The 2020 Mid-Year Economic Update_long

Commentary: A Difference in Degrees

As a pivot point in the flow of products from the point of manufacturing to end use, distributors have several key roles -scout, gatekeeper, product and solution provider, marketer, arbiter. Every successful distributor combines these roles into a unique set of skills that creates value for customers as well as suppliers. Distributors create the most efficient market system into highly fragmented industries and local economies by effectively managing these market relationships both upstream and down. It's a fairly simple equation that is complex to execute well.
 
Not that most distributors have time to sit around and ponder their place in the universe. But that's just it. The interview that leads this issue touches on a key differentiator that separates a relatively few ...

As a pivot point in the flow of products from the point of manufacturing to end use, distributors have several key roles -scout, gatekeeper, product and solution provider, marketer, arbiter. Every successful distributor combines these roles into a unique set of skills that creates value for customers as well as suppliers. Distributors create the most efficient market system into highly fragmented industries and local economies by effectively managing these market relationships both upstream and down. It’s a fairly simple equation that is complex to execute well.
 
Not that most distributors have time to sit around and ponder their place in the universe. But that’s just it. The interview that leads this issue touches on a key differentiator that separates a relatively few excellent companies from a whole lot of pretty good ones. And the issue isn’t about available resources of large versus small companies. It’s about focus.
 
You can’t have 1,000 strategic partners no matter how large you are. Too many distributors and manufacturers operate as though you can. As Robert Kaplan advises, you have to make a strategic choice about who your partners are. Identify the 10 or 20 that are important to moving your organization forward. With all the buzz about lean and tightening the ship in a tough economy, it’s ironic that the focus tends to stay within the four walls of the company, particularly for a distributor! How many of your resources are drained trying to manage too many supplier relationships? Or too many unprofitable customer relationships?
 
That’s where strategy separates companies, particularly in the current turbulent cycle where distributors and manufacturers have to dig harder for growth. Too many suppliers have been slow to adjust relationship management away from strictly a sales volume metric. And too many distributors have been content to pile on product lines to drive revenue growth.
 
Kaplan advocates his Balanced Scorecard methodology to help manage relationships with partners beyond financial measures. Talking about the measures that will govern the relationship is a great way to forge partnership with key suppliers and key customers. Then you should periodically monitor how you are doing on that relationship.”
 
Companies that extend their measurement and management systems to their strategic suppliers and customers have a clear advantage. They spend more time creating opportunities than reacting to circumstances, many beyond their control.

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