Is It Time for a Wake Up Call?

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Is It Time for a Wake Up Call?

• Distribution Conference
• Reno 2005

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Ed RunnerE. C. Runner Associates, Inc.

• 1 630 365 1898

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Is It Time for a Wake Up Call?

• A. History Trends
• B. Important Issues Today
• C. Critical Decision Time

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• A. History Trends

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History- General Business 1955

• Pent up demand.
• Unlimited resources.
• Little world wide competition.
• Few government limitations.
• No world class competition.
• End users lacked knowledge.

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Historical Distribution 1955

• Distribution was transactional.
• Distributors were small.
• Distributors handled commodities.
• Barriers to entry were low.
• Distributors could be easily replaced.
• Distributors lacked funding.
• Channels often under-managed.

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Today

• Distributor/manufacturer relations today have
  legacy issues in all industries.
• In the lubricant industry, we have more legacy
  issues than most industries.

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Generic Sales Channels
Mfr
DMS
EFS
SIR
CIR
EU
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Sales Channel

• Each sales channel has advantages and
  disadvantages.
• We need to be more objective to understand these.
• It takes real effort by all parties for a channel
  to stay healthy for your brand.

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Comfortable Business
Change in the Channel

Concern for Survival
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Joint Success Issues

• High Trust
• Good product or service to sell.
• Acceptable profit for dist major.
• Reasonably easy to deal with.
• A strategy for joint survival success.
• Dependable primary contacts
• Commitment to make it work.

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• A. History Trends

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• B. Important Issues Today

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• Manufacturer-distributor relationships are no
  longer working.
• NAW Study

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Conflicts

• There are a number of conflicts in place that
  threaten our profits and the survival of our
  brands.

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• 1. Sales vs Profit

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• 2. Long term vs short term

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• 3. Efficient vs effective

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• 4. Way we do things vs the need for real change

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• 5. My needs vs your needs

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• 6. Internal company politics distractions

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• 7. Being too passive

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• 8. Structure and organization vs strategy.

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• Result
• Need for clearer strategy focused on long term
  needs and on joint success.

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• Sales channels are experiencing some critically
  important trends.
• But wholesaler-distributor and manufacturer
  partners dont agree on the implications of those
  trends.
• NAW
  Study

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Market Forces-Today

• Buying groups.
• Distributor mergers or roll-ups.
• Integrated marketing.
• Hybrid channel efforts.
• Traditional alternate channels.
• New alternative sales channels.
• Web exchanges.

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Getting More Profit

• Getting higher prices
• Getting paid for extra value
• Getting paid for services
• Getting reasonable compensation
• Running a lower cost model

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High Profit Effort

• The company that does not create a plan that
  successfully motivates customers, employees, and
  channel partners to enthusiastically work
  together, runs the risk of having someone else
  create the plan for the market.

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Total Market Offering Needs to be superior
Product Information Company support Tech
support Quality sales force Advantage Differentiat
ion Better marketing Easy to deal with Rapid
response Training
Total Market Offering
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• B. Important Issues Today

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• C. Critical Decision Time

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Trends in Distribution

• Increased use of distribution.
• End users reducing supplier numbers.
• End users smarter.
• Often old models dont seem to work.
• Manufacturers using alternatives.
• Distributors have more choices.

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Where We Fit in the Market
Integrators

AHTD

MARGIN

Traditional Supply

Catalog or web houses
VALUE ADD
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A Look At Competition
What will you do to move company performance
value to the right?
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Reviewing Your Business

• Its not in the product.
• You survive because youre different.
• You will prosper being compelling.
• How are you really different?
• What do you bring that is compelling?

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Providing Selling Value
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Manage

• This is a crossroads for many companies in the
  US.
• Be sure we know what business we want to be in.
• Connect with customers better.
• Bring real value.

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Distributors/ Manufacturer Profit
Maximum Profits

Cost
Revenue
Number of Distributors
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Voice of Customer

• Customer
• Satisfaction,
• Loyalty, and
• Purchases
• Relate to
• Performance.

Ratings
Importance
II
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You Want Proof
High
Bring Valuable Information
Reliable Performance
Literature
Products Meet Specs
Accurate Invoicing
Applications Knowledge
Advertising
Special Pricing
Current Performance
Contact Frequency
Acceptable Lead Times
Resolution of Complaints
Easy to Deal With
Low
Importance to Customer
Low
High
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• We need a better balance between the long term vs
  the short term needs of all parties
• the major,
• the channel,
• channel partners, and
• the market.

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High Profit Efforts

• Efforts to reduce duplication.
• Cost being taken out of channel.
• Differentiation.
• Manufacturer and distributor can improve profit
  better working together.

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Saturation

• Saturation of distribution hurts all but a
  monopoly. Saturation
• -- distributors compete on price.
• -- customers value product less.
• -- hurts everyones profit.
• -- limits funds for staff and value add.
• -- customer support suffers.
• -- the brand suffers.
• -- everybody loses.

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A Modest Proposal

• Its time.
• The alternatives offer some real negatives.
• Taking the best from other industries, the
  lubricant industry can improve significantly.
• Its reasonable.

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Becoming More Valuable
How Do We Increase Our Value?
What Is Our Potential?
Current
Current Value to Customer
Current
We cant get improved prices or profits unless
the customer sees value.
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• C. Critical Decision Time

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Managing Partner Connections

• Attitude
• Remember, in addition to the message, we are also
  communicating attitude.
• We represent our attitude and the attitude of the
  company.
• We can build the relationship, even in the midst
  of trouble.

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Bullseye
Unimportant
Important
Critical Issues
Growth
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Critical Success Issues

• High Trust
• Good product or service to sell.
• Acceptable profit for dist major.
• Reasonably easy to deal with.
• A strategy for joint survival success.
• Dependable primary contacts
• Commitment to make it work.

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Time for a Wake Up Call?

• A. History Trends
• B. Important Issues Today
• C. Critical Decision Time

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Time for a Wake Up Call?