Distributor advisory councils can provide a more formal avenue for distributors to add value to the channel by providing local market knowledge to manufacturers in a structured setting. This article looks at best practices in implementing a distributor advisory council and why manufacturers and distributors have benefited from participating in these groups.
By formalizing a process for increased communication and partnership, Distributor Advisory Councils are one way some manufacturers have strengthened their relationships with distributors.
Welding, cutting and safety products manufacturer Thermadyne for example started a distributor advisory council in 2005 to move from informal ad hoc meetings to a more formalized process for getting distributor feedback on markets, products and policies. Thermadyne’s advisory council meets twice a year, but other manufacturers’ councils may just meet once a year. Most have more informal contact throughout the year through teleconferences or email.
Thermadyne’s Vice President for Distributor Relations Jim Horvath says the formation of the distributor advisory council has been “critical” in building better distributor relationships. “It’s really been illuminating for all of us,” he says.
It’s hard to say how many manufacturers have implemented some form of distributor advisory council, versus how many depend on more informal programs to seek distributor input or don’t actively seek input at all. Some say the number of suppliers creating distributor advisory councils is increasing but they are still a small percentage of the overall market.
To be sure, there are other ways manufacturers seek input from distributors aside from distributor advisory councils. These may include one-time meetings or special groups convened to solicit input on a specific issue; annual summits for a larger, but select group of distributors; meetings at industry conventions/trade shows; and sending leadership on the road to meet with distributors.
“They can all be effective to some degree,” says Matt Onofrio, president of industrial distributor GT Midwest, Wichita, KS. “It’s a matter of how the feedback is collected and used.”
But distributors that have participated in distributor advisory councils say that the groups have played a critical role in building channel relationships.
“It’s definitely had an impact on my relationships with sponsoring suppliers. The councils have created a sense of partnership and cooperation that might not have existed otherwise,” Onofrio says. “The suppliers who sponsor councils get a larger mindshare from me and from my field sales force.”
Kevin Boyle, who ran adhesives manufacturer Loctite’s distributor advisory councils and is now helping other manufacturers implement or improve them, says a distributor advisory council provides a more formal avenue for distributors to add value to the channel.
“One of the value propositions of a distributor is local knowledge of the market,” says Boyle, president of Industrial Distribution Consulting LLC. “The distributors are in the perfect place to tell you about trends and issues in the marketplace. There’s no one better.
“An advisory council does this in a more formalized nature. It allows a distributor to provide that value-added service for the manufacturer.”
Horvath agreed. “We don’t work in a vacuum,” he says. “Very frequently, you think you know the answer. And you really don’t. You don’t know until you ask your customer.
“Times change and requirements change. It’s an evolving marketplace. In the past, you may have sat in a room with your marketing people and come up with products and ideas for your customer, and threw it over the fence and hope it sold. That’s not how it works today.”
Distributors see belonging to distributor advisory councils as a way to better influence distribution policies and program; better understand and use those programs; develop relationships with a manufacturer’s senior management; and learn from their distributor peers.
“Perhaps the biggest of those benefits has simply been the relationships with both Loctite’s management team and with my peers,” says Onofrio, who has been involved with Loctite’s distributor advisory councils for the past eight years.
Jeff Ramras, vice president for Supply Chain Management at Applied Industrial Technologies, Cleveland, OH, says though the $1.89 billion industrial distributor frequently communicates with its vendors, it benefits greatly from its membership on several manufacturers’ distributor advisory councils, including Timken, SKF, Loctite and others.
He says that structured communication between a group of distributors and a manufacturer’s senior management across disciplines can have a strong impact.
“The message gets heard differently,” Ramras says. “The result in the end is that better decisions are made, and better strategies are formulated. Actions may be taken more quickly.”
He says he also benefits because he learns from the other distributor members, as the groups are usually a mix of distributors of different sizes, channels and product focus.
Just because a manufacturer starts a distributor advisory council does not mean that the initiative will have its intended effect. Distributor advisory councils require time and money on the manufacturer’s part, and if high-level commitment does not exist, manufacturers may not get the return they are seeking.
And some manufacturers view a commitment to an advisory council as expensive. But Boyle says it doesn’t have to be. “A lot of people put a lot of expense into them because they use them more as a sales event for distributors, rather than looking at it as engaging consultants,” he says. “An advisory council does not need to be expensive as long as the distributors know that you are really sincere about seeking their help.”
And that’s key. Wayne Wagner, president of industrial distributor Krayden Inc., says when a manufacturer holds a meeting, but does nothing apparent with the information distributors provide, that can be discouraging.
Also, some say that when a supplier turns a distributor advisory council meeting into a sales meeting, it can result in a lower return and less active involvement from distributors.
Instead, if new products or promotions need to be a focus, Boyle recommends using the meetings as way to ask for feedback from distributor on planned promotions, rather than just disseminating product information.
Boyle says Loctite has evolved its distributor advisory councils to improve the depth of information the manufacturer was getting. “We used to ask sales and marketing questions to senior management,” he says. “We were under the impression they knew the answers, but that wasn’t always true.”
Learning from this, however, has strengthened Loctite’s advisory councils, Boyle says. Loctite realized it needed to recruit management that dealt directly with sales and marketing, or operations, to sit on its distributor advisory councils. Still, many manufacturers don’t take this approach. Some prefer their advisory councils to be cross-functional.
Thermadyne and Loctite say they have formal follow-up mechanisms for the suggestions offered during distributor advisory council meetings. For Thermadyne, that means meeting every four to five weeks to review action items so that the manufacturer can provide an update on progress to the distributor advisory council at its next meeting.
Boyle offered an example of successful follow-through on distributor feedback. About six years ago, Loctite implemented a new SAP system. The company looked to its distributors for advice on smoothing the process. What resulted was an implementation guide that became the template for all of Henkel, the German parent company of Loctite.
Boyle says the guide focused on what a distributor needs to know before Loctite “throws the switch.” The council’s advice was not to do a mass communication but instead send the guide to key people in distribution companies, and that those people would send what mattered in the guide to the people who needed to know it.
In addition to helping to create more efficient communication overall, distributors told Loctite not to bother with printed materials. Instead, they would send the information electronically. “They saved us a lot of money,” Boyle says.
Onofrio cited this process as a success story for the advisory council. “Nearly all of the council’s recommendations were implemented,” Onofrio says. “From our perspective, their SAP implementation was the smoothest we’ve seen.”
Changes that stem from distributor advisory council meetings don’t have to be extensive to have an impact. In response to comments made at a meeting, Thermadyne, for example, cut down on the amount of paper and cardboard in its packaging. “It saved us money and it was greener,” Horvath says. “It was their recommendation.”
Ramras of Applied Industrial Technologies offered best practices based on his experience in different distributor advisory councils. Many of these were echoed by other distributors and manufacturers:
The supplier should have a clear idea of what it wants to achieve through a distributor advisory council and should communicate this through a mission statement.
An agenda should include items from both the supplier and the member distributors, and should be sent well in advance of a meeting.
Clear respect for the council members’ time is important. When crafting an agenda, suppliers should work to find a balance between social events and business that meets council members’ scheduling needs.
A good mix of distributor members, taking into account size, geography and channel focus. This not only benefits the suppliers, but also provides more opportunity for distributors to learn from each other.
Keep antitrust laws in mind. Distributors may be competitors on the council. As a result, some have legal counsel present during meetings.
Set aside time during the meeting for the distributors to meet on their own to list additional concerns, issues or ideas, which then can be presented to the supplier.
Suppliers should take good notes and follow-up with distributors with minutes of the meetings. Throughout the year, the supplier should update members on progress on action items.
Another Channel Management Tool
Ramras says he has been surprised at the different approaches to markets by the other distributors or differing opinions on opportunities from the supplier’s point of view.
It’s a clear example of why formalizing a way for distributors to provide such feedback has value for both parties.
To achieve effective communication through a distributor advisory council, though, distributors and manufacturers have to approach meetings with an open mind, Boyle says.
“And listen to what’s being said,” he says. “You want to be in an environment where people won’t tell you what you want to hear, but what you need to know.”
The bottom line: When implemented with a goal in mind and with the right people – who are willing to speak up – a distributor advisory council can be a productive tool for manufacturers to tap the independent distributor channel for the value it can provide.