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In The News:

The Changing Role of Services

February 2, 2011

Guy Blissett, author of the latest Facing the Forces of Change report from NAW, encouraged attendees at the recent National Association of Wholesaler-Distributors annual meeting to "think broad and innovative" when it comes to services.

He said the first step for distributors is to determine how they define a "service" so that they can create a strategy around services. "There is no right or wrong answer," he said.

He presented a slide with four spectrums to help guide distributors:

  1. Core (for example, delivery) vs. Value-added (beyond the normal course of business)
  2. Fee-based vs. free
  3. Bundled vs. unbundled
  4. Product vs. personnel

A key element of the services conversation has to be around the distributor's perceived and desired position in the supply chain, Blissett said, as services can be an important source of differentiation.

According to the survey conducted for the Facing the Forces of Change report, 51 percent of respondents sell services to customers for a fee separate from product costs. Even more interesting: 35 percent of respondents have no plans to do this, while 14 percent plan to do so by 2015.

About 43 percent said they offer discrete services to customers for a fee – with no product purchase required. And 27 percent offer third-party logistics to customers as a fee-based service.

A few of the questions Blissett said distributors should ask when considering services:

  • What services do our customers and suppliers value, which are differentiating and which they are willing to pay for?
  • How can we change value perceptions where gaps exist?
  • Do our service offerings reinforce our customer and supplier relationships?
  • Are the service offerings a sustainable source of competitive advantage or can they be readily duplicated by our competitors?

My interview with Blissett will be featured in the next issue of MDM Premium, out Feb. 10, 2011. We discussed the services question in detail, and the challenge distributors have analyzing the costs associated with services (and therefore the profitability of these offerings). Not a subscriber? Subscribe here.

Facing the Forces of Change: Decisive Actions for an Uncertain Economy is available through NAW.

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