Six Best Practices For Distributors

An overwhelming majority of wholesaler-distributors and suppliers agree that identifying the best practices in wholesale distribution is the key to cost reduction and future success, according to a new study by the National Association of WholesalerDistributors and Arthur Andersen.

Reducing costs is crucial as economic pressures and new competition from alternate channel formats are compelling companies to become more efficient and effective while reassessing their value-added offerings.

The annual market share of merchant wholesaler-distributors versus other government-defined members of the wholesale distribution channel has dropped l.l%o since 1987, according to the study (against $3.2 trillion, this amounts to $35 billion).

The figure does not include losses to alternate channel formats such as warehouse clubs and home centers, which the government classifies as r retailers. Warehouse club sales were i roughly $32 billion in 1992 and are ; expected to reach $70 billion by 1998. The study states the growth - both in terms of product purchases directly from suppliers and product sales directly to businesses and consumers - has come at the expense of wholesaler-distributors.

The wholesalers' best recourse is to provide the "best value for the price," meaning the "highest delivered value" at the "lowest delivered cost." To accomplish this, the study advises companies to reform their core competencies into a more efficient distribution channel, and transform their businesses to improve the value they add compared to alternate channel competitors.

For the Facing the Forces of Change : Transforming Your Busine s s

With Best Practices study, more than 1,000 industry executives were surveyed, to predict trends that will affect distributors in the years ahead and examine practices already being applied by leading companies to combat these trends.

The study suggests six keY messages to help others:

Wholesaler-distributors must create and use formal methods to gain customer feedback and imProve communication.

. Wholesaler-distributors must use formally gathered customer feedback and other external information to drive a formal strategic planning process.

. Wholesaler-distributors must redesign their sales efforts and other processes to achieve seamless customer service.

. Wholesaler-distributors must identify their "strategic suppliers" and trgat them as customers.

. Wholesaler-distributors must make logistics a core competency or outsource it.

. Wholesaler-distributors must actively.manage the human resource process rather than merely letting it happen.

For wholesaler-distributors, the best advice for facing the numerous challenges predicted in the study is the old axiom, "Be prepared."