The right distributor relationship

June 1, 2009
Is it better to go steady or date around?

One question that motion control users have pondered for years is this: Is it better to select one strategic partner or use my business as leverage to attract several suitors, each competing for my business with a mix of price and delivery?

The argument: Competition is a good thing. Purchasing and procurement gurus of the past preached that “standardization” builds complacency, and complacency makes for sloppy work and escalating prices. While the theory that competitive infighting drives good prices might have worked in the commodity-based days of old, I have reason to believe those days went out just before John Travolta slipped into his white leisure suit on Saturday Night Fever.

First, our world is not commodity oriented. Motion control systems are a finely blended stew of electronics, mechanics, and hydraulics with a dash of human interface, machine safety, and future supportability. Second, today's global economy and fast-paced technical trends continue to level the playing field. Pricewise, what we used to accomplish in a $20,000 drive-motor-PLC combination now costs a third of that. Motion control systems more closely resemble Moore's Law than the cost of commodities. The real benefit to motion control system users comes from increased capability, decreased downtime and operating costs, and less costly engineering.

When a customer and distributor build a long-term association, the exchange takes on a whole new dimension. Rather than partnership, I prefer the term cooperative, implying an arrangement in which two companies work together for mutual benefit. To succeed, a cooperative must provide economic advantage to both parties. In this setting, the distributor learns about the customer's process. Knowledge-based distributors are open to signing nondisclosure agreements that protect their customers' intellectual property. This is helpful because the more a distributor knows about a customer's inner workings, the better the relationship. For example, when the customer shares manufacturing bottlenecks and how these create extra costs, the distributor is ready for problem solving.

Recently, I chatted with Craig Faber, president of Miller Bearings and Motion Systems, Orlando, Fla., a 62-year-old company and longtime PTDA (Power Transmission Distributors Assoc.) member. I asked his opinion on long-term cooperative relationships.

“We believe it's our job to help our customers build a competitive advantage — but believing isn't enough,” says Faber. “Because that which is measured improves, we actually quantify value. Our Miller Mileage program allows customers to track the specifics of the value we provide. They help us understand their problems and we create a solution. In fact, part of our employees' compensation is based on delivering value. We measure the cost savings provided and pay our employees who deliver it.”

What it means to you

Here are several areas where a strong relationship builds value:

Problem-solving solutions: Distributors are privy to thousands of product innovations each year. When they know your issues, they make informed recommendations. This happens without your asking.

Troubleshooting: Imagine the timesavings when your first line of support is intimately familiar with your plant operations. Support phone calls are shorter because the need to describe your environment and application are no longer necessary.

Inventory, spares, and backup: Distributors are in the business of inventorying components. When they commit to maintaining backup in their warehouse, it eliminates costs associated with keeping spares in your crib.

Energy-saving enhancements: Energy is on everyone's mind. Identifying the payback from energy-saving products makes a critical difference. Consider the total cost of ownership for an electric motor: The upfront price of the motor itself is less than 10%. Make the wrong decision to save a few bucks on the purchase and you might find yourself the proud owner of an albatross of a system.

Frank Hurtte consults at River Heights Consulting, Davenport, Iowa, specialists in knowledge-based distribution. He can be reached at [email protected].

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