Collaboration is stronger than competition

May 25, 2006
Manufacturers haven't always had the best relationships with the distribution channels that sell their products.

Wolfgang Dangel
President and CEO
Bosch Rexroth Corp.
Hoffman Estates, Ill.

In some ways, that's not surprising. Manufacturers, on one hand, always want their partners to buy more. Meanwhile, distributors clearly understand that large inventories are expensive to maintain.

There are several important reasons why we are bucking the trend and seeking closer relationships with our partners. First, with the breadth of our product line, we cannot reach all our potential customers without their assistance. Secondly, our most advanced products often need to be customized or engineered to give customers the full competitive advantage. Thus our distributors have the opportunity to offer value-added services to customers. That's why our first question to distributors is not, "How many sales engineers do you have?" but "How many applications engineers do you have?"

As a result, we may not have as many distributors as some of our competitors, but the ones we do have are probably the most technically astute in the industry. In fact, our distributors are an extension of our company. This level of cooperation and collaboration is unprecedented in the industry. We exchange information with our distribution partners that many companies will not share even with their own employees, let alone another business. Some examples include:

  • Confidential information about margins, profits, investments, and plans for the future.
  • Access to internal inventory, order entry, order status, and collaboration software.
  • Close cooperation in applications engineering.

In essence, we give our distributor partners a share of the brand positioning we have built for ourselves over the past several decades.

In the collaboration model, our company routinely gives distributors tours of the manufacturing and research facilities in Europe, introducing key distributors to top management.

In contrast, some competitors have business models that use competitive distribution. This creates an almost adversarial relation-ship with and between distributors, preventing any significant information sharing.

We, however, try to foster collaborative relationships with and between distributors. Specifically, we've granted them exclusivity in their territories so that they don't have to worry about competing with us or another distributor. We believe these cooperative efforts are responsible for significant sales increases, gained market share, and more of our products being used on machines.

And while the industry has been in the midst of a rather lackluster recovery, our sales through U.S. distributors have doubled since 2002, and I expect more of the same in the future. In sum, we are totally committed to partnerships with our distributors. I believe it is the best strategy for doing business as a technical leader in the 21 st century.

Bosch Rexroth ( is a maker of industrial automation equipment.

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