The Importance of Supply Chain Synergy
By Robert Baskin & Sarah Helbig
The goals of every player in distribution are essentially the same: increase sales, lower costs and increase profitability. However, supply chain partners often aren’t aligned to help each other grow, meet customer demand and continuously optimize the costs of doing business. Understanding the responsibilities within the manufacturer-distributor relationship is critical to developing long-term success.
Manufacturers and distributors tend to pass responsibilities back and forth without taking ownership of them, especially with customer outreach and marketing. Understanding who does the bulk of the outreach, who supports it and how, and having a good collaborative process can help smooth the relationship and ensure that both sides gain from the partnership.
Establishing a fair pricing structure in line with market conditions helps provide an underlying base for marketing, while the brand content and marketing materials created by the manufacturer further build this foundation. Quality information that can easily be repurposed while maintaining the message is a crucial element. Once this foundation is set, the manufacturer should aid in the marketing effort by funding co-op programs and marketing support to downstream customers.
This manufacturer-created foundation enables and empowers the distributor to perform its side of the equation – to sell products in the highest volume with the lowest costs possible. This begins with buying in large enough bulk to ensure proper margins and that end customers can purchase without delay.
The distributor also shares marketing and promotion duties. The most important aspect of the distributor relationship, however, is the relationship with the product’s end user. Closing the short-term sale is essential, as is managing long-term customer satisfaction.
One way to increase the likelihood of a positive relationship is for both sides to supplement their sales force outreach with a multichannel marketing solution. By using data-driven, multitouch communication through a variety of channels, manufacturers and distributors can optimize marketing efforts while keeping costs in check.
In an economic environment of smaller margins, squeezed sales forces, increasing technology and company mergers, accepting ownership of these responsibilities will often reduce profits in the short run, but if both sides hold up their end of the bargain, profitability will eventually surge. When all elements of the equation work together, sales will grow and costs will decrease, improving the bottom line for all parties.