SOI 2014 - Relationship Advice

Distributors Actively Increasing Number Of Suppliers They Use

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RelationshipDistributors are actively increasing the number of suppliers they use. Is it due to low satisfaction, a need for more options, quicker delivery, or all of the above?

Jen Lyles says distributors and suppliers had a falling out a decade ago, and the fences between both parties are still being mended.

“I think it started with the suppliers being advantageous and starting separate retail sites to where they would price the items and undercut the distributor. I think that was the first crack in the atmosphere,” says Lyles, “lead igniter” for Firesign Inc. (asi/522741). “For a brief moment, distributors and suppliers were hurting each other’s feelings and trust. Now, we are on the rebuild.”

Perhaps as a result of this mistrust, stemming from an enhanced industry-wide Internet presence, industry survey data shows that many distributors have seemingly rejected the idea of working with just a few trusted suppliers, choosing instead to extend their supplier base. In fact, in this year’s State of the Industry survey, 50% of distributors reported that they increased the number of suppliers they used in 2013, as opposed to only 8% who said they decreased the amount of suppliers they purchased from.

This is a major shift in the market, as data from previous State of the Industry surveys shows a nearly equal number of distributors who said they increased and decreased the number of distributors they ordered from. For example, in 2011, while 24% of distributors increased their number of suppliers, 14% said they decreased – a 10 percentage- point spread compared to the 42 percentage-point spread shown within this year’s survey.

RelationshipLike most of the industry, Judi Brown, owner of Tacoma Trophy, has increased her number of supplier partners in recent years. “Part of it has to do with expanding my customer base, and therefore needing to find products that work across and appeal to a broader spectrum of fields and interests,” she says.

Lyles is one, though, who understands the reasoning behind shrinking the number of suppliers that a distributor uses. “I believe distributors should narrow their focus to a few key suppliers that they can depend on and work together with on a regular basis to use the tools they have to succeed,” she says. “One reason is for your internal processes. If you’re getting into some nice numbers in sales, it’s hard (because) the more suppliers you have, the more suppliers you have to bill out, and the more support you need to bill those people because there are only so many hours in a day.

“Also, if I’m a two-man distributor with 200 suppliers, nobody knows us really, because I’m not calling anybody regularly. When you start building relationships with suppliers and you have a contact, they’ll do things for you they wouldn’t normally do, for no additional fee. And that helps you to become the star.”

The Need for Speed
If there’s one area, distributors say, that could help to improve relations between distributors and suppliers, it’s in the speed with which suppliers can turn orders around. Distributors are increasingly being pressured by clients to deliver products quicker, and suppliers need to adapt.

Brown says one of the reasons that she’s expanded her supplier options is in the search of faster turnaround and shipping times in an era in which more customers are constantly demanding both.

“For the most part, the suppliers I use do meet the in-hand delivery time frames consistently. Quite recently, however, one of my go-to suppliers has failed to meet in-hand deadlines on at least two orders,” she says. “I’m hoping it’s a temporary issue that’s going to be resolved, but I am going to be looking for an alternate supplier.”

However, Brown says distributors should recognize that delays – especially for rush orders – aren’t always the supplier’s fault.

“I have seen shipping delays, not due to suppliers shipping orders late, but due to shipping companies routing orders incorrectly or experiencing other delays like late trucks and trains,” she says. “Because those types of irregularities seem to be occurring more frequently, I will continue to urge my customers to order early to avoid the need for rush processing and shipping.”

A reduction in inventory is one reason that Bob Horwitz, president of Idea Workshop (asi/229563), keeps his supplier options wide open, preferring to source on an as-needed basis.

Relationship“In the last 18-24 months, I’m finding that some of the suppliers don’t carry the depth of inventory that they used to, and so we’ve had to make some changes to find more reliability of inventory of who we’re working with. That’s mostly with soft goods – the apparel people,” he says. “What we work toward there is high levels of confidence that they have the inventory in all sizes and all colors that we need. What we try and do is be proactive in looking at the inventory levels and what’s available first before we offer it to our corporate client.”

On the hard-goods side of the business, Horwitz has run into problems with suppliers that fail to issue timely and reliable proofs – a growing concern due to tighter turnaround times.

“We’ve run into a couple situations where the customer wasn’t happy because their logo came out so small in relation to the product, and they wanted to return the product to us,” he says. “That’s why we work with the suppliers who stand behind their products and who we trust on the decorating side of the business. We’re all faced with the tighter timetables and quick turnarounds, so it limits the product, and that’s why I talk about inventory. But the other thing on the hard goods side is the confidence of making sure that the proof looks accurate and the decoration is high-quality.”

Whether you’re looking to increase or reduce your number of supplier partners, Lyles says the key element is finding suppliers you can trust and, just as importantly, suppliers you click with – and the only surefire way to do that is to go to the trade shows, shake some hands and feel one another out.

“The energy – do you have a synergy, do you like their product line – you can tell all that in a good 10 minutes of standing at the booth, and when you hit it off with that person, you know it, because it’s like a good date,” she says. “When you go out with somebody and everything checks off on the list, but you still don’t have a good feeling about it – those same rules apply to the supplier. They may offer the best pricing and the fastest turnaround, but you can’t put your finger on it – you just don’t like working with them. And if you don’t like working with them, you’re not going to do your job as effectively vs. if you have a relationship where you can send a supplier an e-mail and have an answer for your client in less than 20 minutes.”

Lyles says taking time to build those relationships will limit the number of challenges you have with your supplier partners – and it will prevent those decade-old bad feelings from cropping up again.

“Nothing discounts personal interaction,” she says. “When you’re able to build those solid relationships and you have a team that you can depend on, then you can be whatever you need to be for your client vs. trying to call around to see if a supplier is going to save you.”