How Supply Chain Disconnects Kill Channels
Summary
There’s an undercurrent that’s starting to tug at even the best manufacturer and distribution channel relationships. It’s the ability to set and manage expectations based on supply chain visibility. Distributors, dealers and channel partners don’t call it that, they call it vendor responsiveness when it happens, and being blown off when it doesn’t.
The ironic aspect of this topic is that while many manufacturers insist they have the ability to make and keep commitments based on visibility into multiple layers of their supply chains, their dealers and distributors report just the opposite.
Supply Chains and The Domino Effect
Visiting with auto dealers to gauge if Available-To-Promise (ATP) and Capable-To-Promis (CTP) was important to them on fleet sales proved positive: these dealers only order from manufacturers that can deliver ATP and execute to the date. So fundamental but so true; dealers only trust manufacturers that have supply chains in focus, making and keeping commitments based on solid knowledge of their supply chains, production scheduling and order fulfillment.
When these dealers sell fleet vehicles, mostly to small and medium businesses to either replace or grow their own fleets, the ATP date from the manufacturer is the same date often a small business gets to expand and grow. The Domino Effect, if you will, of an accurate ATP date means the small business now has additional revenue generating assets on the road – a critical link to their future growth.
Conversely not delivering to an ATP date kills the pipeline of new revenue the small business was betting on and forces them to repair damaged trust with their customers. This Domino Effect of commitments in fleet sales has a lasting effect. One manufacturer wedged into a tight rural market by having superior knowledge of and control over their ATP dates versus entrenched competitors. The result: 30% of sales are with the new manufacturer, from offshore, due to better supply chain visibility.
Don’t be Afraid To Tell The Emperor He has No Clothes
For manufacturers that are getting beat in these fleet sales channels, the disconnect between corporate and the field is noticeable and significant. C-level executives, insulated from the channels by consultants and system integrators that profit more when the world outside is seen as in OK shape but internal systems need massive re-working, are hesitant to tell the CEO that basically the emperor has no clothes. Not wanting to tell them their channels are in complete disarray – or worse not knowing it – costs the companies millions in lost opportunity. All because no one has the courage to say that for all the internal system spending the fundamental systems that matter to channels and customers are broken and need fixing now.
Some manufacturers in this state, when you confront their C-level executives about how badly broken their supply chains really are, say “Our business model doesn’t require use to deliver Available-To-Promise…” and that the supply chain is not important to their channels. In those words is the unraveling of a channel strategy.
The reality is that for every manufacturer that relies on channels that ignores providing supply chain visibility on especially complex manufactured products, the greater probability their competitors are. So it’s the choice of each manufacturer, but given how small businesses purchasing fleet vehicles to grow their own businesses key off of ATP and other commitments from channel partners, manufacturers need to realize that by enriching the channel they are enriching their customers – and that being myopic and falsely secure in corporate, away from the channels, is an illusion. The reality is in the channels.
Time To Make Your Channels Stronger
It used to be just a matter of margins and Market Development Funds or MDF for short, to keep a distributor, dealer or channel partner satisfied and selling your products. No more. Competitors want your channels and will deliver advanced systems that give dealer reps the assurance that ATP, CTP and other indicators of delivery dates from your supply chain are real, and can be counted on.
If you have invested in delivering this to your channels, great. You just made a massive debit in your credibility account with your channels. If you’re ignoring it, go visit your lowest performing dealers and see how many of your competitors’ products are selling there and why. Chances are it’s because the dealers have learned to trust an emerging competitor’s visibility into their supply chains and have the track record of making and keeping commitments to prove it.
By Louis Columbus
Posted by LOUISCOLUMBUS on August 2, 2005 at 11:47 AM in Business Infrastructure | Permalink
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