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No Limits With Multi-Line Products
By James Anderson
Gillis Associated Industries has always gone to market through open distribution. We do so because of the variety of products involved in our line, and because we think those products are best served by allowing all dealers to have access to them.
Jarke Corporation historically sold through limited distribution. When we merged the two businesses, we anticipated that the many Gillis dealers who did not have access to the Jarke line would be unhappy about that in the combined company. For that reason, we made Jarke products open to all our dealers when we merged the two companies. As a combined business, we thought the technical advantage gained by an exclusive dealer would be offset by more exposure in the marketplace.
We understood that Jarke's limited dealer network might have difficulty with our decision and we worked with them to ease the transition. In the broad scheme of things, though, I think open distribution serves both the dealer community and the end-user better than having limitations on product access.
All dealers specialize in some form or fashion and gravitate to products that make sense to them for a variety of reasons. In that way, the dealer effectively chooses the product specialization or channel that serves his or her best interest. It seems to me that open distribution facilitates this selection process and lets the market work most effectively.
The best things a manufacturer can provide to dealers are strong technical support and great customer service. Effective literature is also important. At Gillis/Jarke, we want to be in a position to say to our dealers, “Get us opportunities and we will get you sales.”
Our distributors work hard at developing relationships with their customers. We need to work equally hard at being able to deliver the information our distributors need to help them maximize their sales.
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| Meet the Author |
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James Anderson is president of Leggett & Platt Material Handling, Storage Products Group, located in Prospect Heights, Illinois, and on the Web at www.gillisindus tries.com. |
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Manufacturer Mergers And Acquisitions Can Have Positive Impact On Distribution Channel
By Alex Herman
As market and global economics have forced the general manufacturing industry to consolidate via mergers and acquisitions, the material handling industry has not been immune. Over the past several years, mergers and acquisitions have produced some major players out of what were once many smaller entities.
Big companies that offer a large portfolio of products and services can certainly compete more effectively, particularly on the bigger jobs. But what is the impact on the larger world of distributors? What happens to a distributor when one of its products, or even an entire line, is acquired?
Let me begin by saying that in many of the cases I have seen, it appears that the management of the distributor channel is handled post fact. All of the questions that need answers don't even get asked until after the acquisition, such as: How do we merge the product lines? Where do we build them? How do we merge the order entry, manufacturing and engineering systems? How do we handle competing lines? By asking these questions earlier in the process, distributors can be involved in the planning and help create a more effective outcome for the acquiring manufacturer.
Corporate culture issues also come into play. Different companies are like different families, e.g., our methods are better than yours! We have more experience, so why do we have to change? These issues need to be addressed with solid internal communications, and can take time and attention to solve.
Distributors play a key role in the success or failure of every merger. Quick buy-in by distributors is critical to a merger's success. At the same time, distributors may be thinking: Is this good for me? Should I wait and see? Do I leave my old supplier of this product? What's in it for me?
The answer is, a merger can be good for everyone if it's handled well.
Let me use our company as an example. Over the past few years, we have merged two of the largest conveyor systems providers in the United States and the largest palletizer/conveyor manufacturer. We also acquired other material handling product suppliers for tilt-trays, pick- and put-to-light, carousels, AS/RS, and parcel and baggage handling equipment. Each of the conveyor companies had separate distributor channels, and both channels contained valued business partners. Merging those organizations professionally was a challenge, but we managed to keep those partnerships healthy.
We also asked these same distributors to integrate the other material handling products we acquired in their systems. Most of those partners were already systems integrators. While some already represented our newly acquired company, most didn't. Some also were representing a competitor.
As business partners and friends, we discussed and resolved these issues. The decision was not always initially in our favor, but we felt if we provided the best combination of product and service, we eventually would obtain the new product business with the distributor.
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| Evaluating The Issues And Costs Of Representing Competing Brands |
| Jim Wilson, manager of dealer development at Mitsubishi Caterpillar Forklift America, outlines several scenarios that lead distributors to sell multiple lines. How can manufacturers and distributors work together to avoid this scenario and the tension it creates? What considerations must be made before embracing this strategy? Answers to these questions and others can be found in this article.
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The result of this process has been that all of our distributors have become systems integrators, which should prove a plus for their growth. The ability to act as a systems integrator also provides the distributors with the value-added service they can use to set themselves apart from their competition. Further, it offers them a better profit margin. As a result, we now officially refer to all of our distributors as integrators because it best describes their role in our relationship.
It appears that mergers and acquisitions will continue to grow in our industry and in the wider business arena, presenting all of the attendant complexities and challenges for the distributor channel. Accepting these complexities and challenges, and working together to find solutions to them, benefits both integrators and manufacturers. Fighting the trend is detrimental to all involved.
My recommendation to manufacturers and integrators is that they continue to strengthen their relationships. Manufacturers must work to communicate, train and support their integrators with new products as quickly as possible, and plan ahead to the greatest extent possible. Remember, if an integrator has a relationship with a competitor to a newly acquired product, it may take some time to win that integrator into your camp. We all respect loyalty, and that is what they are doing with their existing suppliers.
Integrators, strengthen your support to your manufacturing partner. Be patient: It takes a while for a manufacturer to merge companies. If manufacturers and integrators help each other succeed, the inevitable end result is that everyone will be more successful.
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| Meet the Author |
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Alex Herman is director of integrator sales for FKI Logistex, located in Cincinnati, Ohio, and on the Web at www.fkilo gistex.com. |
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Single Source Suppliers Provide Competitive Edge
By Pat Peplowski
Interlake has pursued the strategy of being a full-line storage rack products manufacturer, serving as a single source supply point for our distributors. We have three points of manufacturing and we offer our products branded exclusively under the Interlake name. We believe this gives our distributor sales channel, our value-added partners, a competitive edge.
Foremost from our perspective, we feel it is important to stay connected with the expectations of our customers. Customer expectations are central to the Interlake go-to-market value proposition. The extent to which a service, product-type, program and/or product line will exceed expectations must always be evaluated and considered in our value proposition.
Interlake has various touch points in the marketplace in order to measure customer needs. Because our distributors engage mostly end-user clients, we rely on various communication vehicles to gain valuable feedback, i.e., regional roundtable meetings, a Distributor Advisory Council, and one-to-one field sales support. Specifically, we try to identify key value proposition issues, create action item lists, and develop initiatives for improvement.
Most business relationships center on the objective of profitability. Interlake believes that single source relationships foster long-term profitability in a strategic and tactical manner. In order for both parties to be successful, a win-win situation has to be consistent in the partnership; relationships must be based on mutual trust and respect. Single source relationships allow for mutually shared goals and a focused marketplace strategy.
Manufacturers, especially Interlake, can help distributors reach goals by establishing the right business relationship. A business relationship aligned at a high level of operations, based on mutual trust and respect, will translate into a shared mission and value statement. Assuming the right relationship exists between manufacturer and distributor, manufacturers need to understand the short-term and long-term objectives of distributors. Manufacturers must then seek out a means to translate distributor goals into focused initiatives, which will help both companies execute for the end-user client. The initiatives can be service-based or product-focused. Manufacturers must then be prepared to deliver on those initiatives.
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| Meet the Author |
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Pat Peplowski is manager of indirect sales at Interlake Material Handling, located in Naperville, Illinois, and on the Web at www.interlake.com. |
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Single Lines Help Distributor Add Value
By Bill Hawthorne
In the current business climate where manufacturer mergers and acquisitions are commonplace, remaining an independent manufacturer with a single product line still has many advantages. The manufacturer, the distributor and the end-user all benefit from a decision to concentrate on a single product line.
Oftentimes, manufacturers involved in acquisition activity lose sight of what they do best: manufacture product, be it conveyor, lift trucks or industrial rack. Taking on and marketing additional product lines, even complementary ones, can distract the manufacturer from its core competencies. It is the duty of the manufacturer to constantly provide new, innovative ideas to its distributor customers. It also must deliver its products in a timely fashion, when and how the customer wants them. The product must be functional when the customer receives them. The addition of multiple lines may interfere with these primary objectives.
Multiple lines cause confusion about the product. The manufacturer must provide training to customers on the application of its product. Knowledge is the ultimate differentiator. If the distributor's salespeople are more knowledgeable of the product and its applications, they will provide their customers with better solutions. In-depth knowledge gives distributors a greater sense of confidence in what they're selling, and provides them an opportunity to bring more value to their distributorship and to their customers.
Along with product knowledge, manufacturers also can provide additional marketing information. The manufacturer should offer distributors data about their areas of responsibility, such as what industries there are, what products fit in those industries, and how to market those products into those industries. The manufacturer must help the distributor understand and utilize the technology of today to better inform them, not only of the application, but also of the industries that are growing. This information can get muddled and confusing when applied to multiple lines.
Building relationships is key. It is very time-consuming and very expensive, but it is essential to providing a customer with solutions. If you understand the business and you understand the customer's business, you're in a better position to provide a solution.
All of the above can best be done with intense focus on one line of products. Each additional line has different characteristics and different applications and requires additional knowledge, running the risk of confusion and taking away time and energy from providing these value-added services to customers.
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| Meet the Author |
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Bill Hawthorne is the vice president of marketing for Hytrol Conveyor Company, located in Jonesboro, Arkansas, and on the Web at www.hytrol.com. |
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Merging Manufacturers Face Important Decision About Exclusive Dealers
By Colin Wilson
The essence of any successful manufacturer-dealer relationship is how the two separate and independent, but highly interdependent, businesses work together with the single focus of meeting the needs of the end-customer. This is best achieved when there is a strong spirit of trust and partnership between the manufacturer and its dealers.
The manufacturer's role in this partnership is to produce products of high quality with competitive pricing and lead times. To be successful, the manufacturer must work to create an environment that enables the dealer to sell effectively to the end-customer and to then support the product in an efficient and effective manner. If the product is for the dealers' own use, such as for rental fleets, then the manufacturer must provide a package that makes the dealer highly competitive in the market served.
The manufacturer requires volume to support its investment in areas such as product development and manufacturing and to allow it to leverage the supply base to ensure the delivery of quality components at lower cost. With economies of scale, the manufacturer can invest in specialized tooling at its plants that creates a low-cost, efficient manufacturing environment. Volume drives field population, which drives higher aftermarket revenues for the dealer and the manufacturer.
The dealers' role in the partnership is to understand the market and provide the investment in sales, service and parts coverage to ensure that they can adequately meet the needs of customers in their assigned territories. The best dealers are those who have an intimate knowledge of the material handling needs of their customers and provide a discrete portfolio of products and services to best meet those needs. The best dealers ensure that their people are trained to excel in customer service and also fully support the manufacturer's direct-to-customer (major/national accounts) channel if available.
Single Line or Dual Line?
A key determinant for any manufacturer is its philosophy regarding its dealers being either single line or dual/multi-line. In this context, dual or multi-line dealers are those who sell products that are directly competitive to each other. By working with single line dealers, a manufacturer can more efficiently involve its dealers in product development activities, thus better meeting the customers' needs. The marketing focus for the dealer is much more clear and easier to manage. Proponents of single line distribution argue that having its dealers exclusive to its brand means that every dollar of marketing investment is spent for the benefit of a single dealer in a territory. The dealer is best served by the manufacturer giving them full support to work in meeting the needs of the customer, without the manufacturer having to be concerned that there may be competition with another manufacturer for the dealer's business or that another manufacturer would get a “free ride” on their efforts. There is also the key issue of confidentiality of information, particularly when it comes to customer sales strategies and pricing.
By having single line dealers, the manufacturer can be certain that the dealer is investing in stock and rental units of their products. The manufacturer can also be secure that the dealer is fully promoting its products in the market, working to provide the needs of all customers with its products and focusing its efforts on why the manufacturer's products best meet the customer's needs. The significant benefit for the dealer is the security that the manufacturer is standing shoulder to shoulder with the dealer on every transaction and that the manufacturer will work to provide first class support in every way. Dealers can focus on developing crisp business strategies for increasing their breadth and depth of customer penetration.
An emerging trend is the significant focus and investment that is required in the arena of aftermarket parts and service. Single line dealers are able to invest in appropriate levels of parts inventory to support the models they are selling, instead of having to spread their investment stocking parts from multiple manufacturers. With the shortage of technicians and the increasing technology in the different makes of trucks, dealers are being asked to invest significantly in tools and training. It is uncertain how well this would be addressed with multiple brands of trucks and at what ultimate cost to the end-customer.
Proponents of dual or multi-line distribution are usually those manufacturers with incomplete product programs where the dealer must have alternative sources of equipment to meet the complete needs of customers, or where the brand of product is not sufficiently strong for the dealer to be competitive within its market. Some dealers prefer to be dual or multi-lined because they feel that this reduces the manufacturer's leverage over them and that they can “shop” for the best deal. It also allows them to go to customers and allow them to make the choice of product. This “supermarket approach” may require less salesmanship.
It should be mentioned that there are some high-share dealers who exclusively sell a single brand of what might be considered a weaker imported brand.
Mergers and Acquisitions
For the manufacturer, the key advantage from mergers and acquisitions is they bring even greater economies of scale. The higher the volume, the more that can be invested in new designs and improved manufacturing, and the more purchasing leverage over suppliers. These all bring significant advantages for the dealers. The manufacturer must have a defined strategy for the evolution of its distribution channels after any merger or acquisition. Much depends on the make-up of the existing distribution channels at the time of the merger or acquisition, and the manufacturer's underlying philosophy regarding the best way to meet the customers' needs.
If distribution networks are based on exclusivity, the manufacturer must ensure that its dealers are provided the full support of the manufacturer through the creation of dedicated teams or brand companies to work exclusively with its dealer body. Dealers must see that the people they interface with on a daily basis are working exclusively for their benefit. The manufacturer has the best opportunity of increasing volumes even further when its distribution networks are kept intact and the benefits of a lower cost base from the higher volume translate into benefits for the dealer and customer.
If one network is based on exclusivity and the other allows dual or multi-lining, the dealer must fully endeavor to understand the manufacturer's chosen direction, as it could have positive or negative implications for the dealer. If both networks are based on dual or multi-lining, the dealer might be able to secure additional lines from the manufacturer.
After a manufacturer merger or acquisition, there are many important business integration decisions required. There are many advantages to brand exclusivity for manufacturers, dealers and end-users. However, there are several examples of very successful multi-brand dealerships. Whatever the decision, it is an effective, healthy manufacturer-dealer relationship based on trust and partnership that will put in motion the cycle of success for which all companies strive.
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| Meet the Author |
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Colin Wilson is president, Americas for NACCO Materials Handling Group, located in Greenville, North Carolina, and on the Web at www.nmhg.com. |
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All things begin with the customer.