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when  they  are  managed  through redistribution.  And  the  wholesaler’s  pricing practices  relative  to  the
                   manufacturer’s price list must be clearly understood in order to develop an effective program.

                   Marketing Value:
                   Another consideration is the marketing value of having your products available through wholesalers. Most
                   manufacturers are initially attracted to redistribution as a means of reaching and servicing the small,
                   non-mainstream  distributors who represent  incremental  new business.  The value  of suddenly  selling
                   previously unreachable customers is very high, and Sales and Marketing people are instinctively prepared
                   to pay for this value.

                   The value  of  switching existing direct  customers to  redistribution  is tougher  to  quantify. There  is no
                   question that distributors value having a manufacturer’s product “within arm’s reach” and available on a
                   weekly basis with no minimums and short lead times. It is also likely that fill rates and service levels will be
                   higher through a good wholesaler than with direct service. As always, the challenge for the manufacturer
                   is converting “happier distributors” into “more business” in order to benefit from this marketing value.

                   Distributor Perspective

                   From a distributor’s perspective, redistribution provides an effective solution to several persistent problems.
                   Inventory turns are a major driver of distributor profitability, and redistribution offers the opportunity to
                   make a significant improvement in this area. Without redistribution, the order cycle for a small-volume
                   product line can easily be every 6-12 weeks; with redistribution, the distributor can receive product on a
                   weekly (or even more frequent) basis.

                   Service levels to end-users are another key measure of distributor performance. During the “downtime”
                   between orders, a distributor often runs out of one or more items from a manufacturer, but must wait
                   until he can put together a minimum order before receiving replenishment. This results in out-of-stock
                   cuts or substitutions, which raise problems for the manufacturer, distributor, and user alike. With frequent
                   deliveries  and  shorter  order  lead  times,  wholesalers  provide  the  opportunity  to  significantly  improve
                   outbound service levels.

                   When one  considers that  redistribution  offers the  potential  to  reduce  cost,  improve  service, increase
                   inventory turns, and  broaden  the  product  offering without  requiring additional  space,  it is easy  to
                   understand why savvy distributors embrace it.  All of these benefits contribute to improved profitability
                   via “fill rate economics,” or the cumulative effect of providing high service levels with fast turns and low
                   inventory costs.

                   Wholesaler Perspective

                   Wholesalers make money in two ways:
                          ■ The margin on their selling price vs. their purchase cost
                          ■ The redistribution allowances which are paid by their manufacturer suppliers

                   The wholesaler’s margin is driven by the base price he pays to the manufacturer and the prices he is able
                   to charge to his distributor customers.  Some manufacturers employ a “Minimum Advertised Price” in an
                   effort to establish floor pricing in the marketplace and minimize price competition among wholesalers.
                   Others request that their wholesalers base their prices on the manufacturer’s published price list, using

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