As manufacturers search for ways to increase margins, they may eye distributor profit pools. On occasion, a manufacturer might “cut out the middleman” and forge a direct relationship that leaves distributors out in the cold.
This is a shortsighted strategy that doesn’t consider the key role distributors—particularly fluid power distributors—continue to play in the hydraulic parts industry.
Distributors provide local, on-site, customer support. They are often closer in location to end-users than are manufacturers, so one of distributors’ biggest strengths is local support.
What Value Do Distributors Add to Hydraulic Product Sales?
A distributor’s main focus is selling finished goods, rather than their production. This means the distributor’s focus is the customer, not manufacturing. Distributors have the resources to provide a wider range of solutions, high-touch service, fast delivery and competitive pricing.
Instead, manufacturers work to improve production and quality, maximizing output. They are really good at the manufacturing process but not as efficient in the sales, warehousing, and logistics needed to efficiently fill an on-demand order. Because of this, industrial distributors are a critical part of the supply chain are really good at the manufacturing process but not as efficient in the sales, warehousing, and logistics needed to efficiently fill an on demand order. Because of this, Industrial Distributors are a critical part of the supply chain.
Here are some key distributor strengths.
Reason #1: Stock Availability
Distributors have an extremely good understanding of the market and are skilled in working their supply channels to efficiently manage their stock specifically in support of their customer base. They have people who keep an eye on stock levels and know when to place large orders from a manufacturer. For end-users, one call to a distributor can replace many calls to various manufacturers.
Reason #2: They’re Relationship People
Possibly the single most important benefit of using a distributor is that all established distributors already have good relationships with an existing customer base of resellers and retailers. Great distributors work hard to know their customers’ needs inside and out, from the way they prefer getting communication to their order preferences to understanding what challenges they face.
Distributors are set up to handle the nitty-gritty involved in the product distribution process in a way manufacturers generally are not. Distributors may offer order and inventory management, promotions and discounts. This allows the end-user to reduce their cost of purchase. Each purchase order they process has an assigned cost. Fewer vendors and fewer POs increase operational cost savings.
Reason #3: Wide Range of Solutions
A distributor’s main job is to grow their product offerings as well as make products more widely available. They have contacts and business relationships with a wide variety of manufacturers and usually with other distributors. They work hard to connect you to best-fit products and solutions whenever you need them.
Reason #4: Customer Service and Support
Distributors often have team members with expertise and training to handle in-depth technical support, and if they don’t, they are almost always able to get you connected to the right person. Many distributors also have the people and communication facilities to handle customer service calls more easily and efficiently than manufacturers.
Reason #5: They Look for the Latest & Greatest
Since distributors are closer to the market than manufacturers, distribution companies collect more market information in the course of business. This means they are on top of trends, common customer needs, the newest technology and best product. Distributors are often quicker than manufacturers to respond to changing customer needs.
Reason #6: Stress-Free Returns, Exchanges and Warranty Claims
Distributors can also help end-users process returns, exchanges and file warranty claims. Distributors deal with these issues regularly and often know the most efficient way to resolve them. They are also motivated to help end-users in this regard as a form of good customer service and loyalty building.
Distributors Are Forced to Compete With Manufacturers
Despite the value distributors bring to the table, some manufacturers decide to go direct. Typically if the manufacturer chooses to go direct it is almost exclusively due to pricing in the market.
According a 2018 survey of more than 100 senior manufacturing executives across the United States, manufacturers predict that the overall share of direct-to-customer sales will increase slightly in the coming years and that the share of products flowing via distributors and retailer channels will fall modestly.
These themes echo across segments. Manufacturers aiming for more direct end-customer sales say they are developing more end-customer relationships (40 percent of survey respondents), easing customer accessibility on the web (21 percent), and aiming to capture distributors’ margins (14 percent).
Some manufacturers are directly selling their own goods through online shops that take days or even hours to set up, thanks to simple ecommerce platforms and templates. This suddenly makes the manufacturer and wholesale distributor competitors, instead of merely different points on the supply chain.
The top two challenges wholesale distributors are facing include pressure on prices due to online competition and the competition from suppliers through direct sales.
Distributors are much more than “middlemen” in the supply chain. They provide services that simplify end-user needs help end-users run their businesses more smoothly. Distributors also help keep manufacturers from distractions and focused on producing quality products, which can only be of benefit to end-users.
A seasoned expert in the fluid power industry, Harvey is passionate about providing outstanding service to his customers. His professional goal is to genuinely invest in the customer’s best interest and provide a level of service that is simply unequaled in the market.