As the title of the best seller book suggests, the world is getting flatter. Distribution has been a facilitator and victim. The primary theme of the book outlines the challenges, risks and rewards the U.S. faces due to shifts in world politics, economics and technology over the past few decades.
Arguably, independent or authorized distribution channels have been flattening since the late 1980s, as systems contracts, integrated supply and other “new” forms of procurement strategies aggregated and streamlined purchasing methods. Many traditional distribution relationships at the customer and manufacturer were displaced in favor of apparently more efficient and cost-effective ways to buy MRO materials. Product barriers flattened as distributors sold deeper into specific customer needs and reduced total procurement costs.
The latest flatness indicator is the announcement by Grainger that it plans to double the number of products in its catalog. Grainger will enter niche product areas it never used to sell because they were too small. That’s changed as distribution has flattened.
What didn’t hit the headlines is how suppliers feel about the product expansion plan. Manufacturers pay for space in Grainger’s catalog model. Will that space be more diluted in the future? Will it hold the same ROI? Will Grainger chase alternate and more competitive sourcing options to broaden its product areas aggressively?
Independent distributors will continue to thrive, not by offering either a flat or round world to customers, where the most destructive margin wars will be fought. The winners will be helping customers in irregular, customized worlds where the distributor has created a clear value offering.