Vendors: Can't live with 'em, can't live without 'em
by Joan Adams
Vendors are the oxygen for all industrial distributors. Without them, distributors would all have a pretty hard time doing what they do. Yet as important as vendors are to this business, it is truly surprising to see how underdeveloped or downright bad some of these relationships are.
When you ask a distributor about vendor A or B, too often the response is a shrug of the shoulder, a roll of the eye. The vendor is viewed as "something we put up with in order to do business," not as a critical partner at the end of the supply chain.
This is a missed opportunity. Your vendors are your partners. What they do and how they do it has an immediate and long-lasting effect on your performance and on customer satisfaction. Choose vendors wisely and cultivate those relationships. It's simple; when vendors and distributors work together, both parties – and most importantly, the customer – are all much better off.
The distributors with brilliant vendor relationships have a huge competitive advantage. They look at the marketplace as something to be conquered as a team, not in spite of each other. As in any good relationship, it is all about communication. The more you and your vendor know about each other, the better you can figure out what works best for each company.
Start by consolidating
Limiting the total number of vendors is a good place to start. I don't want to go all Oprah on you, but there's no way in the world you can have a serious, real partnership relationship with a jillion different vendors. It's time to focus on the vendors that deliver 80% of your products. In the event of a tie, the vendor with the best record for on-time delivery and quality wins every time. In two or three major product categories, select a primary vendor and a back up. Now, start developing a different kind of vendor/distributor relationship with that primary vendor.
Product mix, inventory levels and delivery times are good discussion points. The vendor can't read your mind. You have to tell him when and how your product demand is changing. Share inventory data with your vendor. Knowing what each other has sitting on the shelf will be at first shocking and then very enlightening. The result? Both vendor and distributor will carry much less inventory going forward (big savings). Similarly, every delivery isn't critical. Let the vendor know which items you really need immediately and give him some leeway on parts you are merely replenishing. Packaging, billing and information on-line are all things that have a direct impact on your ability to stock and ship quality product quickly. Tell your vendor your preferences about packaging (easy to unload, easy to store, easy to identify contents), billing (frequency, when, format), and on-line data on manufacturing times, stock in inventory, etc.
Good vendors are also fonts of information. Who better to tell prospective and existing clients about the strengths of a product? They know the whys and wherefores of their designs, manufacturing capabilities, materials, etc. Bringing vendors in to speak with customers (not to sell, but to educate) is another way vendors can enhance your customers' experience.
Be a good partner
Vendors are like any other business folks; they give the best service to their best clients. Make sure you are one of them, particularly if you can't play the buying power card. If you are a smallish distributor, make sure you are a really good customer. This means: someone is always on duty to off-load trucks when the vendor arrives, you always pay on time, you always address problems quickly without acrimony. When there is a change in an order, you notify immediately. You inform your vendors of changes in ordering trends to give them a heads up about what you will and will not order going forward.
As great as this sounds, not all vendors respond to improved communications. Some vendors will never be your partners in the supply chain. Some will probably cause you more grief (money) than they are worth. At the top of the list of inexcusable vendor offenses should be: poor product quality, late delivery, late delivery with NO warning, incorrect quantities or incorrect items in shipments and generally bad information (confusing bills, unlike materials packaged together, poor labeling . . .)
You are the very last step of the supply chain, the only one who faces the end customer. Any time your vendor makes an error – you are the one who will hear about it.
In short, there are some vendors for which it is a futile effort to try and cultivate some kind of partnership. You may not realize it now but these vendors actually cost you money. The sooner you drop them, the better. Every distributor seems to have a handful of flaky vendors. They miss delivery dates by weeks, their quality is sometimes very good, but too often not so good, the paperwork is sketchy at best and usually a nightmare. The standard line I hear again and again goes something like, "I have to keep this guy, he's the only manufacturer in the area who makes X, Y or Z, and I have a customer who orders this part regularly."
No, you don't have to keep him. Find another vendor, right now. Even if they are far, far away, that's fine – despite all my lean tendencies – all this means is you will have to keep more product in stock. In the supply business you want certainty more than convenience. It is a false argument to say it is better to go with the bad local vendor instead of the good long-distance manufacturer. If you know the following for certain: delivery times, quality and you don't have to drive your staff crazy with bad paperwork, half orders, etc., it is worth it to work with the long-distance vendor. (Unfortunately, this is exactly why so many overseas vendors were, and still are, able to enter the U.S. market – distributors didn't work on partnering with their vendors or, if they did, some vendors just didn't get it.)
You need every advantage you possibly can get. When vendors and distributors pool resources, communicate and work with each other, they are impossible to beat and everyone wins. Most importantly, the customer wins.
Joan S. Adams has consulted for industrial clients for more than 20 years. She headed DITT, the consultancy arm of the French National Utility, Electricité de France, and was a managing consultant at ATKearney. Later, she started Pierian, a consultancy that brings sustained and measurable success through operational excellence, customer focus and competitive market strategy. She has engineering degrees from the UW-Madison and MIT. She also has an MBA from the Wharton School. E-mail her at adams@pierian.net.
This article originally appeared in the July/August 2010 issue of Industrial Supply magazine. Copyright, 2010 Direct Business Media.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
