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Distributor Forum Addresses Key Issues: Value-Added & Fee Based Services, SPA Processing and Tiered Distribution

The PTDA Industry Summit’s Distributor Forum, entitled “Big Issues for Small Distributors,” explored issues pertaining to the sales processes and supply-partner relationships.  In an open session facilitated by Frank Hurtte of River Heights Consulting, distributors shared solutions and ideas for some of the most critical issues facing them in today’s market environment. 

Value-Added & Fee-Based Services

Value-added and fee-based services are key advantages beyond product availability that distributors provide to end users.  When asked, “What services do you provide to customers that add real value?” several suggestions were offered including: 
• Vendor-managed inventory programs
• Energy-efficiency recommendations
• Product recommendations leading to cost savings and reduced downtime
• Plant-wide surveys to identify potential future problems and issues
• After-hours calls

When conveying value back to customers, participants noted the importance of providing customers with specific information in terms of dollar and time – not generalizations. That same value should also be communicated back to suppliers. 

As for fee-based services, participants offered the following areas where distributors may consider charging separate fees:
• Training (whether it’s in the classroom, onsite or one-on-one)
• Vibration analysis
• Predictive maintenance
• Bearing repair
• After-hours delivery
• Routine delivery
• Assembly
• Drive start-up
• Plant-wide surveys
• Kitting
Participants noted that the biggest pushback regarding fee-based services often comes from salespeople.  In order for fee-based services to become the acceptable norm, they must first become a part of the sales group culture.

Processing of SPAs
When discussing the best practices for processing and reconciling special pricing authorization, ship-and-debit is the most common procedure because it simplifies bookkeeping and alleviates the chance of double inventory. Participants observed that manufacturers need to train their salespeople better in the area of processing SPAs since many sales teams do not handle them accurately. When distributors discover errors in this area, it is often well after the fact. Such errors typically cost distributors significant time and money.

Tiered Distribution
Manufacturers with multiple distributors may have multi-tiered distributor relationships, with the top-tier distributors providing extra services. Attendees explored what makes a top-tier distributor (from the manufacturer’s perspective) and listed the following as activities that a top-tier distributor engages in:
• Offers technological expertise, including product specialists and application engineers on staff
• Is a market maker and develops new applications, as opposed to “just taking orders”
• Has availability of stock (i.e., local inventory as opposed to a distribution center)
• Provides the right services to targeted end users
• Has an action plan that helps the manufacturer penetrate a specific area or helps the end user increase efficiencies.

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