The 2020 Mid-Year Economic Update_long

Commentary: Channel Management Emerging as a Differentiator

The spring meeting season, now coming to a close, has been significantly more upbeat than for several years. Sales remain strong, with many distributors setting record sales months. Others are rebuilding sales levels back to where they were in the late 1990s.

Nearly every company can say it has fewer people working more efficiently than a few years ago. That is in some cases a natural outcome of the current part of the business cycle. But distributors are also driving lean initiatives in some form. Some of the quality efforts of the 1990s ended up a hit and miss proposition. Sales were so good that few distributors had a compelling reason to go beyond the minimum requirements of customers.

Today many companies aren’t instituting official lean programs, yet they have adapted the core principles of lean to their internal operations to be more competitive. An interesting shift has been that more companies are pushing lean practices out to their channel partners.

Channel management is in fact emerging as a competitive differentiator. Of course, that has been true for a select group of distributors and manufacturers for a long time. Yet conditions this year are lighting fires to pursue what has traditionally been pushed off.

Continued consolidation, increased global sourcing, tighter customer requirements, new competitors from other channels all these factors are creating new game plans for distributors, as well as manufacturers who rely on independent distribution.

Distributors have to ask how flexible they are today to manage new conditions and requirements, whether with their core suppliers or core customers. The old tools won’t create the new relationships necessary to compete.

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