Role of Industrial Distribution In the US

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Corporate speaking engagement in Boston, July 2006

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Role of Industrial Distribution In the US

  1. 1. The Role of the Industrial Distributor in the US Market Tom Clawser, Sales & Marketing Manager Brown Transmission and Bearing Company Lancaster, Pennsylvania, USA Lenze AG Country Managers Meeting, Boston: July 2, 2006
  2. 2. Agenda Origin of the Distributor in the US The Distributor in the Supply Chain Distributor/Manufacturer Relations
  3. 3. Origin of the Distributor in the US Agenda
  4. 4. <ul><li>“ Our concern is that we, as a manufacturer supplier, are not as adept at meeting local needs as our distributors. We don't have the people who would be immediately responsive. We don't have local inventories. And it's not uncommon for someone to need a product or part in hours.” </li></ul><ul><li>Bill Moore, vice president of sales development </li></ul><ul><li>and channel management SKF Service Division </li></ul><ul><li>Purchasing Magazine, November 2006 </li></ul>The Gap between Manufacturer and Consumer... Origin of the Distributor in the US
  5. 5. Bridging the Gap: The Evolution of the Distributor Origin of the Distributor in the US PRODUCTS FOR HOME & FARM, HARDWARE General Store c. 1800’s GENERAL LINE INDUSTRIAL SUPPLIES Mill Supply c. 1890-1955 PRODUCT LINE LIMITED BY CATEGORY Specialist 1955-current
  6. 6. How it began... <ul><li>General Store concept was predominantly a retail model, for home and farm. Industrial consumers bought directly from the manufacturer. </li></ul><ul><li>Mill Supply concept grew exponentially during and immediately after World War II </li></ul><ul><li>Both models sold general line industrial supplies </li></ul><ul><li>Manufacturing boom of the 1940’s created unprecedented inventory demands, which general line distributors could not meet. </li></ul><ul><li>Hence, the birth of the specialist distributor </li></ul>Origin of the Distributor in the US
  7. 7. Distribution at a Glance <ul><li>$825 billion industry in North America </li></ul><ul><li>In the United States alone, industrial distributors: </li></ul><ul><ul><li>Represent over 5% of total gross domestic product ($750 billion). </li></ul></ul><ul><ul><li>Operate more than 83,000 companies with over 113,000 branch locations. </li></ul></ul><ul><ul><li>Employ 1.4 million workers, nearly 1% of total employment. </li></ul></ul><ul><li>Source: PTDA Foundation, 2006 </li></ul>Origin of the Distributor in the US
  8. 8. Origin of the Distributor in the US The Distributor in the Supply Chain Agenda
  9. 9. The Role of the Distributor in the Supply Chain <ul><li>Add value for manufacturer and consumer </li></ul><ul><li>Reduce cycle time from requisition to receipt </li></ul><ul><li>Manage quantity differentials between production and consumption </li></ul><ul><li>Increase available inventory </li></ul><ul><li>Improve consumer ROI on machine components and spare parts inventory </li></ul><ul><li>Provide a communication channel between manufacturer and consumer </li></ul>The Distributor in the Supply Chain
  10. 10. Services and Market Strategies <ul><li>Entry-point Services are common to nearly all distributors. </li></ul><ul><li>Value-Added Services generate measurable returns to the consumer, and add competitive advantage to the distributor </li></ul><ul><li>Premier Services are of a consulting nature, and are offered by only a small percentage of distributors. </li></ul>The Distributor in the Supply Chain
  11. 11. Entry-point Services The Distributor in the Supply Chain Local Inventory Technical Support Delivery Services Product Application Line of Credit Distributor Industrial Consumer
  12. 12. Value-Added Services The Distributor in the Supply Chain Sub-Assembly Kit Building VMI Installation Repairs Distributor Industrial Consumer
  13. 13. Premier Services The Distributor in the Supply Chain Energy Audits Training Predictive Maintenance Storeroom Mgmt Distributor Industrial Consumer Process Improvement
  14. 14. Why Consumers Buy from Distributors <ul><li>Single source for multiple product lines </li></ul><ul><li>Local inventory </li></ul><ul><li>Technical expertise </li></ul><ul><li>Application assistance </li></ul><ul><li>Large selection of products and services to choose from </li></ul>The Distributor in the Supply Chain
  15. 15. Why Manufacturers Sell Through Distributors <ul><li>Local, personalized service for consumers </li></ul><ul><li>Extension of existing sales force </li></ul><ul><li>Complementary product lines afford greater opportunities for “systems” selling </li></ul><ul><li>Closeness to market; distributor is more sensitive to regional market trends </li></ul><ul><li>Adds depth to available inventory </li></ul>The Distributor in the Supply Chain
  16. 16. Origin of the Distributor in the US The Distributor in the Supply Chain Distributor/Manufacturer Relations Agenda
  17. 17. How Good Distributors Choose Good Manufacturing Partners <ul><li>Products that meet consumer needs/desires </li></ul><ul><li>Functional stability (financial, organizational, process and personnel) </li></ul><ul><li>A well defined, well communicated marketing strategy </li></ul><ul><li>Collaborative sales planning and execution </li></ul><ul><li>Training capabilities and emphasis </li></ul><ul><li>Selective, limited distribution </li></ul>Distributor/Manufacturer Relations
  18. 18. Developing a Mutually Beneficial Sales and Marketing Strategy <ul><li>Add value for the consumer </li></ul><ul><li>Set reasonable, written expectations </li></ul><ul><li>Select accessible target customers/products </li></ul><ul><li>Evaluate quarterly and adjust as necessary </li></ul><ul><li>Know your competition well and be ready to address their strengths and weaknesses </li></ul><ul><li>Be of one voice in front of employees and prospects </li></ul>Distributor/Manufacturer Relations
  19. 19. Key Performance Indicators Getting Both Sides What They Need <ul><li>Communication : sharing ideas, successes and failures assures a healthy partnership </li></ul><ul><li>Cooperation : joint sales efforts on a regular basis indicate a willingness to work toward common goals </li></ul><ul><li>Competence of both parties to testify to each other’s capabilities before the consumer </li></ul><ul><li>Commitment : partners will only invest when they are committed, they will only succeed when they invest </li></ul>Distributor/Manufacturer Relations
  20. 20. Final thoughts... <ul><li>By working with distributors, customers and manufacturers are improving their profits and achieving competitive advantage in the marketplace. </li></ul><ul><li>Tim Underhill, Underhill & Associates </li></ul><ul><li>“ The Channel of Choice” </li></ul><ul><li>“ Don't underestimate the value of a good distributor.” </li></ul><ul><li>Bill Moore, vice president of sales development </li></ul><ul><li>and channel management SKF Service Division </li></ul><ul><li>Purchasing Magazine, November 2006 </li></ul>
  21. 21. Thank you

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