What You Should Know Before You Decide to Switch Your Distributor
When we work with customers, we ask them to consider their distributor relationship in totality. Generally speaking, there are three foundational elements to that relationship: access/stocking, reliability, and financial terms. And each of these, though somewhat intertwined, should be examined independently to assess the overall health of the relationship. Sometimes a customer may be fixated on one area or may not fully understand the benefits they are receiving in other areas. We often help customers with these assessments by providing industry insights. This helps present an objective picture of performance and can act as a check against what can be a very emotionally-charged decision.
Once we have a proper diagnosis based on the data and are agreed that opportunity for improvement exists, our recommended first course of action is for the customer to share what they’ve learned with their current distributor. Customers are often surprised by this recommendation. GPO service providers have a reputation for pressuring customers to immediately look to other distributors. This may be because the GPO requires a distributor switch for a customer to utilize their services. However, at Foodbuy, we have the flexibility to work with any distributor and we have found that constructive dialogue with the distributor improves value for the customer.
The distribution landscape has changed significantly in the past few years and is experiencing both consolidation and reduction in capacity. They are also seeing higher costs to serve due to ongoing driver shortages—the result of an aging workforce, Department of Transportation regulations, and a significant increase in demand. In this environment, most distributors want to keep good customers on their books if there is a way to do so profitably.
So how can you get the improvements you’re looking for with your current distributor? Try to find the wins for them where there is little or no negative impact on your organization. Here are some areas to consider:
One win might be looking at your current service model. Do you really need three day a week delivery? A higher drop size may result in an earlier delivery and is certainly more efficient for the distributor. Can a delivery day be changed? A distributor is likely to ship many more cases on a Monday and a Tuesday. Could you exchange a different delivery day for a more attractive delivery window?
It is also worth looking at your proprietary inventory. What do you truly need that is critical for your operation? The more you can reduce the number of SKUs, the more attractive a customer you will be. A compromise approach might be to trade a reduced number of proprietary skus for reduced volume requirements for the items that are mission critical.
The distributors are interested in being paid as quickly as possible. Can you negotiate an early pay incentive?
Do you need a salesperson to visit “in person” on a regular basis? Do they bring enough value for you to pay their commission? Working with the distributor’s inside sales team and utilizing web-based ordering platforms might suffice and will reduce the distributor’s cost to serve.
This is by no means an exhaustive list but hopefully gives you some insight into how you can create a win-win, long-term relationship with your distributor.
If you would like to learn more about how we can help you with your decision process, please Contact Us.