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Chapter 8: Barriers and Enablers

Despite the growth of wholesaling, there is still a considerable amount of high-cost, small-order
shipment activity from manufacturers to distributors in the Jan-San channel. While this can be
attributed in part to “tradition” or “inertia,” it is also true that manufacturers, distributors, and even
wholesalers cling to some beliefs and practices which perpetuate the inefficiency.

In this chapter, we explore these beliefs and practices (Barriers), and offer suggestions for overcoming
them (Enablers) on the road to building a more efficient supply chain.

Manufacturers

The many manufacturers serving the Jan-San industry exhibit a wide range of attitudes toward wholesaling.
There are several who have embraced the concept for years, and will only direct-ship orders of ½ truckload
or more; all other volume is served by their network of wholesalers. Others maintain a skeptical attitude
toward the concept of wholesaling, entering into individual wholesaler arrangements reluctantly and
maintaining a watchful eye on the business. The majority of manufacturers employ wholesalers because
they recognize the value they provide, but often their actions continue to limit the potential for maximizing
this value.

The following manufacturer practices can be barriers to a successful wholesaler strategy:

1. Refusing to pay distributor allowance programs when volume flows through a wholesaler.
This practice may be driven by the misconception that the wholesaler’s redistribution allowance is an
incremental cost, leaving “no room” for distributor programs.
When the redistribution allowance is viewed in light of the manufacturer’s cost-avoidance, however,
this argument is weakened.
Wholesalers can contribute to this barrier if they refuse to provide trace reports to their suppliers, showing
sales volume by product and customer. Without these reports, manufacturers and distributors must rely
on cumbersome allowance claims to clear programs.
With trace reports, manufacturers are able to blend wholesaler data into their own Sales Reporting
and Program Management systems, providing seamless payment of distributor programs.
Regardless of the cause, the lack of distributor programs keeps many high-cost direct shipping arrangements
alive, when the distributor and manufacturer would both be better served with a wholesaler program.

2. Abdicating business-building responsibility to the wholesaler.
It is not unusual for a manufacturer to enter into a wholesaler program, only to quickly complain that “it
didn’t meet our expectations for new business growth.”
While accelerated growth is a valid goal for a wholesaler program, it requires a cooperative effort from
the manufacturer AND the wholesaler in order to maximize the potential.
Wholesalers certainly provide extended marketing and sales support to their suppliers, but a
manufacturer should consider his wholesaler first and foremost to be an efficient way to move product
to the marketplace. Manufacturer Sales Managers and Rep Agencies must be held responsible for
building all volume, whether shipped directly or through a wholesaler.

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