e-KMI.com Eye On The Industry

Visit Kart Expo Online

CLICK HERE

International Karting Industry Buyer's Guide

Kart Expo International
ExhibitorInformation and Show Directions

EYE ON THE INDUSTRY

SURVEY FINDS MANUFACTURERS MOSTLY TO BLAME FOR DISTRIBUTOR SHORTCOMINGS

Manufacturers unhappy with the performance of their distributors only have themselves to blame.

That’s the conclusion to be drawn from a major study of U.S. manufacturers who ell through independent distributors. The study was conducted by the Industrial Performance Group, a Northfield, Illinois firm that specializes in helping manufacturers and distributors improve their working relationships.

More than one-third of the manufacturers participating in the study give poor or failing marks to their distributors in such critically important areas as their commitment to the manufacturer, their ability to penetrate local markets, their sales capabilities and their inventory management practices. Only one percent characterizes their distributors’ performance as excellent in these areas.

“That manufacturers are less than enthusiastic about the performance of their distributors is certainly no revolutionary find,” said Edward S. Stecki, president of the Industrial Performance Group. “But what is especially noteworthy from the data is that distributors themselves cannot be held solely responsible for many of their perceived deficiencies.”

Instead, manufacturers must shoulder the lion’s share of the blame for distributor shortcomings, Stecki emphasized. The reasons are that manufacturers often:
1) Neglect to tell their distributors what’s expected of them.
2) Fail to adequately prepare them for assigned tasks.
3) Take much too loose of an approach to managing their distributor relationships.

Nearly one-third (30%) of the 250 manufacturers participating in the study give themselves poor or failing marks in defining their distributors’ roles and responsibilities in the marketing, sale and service of their products. In addition:
A. More than half (52%) of the manufacturers say they do little with their distributors to develop local marketing strategies.
B. More than 4 in 10 (42%) make little effort to set sales goals for their distributors.
C. Nearly half (45%) give themselves poor or failing grades in specifying inventory levels to be maintained by their distributors.

“How can you chastise distributors for not doing their job when you haven’t told them what their job is in the first place?” Stecki asked of manufacturers. He cited the data on inventory levels as particularly disturbing.

“Immediate availability of product is usually a key component of customer satisfaction,” Stecki said, “and poor inventory management practices on the part of distributors seriously hampers a manufacturer’s ability to make sure its products are available when the customer needs them. Slipshod inventory management also leads to higher costs for expedited freight and air express.”

Besides failing to sufficiently define distributor roles and responsibilities, another major factor contributing to lagging distributor performance is the “hands off” approach that many manufacturers take regarding their distributors’ relationship. For example:

a) Nearly half (49%) of the participants in the study do not have written agreements with their distributors.
b) Some 60% do not formally evaluate their distributors’ performance.
c) Nearly three-fourth (74%) have no distributor advisory council or other formal mechanism for getting input from their distributors.

The lack of formality in most manufacturer-distributor relationships is also evident in findings regarding communication. Overall, manufacturers rate themselves high in providing distributors with information about product improvements, discount programs, and promotional efforts. Yet, a large percentage of manufacturers admit they are deficient in keeping distributors up to date on important issues like what’s happening in the industry in which they both operate, the manufacturers’ plans for responding to industry changes, and what will be expected of the distributor as changes occur. Manufacturers are also lacking in the amount of feedback they give their distributors regarding customer satisfaction.

The Industrial Performance Group’s findings should serve as a warning sign for all manufacturers who sell through independent distributors. “By neglecting their distributor relationships, manufacturers wind up paying higher sales and marketing costs to pick up the slack for distributors who can’t or won’t do what’s expected of them. An informal relationship also makes both manufacturers and distributors more likely to squander precious resources dealing with conflict and resolving complaints,” according to Stecki.

Nonetheless, Stecki cautioned that the findings should not be viewed as an indictment of manufacturers or the independent distributors who represent them. “The real message of our study is that there are tremendous opportunities for manufacturers to use their distributor relationships to improve their profitability and gain an edge in the marketplace,” he added.

“Sales and distribution costs account for as much as 40% of a product’s end cost to the customer, so taking unnecessary costs out of its distribution channel will have a real effect on the manufacturer’s cost position and bottom line,” Stecki concluded.

For more information, contact the Industrial Performance Group at 847-501-3343 or on the web at www.indusperfgrp.com.

END

View Past "Eye On The Industry" Articles

Kart Marketing Group, Inc.
Post Office Box 101
Wheaton, IL 60189 USA
Telephone: 630-653-7368
Fax: 630-653-2637
Email: karting@msn.com

Back to Home Page

Neatconcept, Inc