Delivering for Best-in-Class Wholesaler-Distributors
May 30, 2019  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow

A primary goal for the next Facing the Forces of Change® report, which will be published in November (sign up here to be notified when you can preorder it), is to help distributors get out in front of market trends with innovations that help customers transform their business for the digital age. Just as every distributor is considering how they will do business in the digital age, so is every customer of distribution. By working with customers as a partner for change, distributors can create new value, fend off disruption and build sustainable, perhaps impenetrable, customer loyalty. Collaborating with customers can lead to expanded service offerings as distributors are recognized as a valued partner with a deep understanding of their customers’ challenges and opportunities.

As distributors transition to a business model dominated by services, there is a growing realization that suppliers are customers too. Precedent is a prison, however, and distributor–manufacturer relationships are locked in place by established distribution programs and policies. Manufacturers will continue to value distributors primarily as a channel for stocking inventory and taking orders until distributors create compelling alternatives. Distributors must offer a compelling vision of how to revitalize the value chain in response to disruptive threats. The key to success is not to merely replace today’s arrangements with a new approach, but to identify strategic problems and opportunities for manufacturers. The best ideas may be solutions that suppliers have not identified themselves.

A recent article in Forbes, “Manufacturing-as-a-Service: The New Efficiency Revolution,” points out an opportunity for distributors to help manufacturers harness a force for change. As the article explains, additive manufacturing technologies have led to the formation of new platform business models that connect customers with manufacturers to place orders. Increased connectivity is leading to facilitation of orders for custom manufacturing of products by traditional means as well. Manufacturers benefit through increased factory utilization. Customers gain a more efficient method for acquiring products made to specific specifications. Players like Xometry and 3D Hubs are building the platforms and leveraging artificial intelligence to optimize productivity. There are benefits for small manufacturers that have failed to leverage the internet for connecting with customers.

Usually, distributors might view manufacturing-as-as-service (MaaS) trends as another form of disintermediation, because it creates a direct link between customers and suppliers, cutting out the traditional role for distributors. However, if distributors adopt a different mindset — one where suppliers are customers — then new opportunities may emerge. Based on our ongoing research for the upcoming Facing the Forces of Change® report, here are four ideas to help kickstart your ideas for assisting suppliers in taking advantage of MaaS trends in a way that creates mutual benefit:

  • Promote awareness of MaaS solutions. Distributors already serve the customers of many manufacturers, large and small. Through traditional and digital marketing, combined with sales efforts, distributors are in a strong position to help suppliers build awareness of their MaaS services. Distributors could also create partnering arrangements with platforms directly. Moreover, as distributors build light manufacturing and private label products into their business, they can participate on MaaS hubs as a supplier.
  • Manage the total MaaS customer experience. Unlike consumer products, business brands are built through customer experiences and not through advertising. Distributors are local, human businesses that can do what virtual platforms can’t. That is, distributors are in a unique position to create the customer experience, thereby building their brand and the manufacturer’s brand. MaaS may be about direct ordering fulfilled by direct shipping, but distributors can make sure that the total customer experience before and after the sale is optimized for all supplier products.
  • Offer Distribution-as-a-Service. As distributors help suppliers to promote MaaS, and they manage the overall customer experience, they are not earning margins by selling products from inventory. This creates an opportunity to gain compensation from suppliers as a service. If distributors help suppliers to capitalize on MaaS as a strategic opportunity, then the compensation earned by distributors may be significant. Over time, distributors may offer distribution-as-a-service to a wide range of existing and new suppliers and customers.
  • Create your own platform-based business. Distributors are considering transforming their business model to one that is a platform business which offers specialized services with game-changing solutions. With creative thought, distributors may be able to incorporate connecting customers with manufacturers for MaaS ordering as part of their overall platform and complemented by other innovative solutions for customers.

The manufacturing-as-a-service trend is new and growing, which is even more reason for distributors to reach out to suppliers now. By doing so, distributor leaders can offer their vision for how markets are evolving and how the traditional distributor–manufacturer partnership may evolve. Distributors are experts at optimizing efficiencies, and efficiency is a significant driver of the MaaS trend. Thoughtful leaders can carve out a role for distributors, and in so doing, open a new line of innovation to help distributors survive and thrive in the digital age.

One more thought: If you haven’t considered how to offer your capabilities through a distribution-as-a-service (DaaS) model, you are behind. For your explorations, here is an example of DaaS for market expansion, one of many priorities for suppliers. I don’t argue that DaaS is an established trend for traditional distribution; but if MaaS is growing, distributors should consider DaaS as an opportunity.

I found the Forbes article that I referenced in this post as part of my ongoing research for the upcoming Facing the Forces of Change® report. If you read the article and have different experiences or ideas, please reach out to share your takeaways with me at mark.dancer@network4channelinnovation.com.

And, if you’d like to be among the first to preorder NAW’s next Facing the Forces of Change® study, submit this form.

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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Channel Innovation to drive awareness, advocacy and excellence for channel innovation, and to enable an exchange of ideas between channel leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve channel excellence across a wide range of industries in developed and emerging markets.

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