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While this helps to clarify the subject, we remain somewhat skeptical of most marketing programs
offered by distributors and wholesalers alike. It seems that manufacturers are best served by taking full
responsibility for creating demand throughout the supply chain, then removing the artificial barriers that
might keep wholesalers and distributors from effectively fulfilling that demand.

Rather than pour money into a marketing program with unclear expectations, wise manufacturers will
invest the time and effort to work with the wholesaler sales force. Together, they can identify opportunities
to penetrate new distributors and to add categories to existing distributors. This type of “blocking and
tackling” is more likely to yield sustainable results.

A Word about Redistribution and the Manufacturer Sales/Rep Agency Force
It is important to note that while wholesalers take away the order management responsibility from
representative agencies, it is a mistake to abdicate all sales responsibility. Too often, manufacturers fall
into an “out of sight – out of mind” attitude toward the distributors who buy from redistribution. With a
wholesaler handling all of the day-to-day transactions, both the manufacturer’s sales force and his rep
agencies may lapse into a pattern of neglecting the relationship-building and business-building activities
which they naturally bestow on direct customers.

At the same time, some manufacturers complain that rep agencies should not receive full commission on
volume that flows through wholesaler. This stems from the fact that agency reps are freed from most of the
transactional and “firefighting” activity that consumes so much of their time for direct customers.

Wholesalers have traditionally fought this attitude, wishing to avoid any barriers which might make a
distributor hesitate to source a line through redistribution.

So a logical solution is to continue to pay full commissions on wholesaler business, but require Sales
Managers and agency reps to regularly work with their wholesaler counterparts as outlined above. Done
effectively, this type of business-building activity should have higher value than the traditional order
management functions performed by agencies.

Joint Cost-Reduction Opportunities

“We are currently most concerned about capacity. An improving economy is increasing demand
for transportation and Hours of Service rules are making carriers less efficient. Estimates
indicate an impact of anywhere from 5 to 20 percent. So it is like there are that many fewer
trucks on the road.”

“Today we face considerable challenges in fuel costs, driver turnover and shortage, network
consolidation…all combined with mounting pressure from receivers for improved service and
lower costs.”

A shortage of trucks and drivers has combined with record high fuel costs to create a “perfect storm”
of transportation issues for Sanitary Supply manufacturers. These forces not only support the need for
a sound wholesaler strategy, but highlight the importance of continually seeking and implementing
ways to reduce the overall supply chain cost by working closely with your wholesaler.

As unquestioned experts in the physical movement of goods, high-quality wholesalers can be important
allies in helping manufacturers drive total cost out of the system. In our experience, manufacturers and
wholesalers who have long-standing relationships can begin to “get sloppy” and fall into practices which
add unnecessary costs. By paying attention to the details and working together, manufacturers and
wholesalers can identify cost-reduction opportunities and share in the financial benefits.

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