Manufacturers Speak Out On the State Of The Relationship

Doing business in 2014 is certainly very different than doing business in 2004 or (yikes!) in 1994. We all know that 1994 was so last century. Welding and Gases Today discussed the ever-evolving relationship with distributors and, without exception, each supplier pointed to the importance of their partnership with distributors and the importance of continued communications to achieve the mutual goal of adding value to the sale of products and services.

WGT: Just like rest of how we do business, the alliance between the distributor and supplier is in a perpetual state of evolution. Have you seen changes in how you manage the alliance between your companies and the distributor channel?

Ashley Madray: The relationship has changed in so many ways. First of all, in some cases we are working with a new generation of management and, in some cases, outside management. In other cases, the principal is still managing his business. There is much more customization in managing our relationships with distributors.

Chris Mapes: The amount of products and solutions that Lincoln is targeting for channel partners to take to their customers has expanded as we assist them in understanding the technologies and the challenges in solution-selling in our marketplace. Our partners are trying to create more value for their businesses and for our mutual customers. We continue to invest more in distributor training. Yet there is still a huge opportunity for a closer relationship between the supplier and the distribution channel.

Mark Elender: ESAB continues to look for ways to partner together, to enter new markets and to take advantage of new opportunities with the distributor. We’re always trying to determine how we can add value. Recent surveys indicate that the end-customers need more training and access to expertise.

Jim Johnston: Better and faster inventory management continues to be a top concern amongst distributors. During the past ten years, Kaplan has put more focus on shorter delivery cycles by adding strategic locations from which we can deliver product. We even added consignment warehouses, which we never would have thought of ten years ago.

Dave Nangle: Suppliers and distributors are better at managing their businesses today than they were ten years ago. Supply chain metrics are more closely matched up with the customer’s needs. There’s a laser focus on gross margins and sales at the distributor level for not only gases, but hardgoods. The leveraging of IT to provide internal and external efficiencies is much more dominant in our businesses.

Andy Pazahanick: Relationships are still very critical in today’s market. Today, Taylor-Wharton focuses on an expanded offering in the value chain. We’re not just selling an individual product. We continue to reexamine this value chain and what we bring to the table.

Dave Nangle: Business interactions have also evolved, as corporate-level relationships strengthen. Distributors are now coordinating purchases and marketing programs at a corporate level rather than at the branch level, which means supplier and distributor sales associates in the field need to coordinate their efforts to accommodate these new models.

Mark Elender: By making better use of IT systems, distributors and suppliers are better able to manage inventory by connecting their IT systems. We’re shipping products to distributors’ locations and to their end-users, drop shipping on the distributors’ behalf, which removes costs from the supply chain.

WGT: It sounds like the continual investments that you are making are working. Exclusive relationships are a relic of the past. How does that impact the partnership?

John Kaylor: I remember when product exclusivity and preferred treatment were the norm. We’ve had to lower our expectations when it comes to having a distributor sell our product exclusively.

Tom Carey: Chart is not contractually exclusive with any welding distributor. But we certainly focus effort on key welding distributors who are loyal and growing with us. We try to demonstrate our loyalty with effort rather than with an exclusive agreement.

John Kaylor: First and foremost, our responsibility is to analyze how to add value in order to support the distributors’ efforts to sell our product.

WGT: Do you still do joint sales calls with distributors?

Tom Carey: We do a lot of joint selling and lead generation with our distributor partners. We’re competing to get on their dance card. By focusing on driving their top line numbers, we can contribute to their revenue creation. It is no longer a matter of just supplying quality equipment, on time, and at a fair price. We have to demonstrate increased sales by providing sales and marketing support.

Chris Mapes: If a distributor identifies an opportunity for an automation project, we can go in, manage that effort, provide assistance and drive the automation project, which can allow them to really protect their position within that customer’s business. We want to work hand-in-hand with distribution when they identify opportunities.

Mark Elender: When distributors encounter a more sophisticated program or a project that is outside their realm of expertise, we can add value by partnering on that more sophisticated sale and bringing technical expertise to the meeting. That assist can enhance the customer’s view of the distributor and the support that the distributor can provide.

WGT: The trust and loyalty that were part of the relationship ten or twenty years ago still seem to be important.

Jim Johnston: You have to be able to say what you do and do what you say in order to build that kind of trusting relationship.

John Kaylor: When we protect each other’s interests as well as our own, we are building the trust that develops over time.

Jim Johnston: The trust that develops between the distributor and Kaplan helps us to perform better when it comes to JIT deliveries. We are always striving to better anticipate the distributors’ needs. If the distributor can look down the road and anticipate his customers’ needs and share that information with us, we can avoid the rush and push, screamer deliveries. If there is a possibility of a large project and there is an adequate level of trust, that information can be shared without having to sign a non-disclosure agreement.

Tom Carey: Trust is part of an open and honest relationship. We can openly discuss both opportunities and challenges. It means open and honest dialogue. No one gets every piece of business in a given region. But we can discuss opportunities openly and honestly and have a positive go-forward relationship.

Andy Pazahanick: We work with distributors to earn their business. In earning their business, we have to do what we say we’re going to do. And that starts with everything from a promised delivery date to product performance and building that relationship by proving that we can be relied upon. Reliability is proven when we do what we promise to do, when we demonstrate that we are listening to the distributor, and when we deliver on those expectations.

Dave Nangle: We all want the same thing and that is to serve an end-user customer in the welding business. And I think trust is proven over time in these relationships.

Tim Miller: That trust is a vital part of the relationship. Trust for us is really about repeatability. Relationships are very important, but the history of that relationship is what is critical. Trust is really built with repeated on-time delivery and repeated quality standards at fair market prices.

Ashley Madray: We see more collaboration with distributors. When working on a large project, the distributor often calls us early to strategize. We can offer that distributor more support, beyond our ability to provide a price.

WGT: Successful relationships of all kinds require good communication skills. How has technology impacted how you communicate with each other?

John Kaylor: Our ability to communicate is a two-way street. Successful communication between Abicor Binzel and our distributor partners means that it is frequent and, most important, candid.

Chris Mapes: With better communication, we can identify and find ways where we can create more value for our customers. The distributor needs to acknowledge that there’s strength in providing that value with the manufacturer versus separate from the manufacturer.

Dave Nangle: The communication between the manufacturer and the distributor is just as important today as it was the past. In the end, we are still working together to serve the end-customers’ needs.

Andy Pazahanick: How we communicate is very important in today’s fast paced, information overload world. We all have to sort through tons of information and determine what is really important. Mindful of this, Taylor-Wharton is making upgrades to our website and using various forms of social media to enhance our communication efforts.

Mark Elender: We need to have an understanding of what each other needs as we try to drive our own businesses forward. And we need to communicate those needs. Support works both ways.

Tim Miller: For us at INOXCVA, the most effective form of communication with distributors is email. We make weekly use of broadcast emails to the appropriate person, providing up-to-the-minute information regarding available inventory. This use of technology is helping us to meet the distributors’ inventory requirements.

Ashley Madray: Our communications are improving as more distributors regard us as a partner, as opposed to merely being a supplier. We can be sensitive to what is happening in the distributor’s business. We don’t want to just load their shelves. Our job is to help the distributor to sell products.

WGT: A decade ago, many in our industry were concerned about the impact of foreign imports. Today there is growing concern over various online-based alternative distribution channels and the impact on the local distributor. How do you see online sales impacting the distributor?

John Kaylor: AmazonSupply is a big threat. The manufacturer and distributor must work together to offer the service that the online seller will never replicate. While Internet sales are growing, they are still a relatively small percent of sales.

Tom Carey: In the gas sales market, our sales are still driven by distributors. Face-to-face relationships with the end-user are still needed to sell a gas system. The gas component of the distributors’ business is not faced with the same challenge as their hardgoods business is faced with.

Tim Miller: We don’t ever sell product to the end-user either in person or online. That support of the distributor’s sales efforts has never changed in that regard.

Tom Carey: We have tried to automate replacement parts sales. We do have and a warehouse to support that site. While we may be exploring AmazonSupply or other channels for Chart Parts, it would be dedicated to replacement parts and accessory items for our whole goods.

Chris Mapes: There is no question that there is another channel that’s developing in our industry. But the individuals utilizing that channel are very product-centric. We think there’s a real value created in the technology that we bring to the marketplace and in the solutions that we can provide our distributors and customers when solving problems associated with welding and cutting. As a manufacturer with our distributor partners, we deliver that value to the customer and the end-user in a manner that allows them to utilize the technology more effectively than if they were buying online.

Dave Nangle: The alternative distribution channels are just another one of the many cycles that challenge the business. Harris Products has a limited online offering. At the end of the day, the end-user is looking for somebody who can give them solutions to their welding, cutting and brazing applications. I believe the customer still needs somebody at the local level they count on. An entry-level online purchase can lead the consumer to embrace the overall product line. We are starting new customers out at a very lower tier and when they buy one of these wire feeders, in many instances, they want to use gas in the process, which they will have to purchase from an industrial gas distributor.

Andy Pazahanick: The products Taylor-Wharton sells online are limited to dewars, parts and accessories. Other products are sold direct or through a distributor network that provides complete offerings from products to installations to start-up to parts and service.

Ashley Madray: 0Gas Innovations’ objective in being online is to be found, not to sell product.

Mark Elender: The online websites were never imagined a few decades ago and are more of a factor today. While some are purchasing more product online, the growth has not been dramatic. Certain products don’t require value-added support. Distributors are also hosting e-commerce sites, alongside the Amazons and Fastenols. The web drives a lot of this change. Often it is just easier to purchase product online. It’s a matter of convenience if the purchaser does not have to travel from a remote location to purchase product from a conventional distributor. It is easier to have product UPS’d and sometimes it can be lower priced.

The old adage continues to ring true: The more things change, the more they stay the same. In the face of new competition from online sales, the importance of the bond between distributors and suppliers remains the same. In order to further this bond, the value of constant and candid communication can never be underestimated.

Gases and Welding Distributors Association