Supply chain disruption and labor woes caused distributor-supplier relationships to strain almost to a breaking point in 2021. The good news is those tensions have eased. Suppliers report they retained more of their clients in 2022 versus 2021, and distributors say the number of orders that arrived with errors has dropped. Three-quarters of both suppliers and distributors report that communication with their counterparts on the other side of the supply chain is strong. One intriguing note of discord? Suppliers say they’re increasingly concerned about distributors eating into their sales. “Distributors are becoming one-stop shops by buying decoration facilities, or they bought a supplier out,” says Brian Duran, vice president of sales & marketing at MediaTree (asi/70303). “I understand it’s good for the bottom line, but it’s a gray area. That’s business suppliers could have.”
Hover over the bar charts to see more detailed State of the Industry statistics.
FRIEND OR FOE?
One sticking point in the supplier-distributor relationship? Suppliers feeling threatened by online sellers. Responses from large suppliers leapt up this year and now match the levels of medium and small suppliers. Reasons range from fears of distributors sourcing direct, to consolidating their spend with a few vendors, to distributors offering services (such as decoration and kitting) that compete with suppliers.
“Online distributors pose a significant threat to my business”
Large Suppliers ($5M+ in revenue)
The percentage of distributors who purchased from a greater number of suppliers in 2022 compared to 2021.
On average, suppliers retained 72% of their clients from the prior year, the highest number ever recorded for SOI.
of orders from suppliers in 2022 were delivered without errors. The previous year’s figure of 84% was the lowest in the five years Counselor has tracked the metric.
We asked suppliers:
“I feel that communication between my company and our distributor clients is strong.”
We asked distributors:
“I feel that communication between my company and our suppliers is strong.”
“Our relationships with suppliers got stronger during the challenges. We have a lot fewer backorders and now we can look forward and work on strategy.”Lisa Hubbard, The Vernon Company
(asi/351700)
4 Tips for Better Efficiency
Why are stronger relationships between suppliers and distributors so important? Because it drives efficiency, which leads to more business and happy customers. Here's how to improve your processes and communication.
1Delegate Back-Office Tasks
Both suppliers and distributors can save time and be more efficient by hiring in-person and/or virtual assistants to take care of repetitive but necessary duties, like checking on inventory, confirming delivery addresses and following up on order statuses. “You have to outsource when you can so you can be more efficient at running the company,” says Brian Swift, president of Swift Incentives (asi/490042). “Find a way to hire help and build it in to your business.”
2Consider Overseas Help
Swift has a team in the Philippines dedicated to customer service for his Miami-based company. Key to hiring competitively internationally is to offer slightly higher pay and more benefits, as well as comprehensive training. “Wages there go a long way,” he says. “Invest in people more so they want to stay. You don’t want a lot of churn. We also have a lending program for healthcare costs and other necessities. We’ll loan them money for what they need, and I’ve given my office manager free rein to do that.”
3Automate Systems When Possible
Lisa Hubbard, VP of sales & marketing at Top 40 distributor The Vernon Company (asi/351700) and a member of the Counselor Power 50 list, says that thankfully the frequency of order errors has lessened and there are fewer backlogs at suppliers. It’s helpful, she says, for both suppliers and distributors to use automation whenever applicable – for things like internal workflow, order entry and status updates. Some suppliers are even leveraging robots at their warehouses for more efficient picking and packing. “Automate as much as possible, especially the back and forth between suppliers and distributors,” she says. “Let’s work smarter, not harder.”
4Enlist a Second Set of Eyes
Brian Duran of MediaTree (asi/70303) suggests a simple practice that doesn’t require too much extra investment – copy a colleague when communicating with clients over email. “I don’t like to have too many cooks in the kitchen, but I do like to have one other person on email for an extra set of eyes,” he says. “Then if there are questions, we can side chat about it and figure it out before coming back to the client. That’s greatly helped me over the years.” The company has also changed its proof timing – it now offers them in four hours, rather than 24. “We find the response rate from distributors is higher, we find mistakes more quickly and everyone remembers important details more easily versus the next day,” he says.