The past year has revealed the critical nature of the supply chain to a contractor’s success. No matter how well a contractor performs, he can’t take care of customers without the right parts and equipment. For a contractor, the most critical link in the supply chain is the one with his supplier/distributor. Conducting a supplier review can enhance and strengthen this relationship.
At the 2022 Air Conditioning Contractors of Ohio Convention, Ed Bishop from Winsupply presented his recommendations on the content of a supplier review. While there are fairly distinct differences between supply houses and distributors in the industry, they are not important here, and the terms can be considered interchangeable. Here are Ed’s recommendations:
1. Hold the Review Offsite.
This avoids the constant stream of interruptions that would occur at the contractor’s shop or the supplier’s office.
2. Conduct a Review of the Contractor’s Business.
This is a review of purchases from the supplier over the past couple of years. What is the trend? How does this compare to the supplier’s total book of business? It should be a two-way dialogue.
3. What Works Well?
Each party should discuss what he believes is working well in the supplier/contractor relationship.
4. What Does Not Work Well?
This is where positive changes can be identified that can solidify the relationship and make it work better for everyone. Both parties must be candid.
5. What Costs the Contractor Money?
The contractor should share ways the distributor can save the contractor money and where the distributor’s action cost money. Sometimes distributors are unaware of simple changes they can make that will save a contractor considerable agony.
6. What Costs the Distributor Money?
Now it’s the distributor’s turn. What is the contractor doing that creates pain for the distributor? It may not even be anything the contractor is doing, but something other contractors are doing. The point is to make the contractor aware so he avoids the practice.
7. What Percent of the Contractor’s Spend Is Given to the Distributor?
Sometimes a distributor is unaware of how much of a contractor’s business he receives. He may perceive a reduction in purchases is the result of dollars being shifted elsewhere when the contractor is seeing a contraction.
8. What Is the Total Spend Available?
Again, with the idea that the supplier and contractor are building a partnership, transparency is important. The contractor should let the supplier know what he is spending. This helps the supplier understand the unrealized opportunity.
9. What Are the Contractor’s Goals?
The contractor needs to be candid and share where he wants to take his company over the next few years. This gives the supplier an opportunity to align with the contractor’s goals.
10. Who Are the Top Movers in the Market?
Suppliers have a better view of the overall market than any individual contractor. By sharing who the supplier believes is performing well, the contractor has a benchmark. It helps him understand what competitors he should study.
11. Who Is Losing?
This is the same concept in reverse. It might also lead to acquisition opportunities.
12. What Manufacturers Are Performing Better?
Some distributors might struggle with sharing this information. It is important for the distributor to remember that the contractor is his partner and is going up against competitors carrying these brands every day where the rubber meets the road.
13. What Are Other Contractors Doing?
Is there a best practice the contractor should know about it? Are there moves competitors are taking that he should be aware of? If a distributor feels there might be a conflict because he would be sharing information about another of his dealers, the distributor should limit the information to what is publicly available and known.
14. What Actions Will Be Taken?
Throughout the review, both the contractor and supplier should be taking notes about action items to be followed up on. For a supplier review to be truly valuable, tangible actions must be taken.
15. What Are the Follow-Up Dates?
Each action should have a completion date, and regular follow-ups should be scheduled for each party to check on the actions taken by the others.
One of the outcomes of a supplier review is each party should leave with a clear understanding of the expectations of the other party. Each should know what is important. The days of channel conflict and distrust are antiquated. Today, transparency and candor are required to construct a mutually beneficial partnership where the distributor and contractor work together to fight market forces, not each other.