Master distribution -- friend or foe

BY SCOT MCLEAN

Special to The Wholesaler

The distribution channels used by manufacturers have evolved constantly since the very beginning of the Industrial Age. From general stores, to door-to-door salespeople, to catalog operations, to reverse auctions and multi-level marketing, change has been constant in both B2C and B2B markets. But, while change has been constant, it has never been more rapid than during the past 10 years.

There are two reasons for this acceleration:

• Instantaneous communications -- The internet and electronic communications have enabled previously unheard-of concepts like just-in-time manufacturing and reverse auctions to become commonplace. Rapid ordering, fulfillment, tracking and on-time delivery capabilities that were wish-list items a few years ago are now only marginally acceptable.
• The global marketplace -- Primarily because of enhanced communications, today the world truly is a global marketplace. The notion of adding value through manufacturing processes and expertise is deteriorating rapidly in the face of high-quality, low-cost mostly off-shore alternatives.

Today, it’s easier, less expensive and equal, quality-wise, to manufacture components offshore and, if anything, add value in local final assembly. Many solid, successful manufacturing companies see their futures more as sales and marketing companies that facilitate the marriage of their technical expertise and IP with on and offshore outsourced manufacturing, and flexible distribution alternatives that serve customers’ broad needs. This method of cost-containment, with highly flexible customer-centric distribution, is widely seen as the future of commercial/industrial manufacturing and distribution.

Master distribution: A popular alternative

The U.S. arguably has the most developed and efficient supply chain structure in the world. The U.S. consumer has myriad options for accessing products, which are differentiated by service levels and final acquisition costs.

Concurrently, the manufacturer has many choices on how to meet the needs of the marketplace in terms of access to their products.  The traditional two-step model probably meets the lion’s share of how product moves efficiently to its final destination; however, there is another model that can actually take costs out for the consumer. 

Master distribution addresses the needs of distributors that wish to fill the “one-stop” needs of their customer base, but may not specialize in the category of products and, therefore, may not meet the needs of manufacturers that wish to ship/invoice in bulk. This additional step, while adding a cost in terms of price, takes costs out in terms of acquisition costs for the consumer. In the example noted, consumers can bundle their purchases, creating less “costs” to source, receive and pay for goods -- reducing the true cost of acquisition. 

Master distributors help manufacturers get to “remote” channels not normally visible to their traditional structure.  This allows manufacturers to throw a wider net over the market without the costs of dedicated representation or supply chain costs (set-up accounts, dedicated marketing, etc.).

When all is said and done, it is the customers who decide what works for them. Manufacturers may think they are in control (i.e. Dell Direct moves through distribution), but the consumer will ultimately migrate to what works for them. Master distribution has a key role in the U.S. distribution agenda!                   

Scot McLean is the vice president-sales at Haws Corporation, located in Sparks, Nev. Haws manufactures one of the industry’s leading lines of drinking fountains, electric water coolers and emergency shower and eyewashes. He can be reached at scotm@hawsco.com or by calling 775/353-8351.