Why are manufacturer-distributor relationships hurting?

PREVIOUS conventions have featured educational sessions on manufacturer-distributor relationships. This year, however, the NTEA has some penetrating numbers that “should serve as a wakeup call,” according to Robert Nadeau of the Industrial Performance Group Inc of Northfield, Illinois.

Nadeau, who will be the presenter for “Manufacturer-Distributor Relationships: Why Are They Deteriorating?” (Tuesday, 1:30-2:45 pm), says that a recent survey of 750 manufacturers and 500 distributors shows a 9% decline in the overall level of commitment in their working relationships.

It also reveals that 82% of manufacturers and 92% of distributors believe that sales performance and profitability are being negatively impacted by problems in the working relationships.

For manufacturers, the biggest problem with their distributors is a lack of commitment to their products and promotional programs. They also indicate that distributors lack sales and marketing skills as well as the ability to effectively manage inventory.

The primary problem for distributors is the ineffective or inconsistent management of territories by manufacturers. The result: multiple and often conflicting channels to market, including direct selling. This condition greatly reduces the level of distributor commitment and trust for the offending manufacturers.

The research also reveals that manufacturers continue to do a poor job of providing direction for their distributors. Only 17% of distributors indicate that they have clearly defined goals and plans with manufacturers for accomplishing these goals.

Many of the same problems surfaced during the 1997 benchmark survey. However, data from the second phase of the study reveals that conditions in their working relationships appear to be getting worse: 49% of manufacturers and 42% of distributors tell us that the overall level of commitment in their working relationships is very low.

Fifty-one percent of distributors and 34% of manufacturers indicate that there is a low level of cooperation in the working relationships.

The greatest area of concern is the extremely low level of communication: 63% of distributors and 73% of manufacturers indicate that high-quality two-way communication is virtually nonexistent in their working relationships.

“The findings should serve as a wake up call for manufacturers and distributors alike,” Nadeau says. “By neglecting to maintain their working relationships, manufacturers and distributors are being forced to spend more on sales and marketing budgets while their margins get squeezed even further.

“Nonetheless, these findings should not be viewed as finger pointing at either manufacturers or distributors. The real message of this study is that tremendous opportunities exist for both parties to improve sales performance and profitability simply by strengthening their working relationships.”

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