They may never share a romantic candlelight dinner, but distributors and manufacturers who are united in a supply chain are certainly in a relationship.
And in channel relationships, as with any other kind, the key to success can be summed up in one word: communication.
Sounds simple. But, as in any relationship, communication between distributors and manufacturers can be fraught with landmines. We’ve all experienced communication misfires, so we know this intuitively. But a few years ago, as part of a study of terminated channel relationships, we documented conclusively the disruption that occurs when parties aren’t talking and listening to each other.
In that study, we looked at distributors that had lost one of their top three lines. And in every case, messages were being sent that weren’t being heard, or messages were being heard but not responded to.
The reasons for that are simple: Whether you’re a distributor or a manufacturer, you’re looking out for your own best interest. And those interests often conflict. Here’s an example: A manufacturer may want a distributor to lose a sale if the sale didn’t involve their brand. At the same time, a distributor would rather carry a competing brand than sacrifice a sale.
Conflict is inherent. But we found that could often have been overcome if only the manufacturer and distributor had listened to each other and responded.
Instead, we heard of scenarios where, for example, a distributor will tell a manufacturer that lead-time fluctuation is creating unhappy customers. The manufacturer knows it’s a computer issue, knows the company plans to overhaul the system in a few months, and takes no action. But — and this is key — never communicates those computer-fixing plans to the distributor.
Or a distributor may complain about pricing, and the manufacturer chalks it up to whining. Neither takes steps to address the issue.
It happens over and over. People don’t listen, or they don’t want to listen. Of course, they believe they are communicating. But, as with romantic relationships, that so-called communication often takes the form of, “But enough about me. What do you think about me?”
Over time, this pattern of not being heard builds resentment, and this can happen with either party. Eventually, there comes the proverbial straw that breaks the camel’s back, and the channel relationship breaks apart. And more than likely, one of the parties will be shocked, because they didn’t see it coming, while the other would say the problem has been simmering for years.
The bottom line is, a lot of channel relationships — like marriages — could be saved by talking honestly — and listening.
To learn more about Mike’s approach to value creation in distribution, read his NAW-published books: What’s Your Plan? Smart Salesforce Compensation in Wholesale Distribution, Working at Cross-Purposes: How Distributors and Manufacturers Can Manage Conflict Successfully and Value Creation Strategies for Wholesaler-Distributors.