Why You Should Encourage Distributors to Make Lots of Money
Read Time: 2-3 minutes
When I first stepped into a new role, one of my first “jobs” was absolutely shocking. “Stop the distributors from making so much money”.
Besides the immediate and obvious red flags, it’s an incredible subjective statement to make.
If you’ve followed me for any length of time, you’ll perhaps know I’ve worked extensively in distribution…and prioritisation is crucial. Let’s be honest, products or projects that are least prioritised are the ones that aren’t profitable.
But let’s go a little further than that, as the financial health of a distribution partner benefits everyone in the supply chain.
For suppliers it means having a committed partner who prioritises their products.
For customers, it ensures that the supply chain they rely on is robust, and capable of delivering consistently high service levels.
Profitable distributors are motivated to maintain and improve their service, making them valuable partners who contribute to everyone else’s success too…
I get it though, there is a fine balance and it should never be at the expense of competitiveness. So let me just unpack a few areas that benefit when a distributor is profitable:
Stability
Service Levels
Resilience
Partnerships
"Price is what you pay. Value is what you get." – Warren Buffett
Supply Chain Stability
With profitability comes the ability to maintain a stable supply chain and avoids the need for cost-cutting, essentially allowing distributors to take more ‘positions’ on stock.
This stability helps suppliers – with consistent order handling, and customers who rely on product availability.
The alternative is a distributor without the want or means to stockpile anything…
Quality Service Levels
Financially secure distributors can afford to focus on quality service, including better customer support and offer more flexibility in their service.
I don’t need to detail the benefits of a high service level, so all I’ll say is if you squeeze a distributor (on either side) expect something to give somewhere else in their business as a result.
Market Resilience
This is not only around fluctuations in the world of chemicals (i.e. shortages, force majeure, shipping lane issues) but also withstanding general economic downturns too.
Resilience protects the supply chain during uncertain times, ensuring continuous supply and operations.
Consider a distributor who, during a global economic slowdown, can maintain operations and not cut back on essential services or staff, ensuring the supply chain functions without disruptions (as much as possible, anyway!)
This stability is crucial for businesses that rely on uninterrupted supply to meet their production timelines.
Long-term Partnerships
Yes…again!!
Profitability, or at the very least fairness throughout the supply chain, builds a feeling of mutual success and collaboration.
I appreciate it may sound cliché, but these long-term partnerships are built on trust and shared goals, and ensure that all parties win…
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So, there you have it, short and sweet this week but no less important in my eyes.
By advocating for the profitability of your distributors, you not only foster a healthier business environment, but also create a supply chain which is more reliable, efficient, and responsive to market needs.
It ensures both suppliers and customers enjoy better service, stronger partnerships, and greater overall success.
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Thanks for reading, and see you next week.
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