This is a part of the 2013 Distribution Trends Report. The annual report was researched and written by MDM editors based on interviews with dozens of wholesaler-distributors, as well as industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this report.

2013 Distribution Trends Report

Distributors are thinking more strategically about inventory in 2013, according to Jon Schreibfeder of Effective Inventory Management. Lately, he’s seen a sharp increase in inquiries from distributors who want to review their inventory policies and procedures.

“What we are seeing is that businesses are trying to get as lean as possible without harming customer service,” Schreibfeder says.

The cost of carrying inventory isn’t necessarily the issue because the cost of money is low, according to Mike Gassmann, chief growth officer for Van Meter Inc., Cedar Rapids, IA. “Instead, if we’re going to carry it, the inventory has to stay good, it has to stay healthy inventory,” he says. “So for us, the ability to minimize the amount of non-moving or dead inventory has really been our focus.” The distributor works with manufacturers to set up “exit strategies” for inventory that’s not moving.

Many distributors say they are putting more pressure on their partners. “Distributors are watching their inventory levels a lot more closely than they ever have been and are expecting the manufacturers to have more product on the shelf and be able to ship on an overnight basis if necessary,” says Chris Bursack, director of marketing for industrial distributor ISC Companies, Plymouth, MN.

Customers are more open to services distributors can provide that will help them improve productivity and lower costs, says Steve Drummond, general manager for Source Atlantic, Saint John, NB.

Customers don’t want to stock inventory, so distributors have had to make inventory management a priority to ensure uninterrupted service.  “What our people have to do is make sure they have just enough and not too much,” says Mike Nilson, president of Sabre Industrial, Langley, BC. But distributors say that can make serving customers more challenging if forecasts are off.

Some distributors are working with customers to get better estimates on future demand. Distributors are also providing more information to vendors to avoid erratic lead times. More distributors are also cross-stocking, bringing in large shipments on big savings from vendors, splitting them and sending inventory on to branches.

As a result, Schreibfeder says distributors are becoming more formal in how they determine what they centrally warehouse and what they replenish from a local branch. And for some, slower products are being centralized. “That would have dismissed that out of hand five years ago,” he says.

Schreibfeder says that distributors became more focused on better inventory management over the past couple of years, in part due to fear. This year he says it’s probably due to a renewed focus on profitability. Distributors are “able to breathe” and have left survival mode behind. “I just see people getting aggressive and not being complacent with having too much stock or not enough stock,” he says.

Employees charged with inventory planning are also gaining more respect in the industry, according to Schreibfeder.

“I’m seeing it especially in those companies that are publicly held or held by venture capitalists,” he says. “They are living or dying by their inventory levels.”