Heavy-duty truck parts distribution channels were initially government surplus commodity depots. They have now evolved all the way to pushing new products and technologies to first-time customers. Great industry-wide progress.
However, the declining-value and increasing-costs of both outside and inside reps have become an expensive part of the standard, service-cost bundle. What happens in this channel life-cycle when:
- 70-90 percent of sales are on commodities being bought by experienced repeat buyers?
- Total information (including videos) about both old and new products is on-line?
- Customers want to buy: faster, easier, 24/7, electronically and for less total cost?
Big Customers Seek Integrated Sole Supply (ISS) Benefits
Big buyers have slowly learned to copy the system McDonald’s pioneered with its distributors starting in 1956:
- Find the best supplier
- Partner them (100 percent of spend/share)
- And, co-create continuously-improving, win-win cost economics with evergreen intent.
Entire distribution channels have largely flipped from outside rep territories to “integrated sole supply” (ISS). Drug, grocery, hardware and hospital supply channels all come to mind. Big factories—that buy a range of Maintenance, Operating, Repair and Production (MROP) items—began moving to ISS in the early ‘90’s. The trend is still growing (see MSC Industrial and Fastenal as models).
These demand replenishment systems are (sold, installed, maintained and measurably improved) by a team of people. A rep with a “relationship” can’t do it alone. The Internet-assisted customer is marrying a supplier’s past and future potential, flexible service track record, not (just) one friendly rep. Death of the Donut Patrol.
The rep’s new role with partner accounts? Be customer-centric like Amazon. Ask the customer who they want to service the account in what ways and frequencies. Those activity costs then go into the contract prices and fees.
If there is no post-deal role for the rep, then what? For best ones, assure their income and assign them to best, yet-to-partner accounts. Shuffle account assignments to put only best reps on best potential accounts. And, weed the weakest.
Is your company proactively pitching best customers on getting married? Do you have the cost-to-serve math to co-create a win-win system?
AMZN-BIZ Steals 5 Percent Of Your Most Profitable Orders From All Accounts
AMZ-BIZ can’t do ISS contracts. Traditional fleet specialists can! Without rep costs and best operational costs, AMZN offers low prices on your most-net-profitable maintenance items (filters, belts, hose, seals, bearings lights, etc.) with exceptional fulfillment to buyers who know what they want. AMZ can do this, because distributors unwittingly have big profit/loss cross-subsidies amongst both customers and SKUs.
Special Webinar: Overview on the Analytics to Fix Cross-Subsidies On June 29!
Bruce Merrifield will hold a free-and-open-to-all, one-hour webinar on June 29 ,2017, generously hosted by the Health Industry Distributors Association (HIDA) at this link: https://register.gotowebinar.com/register/1699365971276160771. You will learn a lot!
Bill Wade is a partner at Wade & Partners and a heavy-duty aftermarket veteran. He is the author of Aftermarket Innovations. He can be reached at [email protected].
