IN THE WORDS of the famous American philosopher Rodney King, “why can't we just get along?”
It was a question that brought almost 40 truck equipment distributors and manufacturers together in Indianapolis seeking ways to strengthen the bonds that have been battered in recent years by rapid changes in the way truck bodies and equipment are produced, sold, and serviced.
“The truck equipment industry faces unprecedented changes and increased customer demands,” NTEA President Vic Tedesco said in opening the meeting. “So, the question is not should we change? The question is how and when will these changes occur?”
The group agreed that distributor-manufacturer relationships have declined over the years for a number of reasons, many of them beyond the control of either party. Attendees also agreed — unanimously — that current working relationships are not prepared to respond to the changes taking place in the industry.
Participants listed a number of changes that are putting strains on working relationships between channel partners. In particular, the shift from a supply-driven industry economy to a demand-driven economy is having a major impact on relationships.
To serve as facilitator of the meeting and to lead the group in identifying ways to strengthen the working relationships between manufacturers and distributors, NTEA brought in consultant Robert Nadeau. Nadeau is managing principal of Industrial Performance Group (http://www.indusperfgrp.com), Northfield, Illinois.
“The customer is at a great advantage today,” Nadeau said. “He is better informed and in a position to create greater demands on suppliers.”
Participants agreed that customers are not only in a position to demand a better price, but they also expect better service and value — a situation that is squeezing the profits of everyone in the supply chain.
Nadeau reviewed 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.”
The starting point for developing stronger relationships between manufacturers and distributors is the customer — knowing in detail what the customer wants and expects. Participants received a worksheet designed to help them measure how well their companies know their customers. Customer-focused companies that know precisely what their customers want can then establish a relationship with their channel partner.
According to Nadeau, the ideal relationship should have these attributes:
A clear understanding of industry conditions
Clearly defined goals and plans for accomplishing those goals
Defined roles and responsibilities
Required knowledge and skills
High-quality, two-way communication (distributor to manufacturer and manufacturer to distributor)
A high level of commitment
A high level of cooperation.
Through discussion, participation, and exercises, meeting attendees concluded that they must recognize certain factors if they are to build stronger relationships. Among the factors manufacturers and distributors must accept:
The customer is in control
The current business model needs to change
Value — not products or price — forms the basis for the competitive advantage
Collaboration rather than competition (among the channel partners) will create greater wealth and profitability.
Meeting attendees concluded that manufacturers and distributors could become more profitable if they could improve their working relationships.
“There is a huge opportunity to grow our businesses and to do it profitably while keeping the customers happy,” Tedesco said.
Other events coming
Beyond the four regional meetings, the NTEA will initiate a number of other activities, some of them Web-based, that will continuously explore ways that industry participants can become more profitable through the development of better relationships.
NTEA is scheduling additional distributor-manufacturer relations meetings for October 8 in the Newark, New Jersey, area; November 4 in Las Vegas; and January 20 in metropolitan Atlanta. NTEA will be sending out registration forms to members as the scheduled meetings draw closer.
“This initiative has only started,” Tedesco said. “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.”