The meeting, held May 30 in Indianapolis, organized by the National Truck Equipment Association, tackled what has been described as “the often troublesome and complex issues associated with manufacturer and distributor relationships.” Attendees discussed ways to initiate change for the benefit of all involved, according to a June 12 announcement from NTEA.
“The truck equipment industry faces unprecedented changes and increased customer demands,” said Vic Tedesco, president of Zoresco Equipment in Turtle Creek PA, and this year’s NTEA president. “So, the question is not ‘should we change?’ The question is ‘how and when will these changes occur?’”
Attendees concurred that distributor-manufacturer relationships have declined over the years for a number of reasons, many of them beyond the control of either party. More importantly, delegates agreed unanimously that current working relationships are not prepared to respond to the changes taking place in the industry.
Chief among the number of occurring changes that are putting strains on working relationships between channel partners, participants noted that the shift from a supply-driven industry economy to a demand-driven economy is having a major impact. As meeting facilitator, consultant Robert Nadeau, managing principal of Northfield, IL-based Industrial Performance Group (www.indusperfgp.com) explained, “The customer is at a great advantage today; he is better informed and in a position to create greater demand on suppliers.” Participants agreed that customers are not only in a position to demand better prices, but they also expect better service and value. As a result, greater profitability pressures are put on everyone in the supply chain.
Nadeau reviewed and discussed the different relationships that are required during various evolutionary stages of an industry. According to Nadeau, the truck equipment industry is in a mature stage, one he calls “hyper competition,” and is heading to a more dangerous stage called “shakeout.”
In the shakeout stage, many companies will not survive if they do not have strong channel partners that help them compete on a value basis — thus the need for strong and lasting relationships. Nadeau stated, “You must learn how to compete on value. You cannot continue to compete on low price.” He continued, “Businesses will grow by taking business away from other industry participants, and the only way to do that is to build better manufacturer-distributor relationships that will help you compete by offering better value.”
Meeting participants came to the consensus that you must know your customer in order to set up value relationships. Once you have achieved this, you must establish and maintain a relationship with your channel partner that is based on a number of specific attributes identified by the group.
Finally, seminar attendees concluded that to move forward on building value relationships, distributors and manufacturers must accept that the customer is in control; the current business model needs to change, value (not products or price) forms the basis for the competitive advantage; and collaboration rather than competition (among the channel partners) will create greater wealth and profitability.
Beyond conducting the four regional meetings, the NTEA will initiate additional activities to continuously explore ways that industry participants can become more profitable through the development of better relationships. According to Tedesco, “This initiative has only started. Participants at the Indianapolis meeting saw that relationships can be improved in a positive and collaborative way. Those companies that have the initiative and drive will begin to use what they learned at the meeting to begin building more profitable relationships.”