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Some distributors express resentment over the role that wholesalers play in improving the availability
of a wide product assortment. Large distributors who may feel they have an exclusive pipeline from a
manufacturer feel betrayed when that supplier’s products become “available to everyone” via a wholesaler.
And some distributors view wholesalers as competition, especially if the wholesaler’s parent company also
operates a distribution arm.
But avoiding the wholesaler option on the basis of these issues is somewhat short-sighted. While
there can be some truth behind these concerns, it is likely that the benefits of redistribution to the
distributor will far outweigh the risks.

Wholesalers

Sanitary Supply wholesalers themselves can exhibit behaviors that limit their growth potential. While
wholesalers profess a desire to succeed in educating both manufacturers and distributors about their
value, some of them persist in beliefs and actions that cause hesitation among potential customers and
suppliers.

For instance:

1. Refusing to provide trace reports to manufacturers.
Historically, wholesalers have not felt compelled to report their sales information back to their suppliers;
nor have suppliers requested it. In the past 5 years, however, the practice has grown, with some suppliers
making the provision of trace reports a key component of the program. Still, many wholesalers resist
supplying this information, based on fears that the manufacturers will “take the business direct,” “switch
it to another wholesaler,” or otherwise use customer information in a way that damages the wholesaler.
As a result, manufacturers cannot provide program allowances to distributors who might otherwise
buy from these wholesalers, perpetuating high-cost, small-order direct shipping arrangements. The
fear of having a manufacturer “take the business direct” speaks to a fundamental mistrust and a
lack of clarity about what types of customers are best served via wholesalers. In other channels,
sophisticated wholesalers insist that manufacturers receive their trace reports, incorporate them into
the manufacturer’s internal systems, and pay full distributor allowances and rep agency commissions.
In this way, they eliminate a major barrier to growth.

2. Focusing only on “turnover customers,” not new customers.
Under the “Manufacturer” section above, we discussed some suppliers’ disappointment when new
business does not quickly materialize through a wholesaler program. While it is critical for manufacturers
to have realistic expectations, there ARE cases where the wholesaler places too much emphasis on “taking
over” existing customers and volume that the manufacturer already serves on a direct-ship basis.
The wholesaler has a legitimate need to take on a “base of business” to make a new supplier’s line
profitable. But failing to work aggressively with manufacturers to develop new business will only
confirm their fears, and further their hesitation to commit to a complete wholesaler strategy.

3. Allowing “cost creep” to erode supplier profitability.
When manufacturers commit to a wholesaler redistribution program, they anticipate that the wholesaler
will allow them to reduce or eliminate order management, warehousing, billing, and collection costs.
The goal is to replace many small orders with a few large orders from the wholesaler. But sometimes
wholesalers begin to place smaller, more frequent orders, with special requests requiring case picking and
special handling. In some cases, the wholesaler continually asks the manufacturer to “drop ship” a large
order with his customer, and will only handle billing and collection.

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