“Cut out the middleman and save cost”…. Really?
We’ve all heard some version of this theory. Trust me, in industrial distribution, we’ve heard it A LOT. And we LOVE to hear it, as it gives us the opportunity to provide a differing view.
First off, if you’re buying a mattress and going to a retail store where one brand--the one they manufacture-- is sold and the price and availability they offer meets your needs, you may not want to keep shopping before you buy. You may already have the bed frame, pillows, mattress pad, sheets, comforter and the like to use with it. Or you have the time and interest to go to other retail stores to make those purchases. It’s all part of the beauty of having choices, right?
In the marketplace, there are many world-class manufacturers. They understand what it takes to produce great products. They have knowledgeable employees who are encouraged to innovate to support the ever-changing needs and expectations in the market. They provide training to those selling their products to enable them to help customers solve problems. They meet worldwide quality standards.
Sounds good…. So why not just buy direct from them? You want all those qualities from your manufacturers. But let’s look at a few other considerations:
- Manufacturers do not typically carry finished goods inventory, as that represents a cost they cannot recover. In today’s world, manufacturer lead times are often months from the date the customer’s order is placed. Distributors will typically carry inventory, dropping that leadtime factor from months to weeks to days or even hours. (Note: If your distributor doesn’t carry inventory, contact us. We’d love the opportunity to help you!)
- Because parts are being manufactured based on incoming orders, minimum order quantities with manufacturers tend to be high. For items such as commonly-used o-rings, a seal distributor can use its buying power to offer lower prices while also reducing a need for the customer to buy quantities that may significantly exceed actual need. If the item is something more unique, the distributor can buy that product and hold it in stock, allowing you to take it in smaller releases. This keeps your inventory levels lower, tying up less cash and reducing the need for storage capability.
- A distributor, especially a strong one, is actually a good and probably large customer in the eyes of the manufacturer. Being a customer as well as a partner brings advantages throughout the supply chain. When special challenges exist, whether with product design, delivery, quality or otherwise, the distributor can use its voice on behalf of their customers for the benefit of all.
- These days we all seem to be doing more with less from a staffing perspective. How much time does your Supply Chain team have to manage suppliers? Whether in initial sourcing or managing ongoing production needs, “buying direct” means an increase in the number of vendors your staff interacts with. Simply put, the productivity gains achieved by decreasing your supply base are more meaningful now than ever before.
- No matter how good a manufacturer is, there are limitations to the scope of products they have interest in producing. Let’s go back to the mattress manufacturer example--- they may make the best mattress on the market, but it’s unlikely they’re also manufacturing sheets and comforters. A distributor, on the other hand, can offer much wider ranges of products- whether they are complimentary or unrelated in their use- because they’re using a wider group of suppliers.
- Transportation costs, while in many environments are viewed as “soft costs”, are very real and have an impact on the bottom line of any organization. Whether using carriers such as UPS and FedEx, truck lines or company fleets for your incoming products, consolidation of buying means fewer deliveries and lower freight costs.
Depending on your unique needs, there are likely other ways a distributor can help you reduce your overall costs rather than add to them. The best way to find out is to throw them the challenge and let them show you!