Don’t Get Cut Out of the Supply Chain Due to Disintermediation

How can Distributors combat the disintermediation trend? Distributors are finding that manufacturers are selling direct to businesses and consumers, or that their business clients are buying direct from their suppliers and manufacturers through a variety of Ecommerce websites or other direct ordering mechanisms.

Disintermediation may provide your customers lower cost, but it does not include the additional services you can provide. Your sales and marketing team must be able to articulate the added value your distributorship delivers to your clients in addition to products.

Focus on the Value

Offering more services than just the product and fast delivery will differentiate your business and limit disintermediation. One of the primary benefits of using a distributor is warehousing space.

Your customer does not have to order large volumes of product and they do not have to maintain storage space for the product before it’s used or sold. Distributors give small business the ability to have ‘off site’ storage at a lower cost than leasing warehouse space themselves.

Distributors who work with customers that do not know what they will need until they get to the client job site are often the best customers for a distributor. They don’t have time to wait for product from an ecommerce site. They need the equipment to start the job right away or they will lose money and clients. Businesses who have a difficult time planning their work in advance, or who need advice from experts (your distribution sales staff) on which products to buy are perfect distribution customers.

Communication

Talking to customers about the additional services and value your distribution network gives them is the second key action you should take to limit disintermediation. This article in Modern Distribution Management lists customer service, knowing your customer’s needs, product knowledge and training, and focusing on niche product areas as primary ways to prevent loss of customers to direct buying.

Creating and strengthening relationships with your customers and encouraging communication about planning their product requirements will also limit disintermediation. Many distributors indicate they are increasing their product selection for their customer niche.

Analytics

What can you measure to determine if your efforts to limit disintermediation are working? This webcast by GrantThornton on Fighting Disintermediation shows the results of a study where distributors were able to see improvements by an increase in net profitability, acquiring new customers and increased spending by existing customers.

Reviewing analytics and financial analysis plays a key role in determining whether your initiative is successful. You must have a robust Enterprise Resource Planning system and reporting to provide the information needed. Contact Socius for assistance with improving your distribution business analysis capabilities.