It’s time to kick-start collaboration between distributors and suppliers. The premise is that the traditional value chain is under attack and any solution must involve new and intensive collaboration between these long-standing partners. Many initiatives fall short, however. They fall short not because of a lack of willingness by either party, but because the conversations go too quickly to solutions. It seems both parties recognize the threat and the need to work together. They share a very strong sense of urgency and a desire to make progress, but they skip over an important premise: new collaborations must yield new customer experiences and an upgraded value chain, but these partners must also reinvent the partnership.
The first step for reinventing a partnership is to establish a reason to work together and a common understanding of market conditions and competitive threats. Let’s look at three strategic goals for overhauling a value chain as planks for a new partnership. Consider this a template for collaboration for you, the distributor, to use with your suppliers. Look at it as one that will get the tough questions and answers on the table so that together you and your value chain partners can develop a new level of shared foresight and vision.
1. Reinvent the Shared Customer Experience
As disruptors like Amazon siphon away business from the traditional value chain, distributors and manufacturers must work together to redefine and upgrade the customer experience they offer. The partnership must not be about what is left to offer customers. Rather, manufacturers and distributors must go on offense and redefine and upgrade what the traditional value chain will do for customers. Why not discuss these questions with your suppliers and see what you can learn together?
- What are the unique goals of distributors and manufacturers for improving and innovating the customer experience?
- Where is the common ground for overlapping customer experience objectives between partners? Where does the potential for conflict exist?
- What does the data say about how customer shopping, buying and support preferences have shifted? What predictions can be made about what customers will want?
- What do distributors and manufacturers know about customer experiences delivered or enabled by disruptors, emerging technology and software, human-centric innovations and new uses for brick-and-mortar facilities?
- Given answers to these questions, can distributors and manufacturers come together and create a vision about how the value chain must evolve to stay relevant and offer a new and compelling customer experience?
2. Run the Value Chain on Data and Analytics
Data is the key to optimizing the value chain in terms of efficiency and the quality of customer experience. Traditionally, distributors and manufacturers protect their data as strategic and proprietary. This must change, if only because disruptors like Amazon own all the data of their virtual online marketplaces and compete on it. Distributors and manufacturers will be at a disadvantage unless they leverage their own data and analytics. These questions can help jump-start collaboration:
- As the customer experience offered by the traditional value chain evolves, what are the essential measures of overall value chain efficiency and effectiveness?
- For each measure, what data is held by distributors and manufacturers in existing databases?
- How can new data from digital tools and emerging technology like the Internet of Things and augmented reality be collected and leveraged?
- What analytic capabilities are required for collaborative analysis, problem-solving and innovation initiatives?
- How can the data be combined, analyzed and acted on? How can solutions be implemented industry wide, within loyalty or key partner programs, or by individual distributors or manufacturers working with their partners?
3. Align Incentives with Innovations to Unlock Change
A few years back, many manufacturers overhauled their distributor compensation programs to create strategic advantage by aligning incentives with outcomes desired from distributors. Programs evolved to signal strategic priorities and offer pay for performance and rewards for functional competencies. Today, distributors and suppliers are locked in “old school” behaviors and values by legacy compensation structures. Going forward, compensation plans should be aligned with helping the value chain evolve. Important questions to be answered include:
- What are the essential capabilities of a distributor in the digital age?
- What are the new performance metrics for value chain competitiveness?
- What value will manufacturers gain from distributor investments in e-commerce platforms, e-enabled sales and digital marketing?
- Given disruption, what are the new requirements for loyalty programs?
- Given the answers to these and other questions, how should the type of incentives and overall structure of distributor compensation programs change?
If you have experience working on a new collaboration, or if you are just getting started or you have hit a loggerhead, please reach out to me at email@example.com.
And, if you haven’t yet heard, the NAW Institute for Distribution Excellence has kicked off its 12th Facing the Forces of Change® wholesale distribution trends study … a continuing project that has charted the most important industry trends since 1982. I am privileged to be the lead researcher of this report. The key to a quality project outcome is PARTICIPATION by industry executives, including you. Please help us make this latest Facing the Forces of Change® report the most reliable, helpful and accurate one ever by giving us your feedback about industry trends. Your insight will help shape this important report. Please use this survey link and thanks in advance for your participation: https://www.surveymonkey.com/r/TM6PFZR