Supply Chain Partners: A Tight Bond
Customers expect more these days: better pricing, the ability to order online and fast delivery. They also have more choices to buy from — big box stores, online price clubs and resellers from other industries who are adding cleaning items to their product mix. Meanwhile, jan/san distributors are also facing higher costs throughout the supply chain.
In order to get a leg up on the marketplace and remain profitable, distributors who are teaming up with their supply chain cohorts — buying groups, wholesalers and manufacturer representatives — find that partnerships can go a long way in simplifying their operations.
Purchasing power is one key business function that separates the winners from the rest of the pack in the jan/san distribution industry. Recognizing the efficiencies that can come about in a distribution operation with the ability to purchase the products they want, from the manufacturers they want, more and more distributors are affiliating themselves with industry buying groups.
Buying groups, also known as marketing groups, are organizations that unite independent distributors into a more competitive business force. These groups offer lower pricing and more pull with manufacturers in addition to value-added services and national account opportunities that help level the playing field for distributors.
Emerging on the scene in the 1960s, buying groups have seen some of their biggest growth occur in the past 20 years. During the 1990s, the increasing number of mergers, acquisitions and business failings along with the emergence of large competitors caused a significant reduction in the number of distributors across the country. To throw salt in an already open wound, distributors reported receiving less support from major manufacturers. So, distributors looking for ways to weather the marketplace, found buying groups to be their saving grace.
Fast forward to 2010 and more and more independent distributors believe that taking shelter under the umbrella of a buying group can help protect their margins and provide the necessary resources to expand their business reach, especially when the economy is in a recovery period after a recession.
Traditionally, the most desirable benefit for distributors to join a buying group was access to pricing discounts. This hasn't changed much over time as buying groups continue to make it a priority to leverage their collective buying power to negotiate better pricing with industry manufacturers.
The purchasing power alone behind a buying group affords distributors the opportunity to purchase from manufacturers they would not normally be able to due to higher prices or order minimum restrictions. Some buying groups have relationships with manufacturers in industrial packaging, foodservice and safety product sectors, on top of the extensive offerings of janitorial and sanitary products. Thus, distributors have access to a diverse product catalog and are able to expand their reach to more customer segments, while also becoming a more viable resource for end users trying to consolidate product purchases.
Some buying groups also offer distributors their own private-label product lines to choose from. These programs are particularly attractive to smaller distributors that don't have their own product brand identity.
For years, buying groups had a hard time justifying their place in the supply chain as they only offered product price discounts and rebates. But with the introduction of networking conferences, marketing material and national accounts programs, buying groups are proving to be a viable component to the industry.
Giving distributors the ability to network with other members is one of the most significant benefits because experienced distributors often share their insights and offer advice to newer colleagues. Most buying groups have national or regional conferences where distributors can meet up and exchange business ideas and at the same time attend workshops and seminars where market conditions and industry trends are discussed.
Buying groups are also offering more field support for distributors as well as advanced sales and marketing tools to help distributors secure new clients, keep current ones and expand their businesses. One way affiliation with a buying group is helping distributors grow is by tapping into their national-accounts program, which help distributors service clients in multiple locations throughout the country.
A wholesaler's main role is to improve supply chain efficiency, which helps manufacturers and distributors reach end users more effectively and at the same time help distributors more efficiently manage their assets.
Today's wholesalers serve as an extended warehouse for distributors, granting access to numerous lines of products from national suppliers. A major benefit of working with a wholesaler is that distributors do not have to meet order minimums like when they do buying direct from manufacturers. Wholesalers give distributors the opportunity to purchase in small quantities or can be relied on for special orders. Thus, distributors are not tying up money in inventory that otherwise might end up being dead stock. Distributors also benefit by receiving shorter order lead times from wholesalers, which in turn help them turn over product faster.
Maintaining inventories has been and continues to be a problematic area for distributors. Wholesalers offer distributors more options for product selection, pricing and delivery without the need to work with several vendors or be tied to multiple contracts. This greatly simplifies the process for distributors and allows streamlining of processes for reduced shipping and warehousing costs.
The role of the wholesaler, which is to help distributors manage their working capital, has remained constant over the years. However, that role is now more important than it has been in recent history because of the recent economic downturn. Small and larger businesses alike look to wholesalers to provide guidance in times of economic struggles. As fuel and energy costs rise, wholesalers have the purchasing power to step in and negotiate product prices with manufacturers. This mitigates the need to pass down costs on to distributors, who already are looking to reduce operating costs and are being pressured by customers to provide low-priced products.
What has changed significantly over the years, however is the added services wholesalers now provide, most notably through their e-commerce tools, which help distributors save money by improving purchasing efficiencies. Wholesalers have also developed training platforms around sustainability issues and provide marketing programs that give distributors a competitive advantage.
Wholesalers also have expanded their portfolios to include products that are outside of the traditional jan/san marketplace. Where they were once predominately in the jan/san market, most now provide distributors many other opportunities, such as break room supplies, foodservice disposables, office supplies and safety supplies, which help distributors broaden their product offerings and stay competitive in a changing marketplace.
By teaming with wholesalers, distributors can gain a competitive advantage by selling private label lines as well. Distributors are able to sell these products under their own private lines, helping them create a distinct identity. Often, distributors find that the lines address their individual needs as well as their customers' needs for quality and value pricing.
With so many new products entering the jan/san arena nowadays, it's becoming a challenge for distributors to keep some sort of symmetry. Luckily for distributors, manufacturer reps — independent sales agents who are contracted by manufacturers to provide support for distributors purchasing their products — don't let these products slip through the cracks unnoticed.
For years, the manufacturer rep's position in the supply chain has been to provide a total market awareness from manufacturers to distributors, and from distributors to the manufacturer. Today, on top of being a liaison between manufacturers and distributors, being a manufacturer rep also involves being a marketing manager, a marketing assistant and a marketing associate.
Manufacturer reps are commonly mistaken to be limited to serving just manufacturers' interests. That is far from the truth as distributors also make use of reps by ensuring that information flows both ways. Just as reps carry a manufacturer's message to distributors, reps also are there to relay a distributor's message back to manufacturers.
With distributors devoted to building their businesses, manufacturer reps are a key resource in making that a possibility. Today's reps contribute to a distributors' success by introducing them to new products, product training, sales development and consultative selling — where reps are partnering with distributors to assist their distributor sales reps in their quest in building sales volume.
Manufacturer reps give salespeople the necessary tools to build their business. These tools begin with proper education, including product knowledge and sales training. Reps also help by organizing product information and keep tabs on what new items will be important for particular distributors.
Because they deal with multiple manufacturers and don't take title in the goods they market, manufacturer reps are in a great position to know which products are best suited for their distributor customers and their specific markets. Thus, distributors are able to save time, effort and money by not having to experiment or go through a trial and error process with certain product lines.
The good thing about the jan/san supply industry is that distributors aren't limited to partnering with just one supply chain partner. Distributors can tap into all three aforementioned channels when applicable and reap benefits from each. Those who do will position themselves atop the jan/san marketplace for many years to come.
Distribution Partners of America (DPA)
The United Group
Peerless Marketing Group
The Henson Sales Group Ltd.
The RTF Group
SP Richards Company
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