When 750 manufacturers and 500 distributors across various industries were recently asked if they felt that “high quality two-way communication existed with their distributors / manufacturers”an overwhelming majority answered “NO.” Seventy- three percent (73%) of manufacturers and 63% of distributors held that belief.

So even as the number of cell phones, lap tops, Internet-enabled PDA’s, and Web sites exploded over the years, those in both camps who felt communication between the parties was of “high quality” remained in the vast minority.

Is This a Problem?

Given that any company’s relationship with their suppliers and/or resellers is an important component to success, poor communication truly is a problem. And while both sides are aware of its existence, until recently neither side had any idea of its magnitude.

Last year, a consultancy group that specializes in channel management issues performed analysis leading to the conclusion that poor communication between distributors and manufacturers results in a 2% loss in gross revenue for both parties. Depending upon one's net margin percentage that can translate to a “problem cost” of anywhere from $17,000 to $40,000 for every $100,000 in net profit.

Why It Happens

There are intentional and unintentional reasons poor communication continues to plague the manufacturer / distributor relationship.

Intentional reasons are those where a conscious decision is made by either party NOT to share information with the other.

Examples of this on the manufacturer’s side might include information about a new product under development or changes in their manufacturing processes or locations. For distributors, examples might include considering taking on a competing line of products or thinking about cutting back on inventory levels.

The majority of poor communication in the distributor and manufacturer relationship, however, comes from unintentional reasons. In contrast to intentional reasons where one party has thought long and hard about whether or not to share information, in this case, one party just isn’t thinking about the other at all. Most of this results from a combination of today’s work environment and plain old human nature -- humans trapped in a world of busy-ness, complicated organizational structure, and downsizing.

How to Improve the Situation

It’s obvious that poor communication is real and expensive to both parties. So, how can we improve the situation?

First, keep in mind that the majority of reasons for poor communication are unintentional ones and give the other side “the benefit of the doubt.” By doing so at least initial communication will have a civil and co-operative tone and will stand a better chance of resolving the problem at hand.

Beyond that attitudinal shift, be aware of your business partner and consciously think about what needs to be communicated to them -- and when.

Third, take small steps to improve. Commit to just one idea and do it consistently.

Successful distributor/manufacturer relationships can exist. And when they do both sides benefit greatly. Enhancing communication is one critical way to improve that relationship — so start communicating. Can’t we all at least ... try?

Remember, Mosaic creates customers and increases sales for business-to-business companies through specific project work, on-going retainer assignments or marketing coaching sessions.

Until next time.....

Rosemary Walter
847-483-5018
Rose1Walter@MosaicMM.com

P.S. This is a condensed version of an article in Motion Systems: The Distributor Sept/Oct 2002.

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