Builders, distributors get down to brass tacks.
"Distributors take the commission but add no value to the sales process."
"Equipment builders are bullies that show no respect for their distributors."
Such polarization has strained relationships in the industrial sector probably from the beginning. It has been no different in the machine tool industry. The manufacturers are represented by AMT--The Association For Manufacturing Technology, McLean, VA, formerly known as the National Machine Tool Builders' Assn. The distributors fly under the banner of the AMTDA, the American Machine Tool Distributors Assn, Rockville, MD.
In an effort to improve relations between the two industry-leading groups, the twain have started to meet. In April the AMTDA and AMT met in joint session for the fourth time. They have done so every four years, and it seems to be working. About a year ago they joined forces to broaden their statistical gathering cooperation to produce a more accurate report of monthly machine tool consumption in the US.
Now, according to Allan W Chartier, president/CEO, Midwest Industrial Tools Inc, headquartered in Omaha, NE, the associations will take the next step. The current chairman of AMTDA announced that the two associations will commission a study of their respective memberships to determine just how deep the feelings run between the builders and their distributors. Although details still have to be ironed out, it is expected the survey will be mailed in a couple of months. It'll be conducted by Industrial Performance Group, Northfield, IL, which conducted a similar survey that gaged attitudes of sales and marketing managers in 250 manufacturing companies across a broad spectrum of industries to determine their perception of the performance of their distributors.
The results of that survey, Mr Chartier told his audience of builders and distributors, indicate that there is great improvement needed. "More than a third gave poor or failing grades to their distributor's sales capabilities. Notably none of the 250 respondents rate their distributors' sales capacities as 'excellent' and only 17% score them as 'good.'" Although the survey was not done on the machine tool industry, "I believe the results would be similar," he said, "but we need to know what the people sitting in this room think."
He continued: "I am concerned about our business relationships...about the builder's opinion of the distributor and the distributor's opinion of the builder. Together we must make sure that these relationships are solid enough and flexible enough to meet the fast changing needs of our customers. I believe these relationships are being challenged in ways we have never seen before.
"We don't spend enough time sitting down with our builders to discuss the cost of doing business. Not just ours, but theirs." He went on to warn his distributors that if the manufacturers who sell through distribution have a poor opinion of us, "we had better get busy and work on that."
He told of one meeting he sat through where a builder detailed why he doesn't sell through distributors. Mr Chartier said the comments ranged from "distributors couldn't understand their product; it was too technical" to "distributors do not have customer relationships" to "the builder does all the work, and the distributor makes the money with no investment" to "the distributors don't have qualified service personnel."
He admitted to his audience that "it was brutal. I recognized at that point that we distributors have not done a very good job of explaining the advantages of selling through distribution. . .that we do add value." It is well worth the effort, he said. Among all the companies he represents, there are only six manufacturers his company sits down with, at least annually, and develops a business plan. However, he adds, three of those six companies rank among the top three in terms of sales and profitability and all six are in the top ten.
In another case he shared with his audience, Mr Chartier said his company was asked by the manufacturer to produce a pro forma including costs for inventory, warranty, service, application engineering, and training. "The result was a better informed builder that had a new appreciation of the investment made by its distributors," he said, adding that the manufacturer opened its books to the distributors and annually shared its goals.
"Would we have communicated like this five years ago or even two years ago?" he asked rhetorically. "I don't think so."
Quoting from the conclusions of the Industrial Performance Group study, the AMTDA chairman said: "Manufacturers need to set specific and measurable goals for their distributors...When distributors are aware of what's expected of them, there is a greater chance that manufacturers can avoid costly duplication of effort and destructive manufacturerdistributor conflict." He then edited the quote by suggesting "manufacturers and distributors together need to agree on specific and measurable goals. ..and it should be done regularly."
Mr Chartier then offered an observation he feels ''might be the root cause of the misunderstanding between builders and distributors "-manufacturers considering their distributors as being customers rather than an extension of their sales and marketing efforts. "We need to open the dialogue and decide this very simple issue--are we your customers or are we your distributors?" he asked the machine tool builders in his audience.
He feels the survey will be a step in that direction. "It will be the basis for us to discuss how we will approach the future-- together...Considering the dynamics taking place in our industry's marketing channels, a high level of importance must be placed on assuring that distributors and builders are communicating regularly. The customer has taken control of today's sale and won't tolerate ineffective channel partners," Mr. Chartier concluded.
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|Comment:||Builders, distributors get down to brass tacks.|
|Publication:||Tooling & Production|
|Article Type:||Statistical Data Included|
|Date:||Jun 1, 1999|
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