectful of the distributor’s workload and time commitments

Understand the distribution business
Our research provided many powerful examples of how effective or ineffective manufacturer reps were in the management of the relationship. Unfortunately, if one were to put together a spreadsheet with the first column labeled “Effective” and the second column labeled “Ineffective,” the second column would extend beyond the first. We found many more examples of ineffective behavior by supplier reps. This behavior had a tremendous negative impact on the relationship.

More often than not, ineffective behavior stems from a lack of training and knowledge. Supplier reps, for the most part, do not understand distribution. They are taught about their company’s business and then are sent out into the field to make calls on distributors without any significant relationship management skills. They see the CEO or distributor owner driving a nice car, belonging to a country club, and sitting in the corner office, and they think of only one thing: This executive is making too much money and it’s our money. Instead of seeking to understand the role of distribution in the channel, individual supplier reps are more likely to impose guidelines and rules that make sense in the world of manufacturing. These rules or guidelines hold little validity in the world of distribution. Either the supplier reps don’t understand or they forget that distributors are intermediaries that perform a cost-transfer role. They don’t understand that distributors might not exist if manufacturers could perform the same role at a lower price. They don’t understand that distributors serve many masters, from other suppliers to a massive number of customers of all shapes and sizes.

Help the distributor be successful
Once the supplier rep has a better understanding of the distribution business, he or she can begin to understand that the more successful the distributor is across product lines, the more successful the distributor will be in managing the supplier rep’s particular line. There aren’t many distributors that can be successful at selling one supplier’s line. If they were, the supplier would have a just cause for going direct. Any help the supplier rep can give the distributor will be paid back in more ways than a supplier rep could ever imagine. Supplier reps often have key inside information about products the distributor could offer that would add to their success without actually diluting the supplier’s sales. If a supplier rep is perceptive, he or she will know that introducing these products to the distributor will only enhance the relationship. Realizing that distributors need a wide variety of products to sell to their customers will help a supplier rep solidify his or her reputation as a business partner.

There are legitimate cross-purposes
As our research showed, business partners often operate in a world of cross-purposes. Remembering that your priorities and those of your distributor are often at cross-purposes, and publicly acknowledging this fact, will help the supplier rep strengthen the relationship. Even though these are legitimate, they can be a source of irritation. The more the supplier rep understands the distributor’s business and how a distributor makes money, the more these cross-purposes can serve as a springboard to a stronger relationship. For example, a point of gross margin is often meaningless to a manufacturer, but it can mean the difference between a profitable line and a money-losing line to a distributor. Asking for "manufacturer-like" discounts or rebates doesn’t make sense in the world of distribution. In spite of that, many of our research participants indicated they are often asked to participate in programs that make no economic sense. When supplier reps make unreasonable requests that expose ignorance in how cross-purposes work (or in this case, how the distributor makes money), there is a dampened ability to influence the distributor, and the relationship suffers. Understanding cross-purposes presupposes understanding the true economics of distribution. This important concept should be included in the manufacturer rep’s training under Distributor Management 101.

Keep the MBAs to a minimum
In our research, minor but aggravating (MBAs) requests often became very serious sources of aggravation for both suppliers and distributors. Don’t overload the distributor with MBAs — those minor and usually aggravating requests from the supplier that eat up a distributor’s limited resources and time without providing a financial return. Examples of these are territory audits and reports that, as everyone knows, never see the light of day. Another example is a request to take in products for resale that have no redeeming market value. Neither the customers nor the consumers/end users want the products, so they either are sold at a significant cost (below cost or with a large sales incentive) or they take up wasted space in the warehouse.

Be respectful of the distributor’s time and workload
Lastly, realize that you aren’t the only arrow in the quiver, the only master of the universe. Distributors serve many masters, from suppliers to customers. If you want a dedicated sales force, go hire one. Otherwise, realize you are only as important as your bottom-line contribution. If your goal is to get more attention from your distributor, add more value and profit to the bottom line and remove as many of the aggravations as you can.

Working at Cross-Purposes: How Distributors and Manufacturers Can Manage Conflict Successfully was published in June 2006 and is available from NAW/DREF at http://www.naw.org/cross or by calling 202.872.0885.

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