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Maintaining the Wholesaler Customer Mix

Unfortunately, it is not unusual for manufacturers to adopt an “out of sight, out of mind” attitude toward
the volume that flows through wholesaler, only to discover that the customer mix “ain’t what it used to be”
(if it ever was)!

We believe that Sanitary Supply manufacturers should require regularly-submitted “Trace Reports” from
their wholesalers. Trace Reports provide detailed information about the wholesaler’s sales to distributors,
including customer names, products, volumes, and prices for a given manufacturer’s line. These reports
help manufacturers regularly evaluate the business that is served by their wholesalers. And they provide a
“gold mine” of data that can help manufacturers optimize logistics costs and uncover growth opportunities,
to make sure they get the most out of their wholesaler partnerships.

Typically, a manufacturer will find that there are still small-order customers buying direct, when they could
be better served via wholesaler. The opposite situation, large-order customers switching from direct to
wholesaler service, can also occur.

Both situations should be addressed via a joint effort by the manufacturer and the wholesaler, based on
their shared understanding of the target customer base. While it is never advisable to force a distributor
to buy in a manner not of his choosing, distributors can usually be persuaded to make the right decision
provided:
■ There is a consistent message from the manufacturer, wholesaler, and representative sales people.
■ The manufacturer and wholesaler practice price discipline (i.e., adhere to bracket price structure).
■ A small-order distributor is able to source all of his required items from the manufacturer’s product
line via wholesaler

When a distributor insists on buying “the wrong way” despite cooperative good-faith sales efforts, the
manufacturer and wholesaler should agree to tolerate the situation for the overall good of the program.

Joint Sales and Marketing Opportunities

As we stated at the outset, redistribution has gone from being a source of competitive advantage to
becoming a “must-have” strategy for most Sanitary Supply manufacturers. Whereas early adapters
may have enjoyed the benefits of being a sole supplier in their category, it is likely that today they
share space in the wholesaler warehouse (and in the minds of the wholesaler sales force) with their
direct competitors.

So how should a manufacturer regard the wholesaler’s “sales and marketing support” story in light of
the presence of competing product lines?

This question was posed to the CEO of a leading wholesaler who participates in a non-Jan-San channel. We
asked whether this wholesaler is strictly in the business of expertly fulfilling demand that is generated by
the manufacturer, vs. influencing distributor demand for various manufacturers and brands.

The CEO’s response was, “We are neutral in the sense that we make the products available to the
appropriate distributors in multiple channels, and we do not try to provide an end-user selling function
or be the product experts technically. However, by selling the distributor on the value of our concept, and
creating demand for products through our system, we are breaking down barriers for our manufacturers to
sell product. That said, our sales people are like others. If a manufacturer has created numerous barriers
for the target volume to move through our system, they are going to focus more on manufacturers that
have fewer barriers in place for them to sell and influence our distributors. Most distributors have a good
idea what they want; if not, our sales people will focus on the lowest-barrier manufacturer.”

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