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3. Offering wholesaler service as “an option,” without encouraging high-cost, small-order distributors to
use it.
Some manufacturers enthusiastically pursue wholesaler programs in order to “cover all the bases,”
but maintain low order minimums and refuse to steer appropriate customers to their wholesalers. In
some cases, this is rationalized with “if I don’t have a wholesaler in every market, I need to maintain a
low minimum, and therefore lots of small-order distributors will continue to buy direct.” In other cases,
manufacturers fear offending their distributors by forcing, suggesting, or even asking them to switch to
wholesaler service.
In a properly designed wholesaler program, there will be a clear understanding of what customers and
order sizes are best served via wholesalers. Manufacturers who steer these customers to wholesalers
are ultimately helping the customer, the wholesaler, and themselves.

Distributors

As with manufacturers, Jan-San distributors display a wide range of attitudes and practices with regard to
wholesalers. There are many who look first to wholesalers when adding new lines, due to the simplicity
of “adding to an order” as opposed to “setting up a new supplier.” In the best working relationships,
distributors consider their wholesalers to be “another warehouse,” delivering the right mix of products
to support cross-docking and immediate shipment to the distributor’s customers. But other distributors
regard wholesalers with distrust and suspicion, steadfastly refusing to do business with them in anything
but an emergency situation.

Ironically, it is often the smallest distributors (who could most benefit from sourcing through a wholesaler),
who cling to direct ordering-shipping relationships with all of their manufacturers. The largest, most
sophisticated distributors tend to use wholesalers wherever they can minimize the total cost of procurement.

Below are the distributor practices which stand in the way of successful wholesaler programs:

1. Fear of losing the manufacturer relationships.
Distributors often express the belief that they can only ensure full manufacturer support by maintaining
direct ordering-shipping arrangements with each supplier. This concern is usually centered on “getting the
best price,” but also encompasses manufacturer sales/technical support and the desire for a timely and
complete flow of information from the manufacturer.
Manufacturers unwittingly contribute to this barrier if they take an “out of sight, out of mind” attitude
toward the distributors who buy from wholesalers. The challenge for distributors and manufacturers
alike is separating “relationships” from “the physical movement of boxes.” Once both parties make
this leap, they can work together to ensure that relationships are maintained and strengthened
regardless of how the boxes move.

2. Clinging to “Gross Margin” as the sole determinant in sourcing decisions.
It is true that distributors may pay a higher price when they buy from a wholesaler than when they buy
directly from the manufacturer. To focus solely on this fact is to ignore the costs of processing multiple
PO’s, tying up receiving docks, holding inventory, paying multiple invoices, and stock-outs due to long order
cycles.
The “total cost of procurement” calculation is too complex to allow simple rules of thumb regarding
which lines should be sourced via wholesalers, or how much price premium is worthwhile. But
savvy distributors will work through the numbers on key lines, and many have developed an intrinsic
understanding of how to balance the benefits of wholesale redistribution with the potentially higher
price.
3. Allowing “resentment” to cloud judgment regarding wholesalers.

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