If you have ever started a new business relationship with a manufacturer or vendor, you know the drill. At first, you both meet to do your best to “sell” yourself to the other person. It looks like a dance of peacocks that are showing off their feathers to see who is the best, brightest and most connected.
But if you stop and listen to the conversation between a manufacturer and a distributor, they tend to miss some key points that would make the relationship so much more effective. “Partnership” is a word that is used in many companies today. Before you say to yourself, “I am covered there, we really partner with our distributor or manufacturer…” Look closely at the definition of “partnership.”
Partnership is defined as a contractual relationship between two or more persons carrying on a joint business venture with a view to profit, each incurring liability for losses and the right to share in the profits. Sounds harmless enough, right? Read it again and this time, focus on the second part of the definition – each incurring liability for losses. Wait, you want me to be responsible for the losses of my partner, and not just their gains? That is what the definition says. So if you are not open to this, then it might be best to refrain from using the term. Partnership requires trust, something lacking in many business relationships today.
Working with someone means taking risks. If the partnership lacks trust, one partner is left constantly second guessing the other, which makes the team highly ineffective and ultimately unsuccessful.
Here’s something to consider if you think that you are immune from this:
A recent survey of 750 manufacturers and 500 distributors revealed that 82 percent of manufacturers and 92 percent of distributors believe that sales performance and profitability are being negatively impacted by problems in the working relationship that they have. Did you catch that? Your poor working relationship is costing you sales, not the competition, the economy or government, but you.
Manufacturers said that the biggest problem with distribution is the lack of commitment to the products and promotional programs that the manufacturers offered. They also said that the distributors lack sales and marketing skills.
The distributors say that the primary problem is inconsistent management of territories by the manufacturer. The result, multiple and often conflicting channels to market, including direct selling. Only 17 percent of distributors indicated that they have clearly-defined goals and plans with manufacturers for accomplishing these goals.
It gets worse…49 percent of manufacturers and 4 percent of distributors said that the overall level of commitment in their working relationship is very low.
The greatest area of concern is the extremely low level of communication. According to the survey, 63 percent of distributors and 73 percent of manufacturers indicate that high quality two way communication is virtually non-existent.