Decoding Manufacturer, Distributor Relationship Expectations
Data Should Help Define Realistic Conversations
Steve Deist is a partner at Indian River Consulting Group (IRCG) and someone that HARDI has called upon to head a session during the association’s annual conference, Evolve ’13. Distribution Center called Deist and got an inside scoop as to some of what he would be covering during his presentation for the Supplier and Manufacturer Representative program on Saturday, Dec. 7.
A central part of Deist’s presentation will focus on the distributor’s role in creating demand and what that actually means. He will also take a specific look at distributors’ partnerships and relationships with other links in the supply chain. The information presented will be based off HARDI Foundation’s Demand Quantification Project — a study he directly participated in.
“The presentation and the research project were designed to try to articulate the services and the things that distributors do to create and hold on to markets,” Deist explained. “We want to use the data to make these things more objective. In the channel we have a lot of discussions between distributors and manufacturers, and they tend to be data-free discussions.”
According to Deist, data-free discussions aren’t productive and can become emotional as opposed to business discussions based on facts.
“In some sense these conversations are almost predictable. The manufacturers say, ‘We aren’t really seeing what the distributors do. We know that they put a bunch of mark up on our products and sometimes they don’t even stock them. It’s hard for us to appreciate the things that they do,’ ” he said. “Then on the distributor side they say, ‘Well manufacturers aren’t really creating demand for their products. They just come out with something new and expect us to promote it on our own nickel. In the meantime, they’re opening up distribution and letting anybody sell the product. There is no incentive for me to worry about promoting a manufacturer’s product if I am going to have competitors sell the same thing, who aren’t going to spend that same money on promotion, and who can afford to undercut me.’ ”
Deist plans to look at the data from the study so as to provide a way that distributors and manufacturers can discuss their roles and products. A summary of his findings will be a part of the presentation.
Besides exploring and applying the data from the study, Deist will be looking further at distributor partner relationships and what can be realistically expected from them.
“In a lot of cases, business relationship frustration comes from a partner wanting something specific from the other company,” he explained. “Yet after looking at the economics of the business offered and the incentives, sometimes it is not a realistic request. It comes down to what you can and cannot realistically expect distributors to do in terms of demand creation in the channel.”
To help accomplish this, Deist intends to give his audience an overview of how distributors look at and evaluate manufacturers’ lines, as well as how they make decisions about investment in manufacturers’ lines.
“I am going to give them a much clearer picture of distributors’ costs to provide demand creation and services,” he said. “I will also look at how those costs vary by product categories.”
Deist noted that he is looking forward to having a mathematical model from the research being conducted by IRCG.
“There is a cost to creating and fulfilling demand, and this research is expected to give us a mathematical model to help explain it.”
Saturday in Phoenix
There are multiple other sessions and activities on the agenda for Saturday at the HARDI annual conference. The first is an optional golf outing at the Wildfire Golf Club, where attendees will get a view of the Phoenix landscape on a Palmer Signature Course.
The traditional Distributor Town Hall meeting will be held on Saturday as well. It is a closed door session that according to HARDI, is intended to bring distribution’s leaders together in an open discussion format to address topics essential to the long-term growth and prosperity of HVACR wholesale distribution. The meeting will be run by Talbot Gee, HARDI executive vice president, and Brian Cobble, HARDI president. Development strategies, HARDI’s policy positions, and future priorities are on the list of topics to be discussed.
As the evening rolls around in Phoenix, conference attendees will make their way to the opening reception and a silent auction. The auction, hosted by Helping All Live on (HALO) membership will benefit Homes for Our Troops (HFOT), a national nonprofit organization dedicated to building specially-adapted homes for service members who have been severely injured in combat operations since Sept. 11, 2001. Auction items were donated by HARDI members prior to the conference. HARDI donated a full executive conference registration valued at $700. The registration is valid for the 2014 or 2015 annual conference.
For more information, visit www.hardinet.org.