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Manufacturers with active distributor advisory boards develop stronger relationships with their channel partners

by Richard Vurva

When Norton Abrasives proposed changing its distribution payment terms a few years ago, the company first ran the suggestion past its distributor advisory council. Not surprisingly, the dozen members on the council were not happy.

“There was a pretty strong outcry that this was not a good thing. It was viewed very negatively,” says Rick Nowlin, Norton’s manager of industrial distribution.

After much lively discussion, distributors on the council met separately to hash out a response to the proposal. Council members returned with an alternative plan and presented it to Norton management. After hearing their input, the company decided to postpone the term change for several months and eventually developed a new plan that incorporated many of the council’s suggestions.

“The important thing is they came up with an alternative. Our top management was right there listening to their feedback,” says Nowlin.

The give and take that occurred between Norton executives and the council, comprised of principals from a cross-section of distribution companies, illustrates the value of having distributor advisory councils. Without a forum to discuss issues important to their channel partners, relationships between manufacturers and distributors would surely suffer.

“The discussions were remarkably open, and I think that’s one of the things I’ve found so impressive about Norton,” says Tom Berger, president of Fuchs Machinery in Omaha, Neb., a member of Norton’s advisory council. “They had the top people in the organization sitting in that room. They encourage you to be open and honest and say what you think.”

A willingness to openly discuss issues — no matter how contentious or uncomfortable discussions may become — is one of the keys to a successful distributor advisory council, according to manufacturers and distributors that have participated in such efforts. Running a successful council requires time and effort, but in the end, results in stronger business relationships.

“A key thing for suppliers is that management must be open to different ideas and maybe even a little criticism,” says Berger. “The most important thing is that they take suggestions brought up by the advisory council and act upon them.”

Thoughtful planning required
Rick Star, president of Engman-Taylor Company in Menomonee Falls, Wis., has served on several manufacturer advisory boards. He says the best boards are those with structure.

“I’ve served on some boards where there was no structure going in, so it made it difficult for me to prepare. As a result, I probably didn’t prepare very much because there was no direction from them,” Star says.

He points to Sandvik Coromant as an example of a company with a well-run advisory board. Several weeks in advance of the board’s annual meeting, the company sends board members a copy of the meeting agenda and a list of questions on topics it wants distributors to consider. For example, it might ask board members to compare their company’s sales of Sandvik products to small vs. large customers, evaluate how much time their salespeople devote to selling Sandvik products and similar issues.

In addition, Sandvik sends a notice to all of its distributors to let them know that a board member will be in contact with them to gauge their opinion on issues of importance to the distribution network. That allowed Star to develop a questionnaire he sent to other distributors within his region. At the board meeting, Star summarized the thinking of several distributors, rather than simply voice his own opinion.

John Jacobsen, director of commercial services for Sandvik Coromant, says the company often turns to its distributor advisory board (DAB) for advice.

“Whenever there’s an issue, we will go to our DAB and ask them to poll other members and get their input. When we have our annual meeting, we send them a list of our issues and ask them to contact their constituents to see what issues they would like us to address,” he says.

Solicit added input
At the suggestion of its board, cutting tool manufacturer Walter Waukesha in Waukesha, Wis., asks distributors to contact non-competing distributors from other geographic locations when it wants a sampling of distributor opinion. The company learned that distributors are more willing to talk openly to distributors from other parts of the country than to competitors.

Walter Waukesha also learned that the message from distributors isn’t always pleasant to hear, says president and chief executive officer Muff Tanriverdi. For example, when metalworking manufacturer Walter AG acquired Waukesha Cutting Tools, its advisory board suggested that some of the company’s products were priced too high.

“Obviously, that was a very important but painful discussion for us, but we felt if that was what our distributor advisory board conveyed to us, we had to act on it,” Tanriverdi says.

Walter Waukesha’s advisory board also told the company that its item numbers — which sometimes reached 22 digits — were too long and could cause data entry errors and other problems. After hearing input from board members, the company recently devised new, seven-digit electronic data processing numbers.

“If we can’t implement a suggestion, we tell them why or give them a time frame if it’s going to be a long-term project. It sends a message as to how seriously we take their suggestions,” says Tanriverdi. “If you kept taking suggestions and didn’t produce results, obviously distributors will have a negative opinion about how you operate.”

What makes a good council?
Most companies say councils should have a mix of small, medium and large distributors. Groups of eight to 12 participants work best. In larger groups, some opinions may not be heard, and smaller groups might not bring enough expertise. Regardless of the size of the group, make sure distributors feel comfortable offering ideas and suggestions.

“Suppliers need to accept constructive criticism,” says Scott Shively of Shively Bros. in Flint, Mich. “When that happens, you can walk away realizing that a lot of your concerns are being addressed and, in many cases, they’re a step ahead of you. That’s good to see.”

For example, Shively says that at the urging of its board, one supplier rearranged its distribution center to respond more quickly to special orders, enhancing service levels.

Suppliers must involve top management/ownership in the process. In most cases, suppliers prefer to have distributor principals serve on their boards. Depending on the types of issues a supplier wants to discuss with its board, however, having company presidents might not always be appropriate, says Kevin Boyle, vice president of distribution and channel management for Henkel Loctite.

For example, because Loctite has had an advisory council for more than 30 years, members realized that the issues being discussed were becoming more tactical and less strategic. As a result, during the early 1990s the company formed two functional advisory councils.

The sales and marketing advisory council consists of sales and marketing personnel from distribution companies and their counterparts from Henkel Loctite. The operations and logistics advisory council includes members with full-time responsibility for operations.

“It has been incredibly successful. Both councils have been very productive,” says Boyle. The councils have helped the company develop new technology programs, a new channel strategy and an electronic rebate process.

“In the early days, our council helped us formulate our distributor policies and philosophies. Now, we deal more with operational issues rather than pure strategic, long-range planning,” Boyle says.

Most councils meet annually, often in conjunction with industry trade shows to reduce travel costs. Many hold meetings near manufacturing sites and distribution centers so council members can tour those facilities to learn how they operate. Participants usually communicate frequently throughout the year via e-mail and over the phone.

A firm agenda, set well in advance of the meeting, is a must. Following the meeting, share the key points of discussion not only with meeting participants, but with other distributors. Suppliers should also share the feedback throughout their organizations. Norton videotapes its council feedback session.

“We distribute the minutes and the videotape throughout our organization. We take their input very seriously and use their feedback in our decision-making,” says Nowlin.

Don’t get sidetracked
Participants should remember the purpose of the meeting. To keep discussions on track, have one person serve as moderator. It may be necessary for suppliers to bring different people in and out of the meeting for presentations, but they should try to never outnumber distributors.

“Do not make it a sales meeting. This is not the time to give distributors your sales pitch. They came to share insight on important issues,” says Boyle.

Although combining some social activities into the annual gathering helps build team spirit, distributors are there to participate and share their advice, not play golf.

“You don’t want the meetings to be merely a social event or a gripe session,” Star says.

Perhaps the single most important key to success is follow-through. Participants from both sides must understand any action plans agreed to during the meeting and do what they promised to do. Berger recalls one supplier that unveiled a new marketing campaign to its board and asked for input. Distributors expressed concern with some aspects of the program and suggested changes.

“They were very kind and thanked us for our input,” Berger says. “Two weeks later, the program came out exactly as they presented it to us. Guess what? It failed.”

Don’t shy away from important issues. Companies won’t likely agree on every issue, but providing a forum to air concerns will result in better policies. For example, Sandvik Coromant developed several case studies about integrated supply and presented them to its board.

“Based on the information presented, we asked members of the DAB how they would react to authorizing integration in each situation,” says Ray Farrell, manager of sales channels. “It allowed them to get a better understanding of some of the issues we have to contend with, and also a greater understanding of the customers who are requiring us to go to integration.”

The board helped Sandvik develop a checklist of functions that integrators must perform in order to earn discounts. Advisory board members say the discussion proved that Sandvik valued their input.

“They didn’t agree to everything that we wanted. But they came up with a standard policy and incorporated a lot of things into it that had been discussed in our meeting,” says Mike Baker, president of Quality Mill Supply in Columbus, Ind. “Even though we might not like it all, the final document was different because of our involvement, and that’s positive.”

Distributor advisory councils not only help suppliers understand how their distributors feel about their policies, they also bring new ideas to the table.

“The manufacturer gains from discussions like this because we can share with them the kinds of programs we see from hundreds of different manufacturers. Our exposure to various manufacturer solutions is very broad-based compared to theirs,” says Berger.

Distributor principals who participate on advisory boards say it takes up valuable time, but it is worth the effort.

This article originally appeared in the March '03 issue of Progressive Distributor. Copyright 2003.

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