Believe it or not, there was a time when distributors were content in their niche markets. Customers would go to jan/san distributors for their cleaning supplies, foodservice distributors for their cutlery and industrial distributors for tools.

All that all changed, however, with the emergence of big-box stores. Customers soon began demanding the same “one-stop shop” convenience for their businesses that they were enjoying in their personal lives. This put pressure on distributors to step outside their comfort zones. Not only were they now required to carry the extra stock that comes with diversifying their product catalog, but they realized if they didn’t do so, they could potentially lose loyal customers to their competition.

For those distributors who couldn’t purchase these new-ticket items direct, they bought into Internet trading networks — Web-based platforms where distributors can create partnerships with other distributors from other industries to streamline sourcing and allow everyone to maintain their area of expertise.

Sourcing On The Web

Internet trading networks allow distributors in different markets to source product from one another with little disruption to their daily operations. In fact, the entire process is automated and tied to each member’s back-end enterprise software solution. From the convenience of their order entry screen, distributors are then able to check a product’s availability and price, as well as place and ship orders all in a matter of seconds.

OmniSolv, a distributor in the retail packaging industry implemented this technology in its Salisbury, N.C. headquarters a few years ago and has been able to grow its business exponentially. With a core product catalog of bags, boxes and bows, the company now has access to products such as breakroom supplies, janitorial products and shopping carts, just to name a few, says Bob Spence, the company’s president and chief ethics officer.

“I wanted to connect with suppliers that had as their core business items that we wanted, but maybe only represented 10 percent of our business,” he says. “So we developed a relationship with them and can easily tap into their inventory base because in the cases that we use them it’s more of an issue with our clients and they need us to fill the order, rather than search high and low for the best price in the nation type of thing.”

Essentially, by joining an Internet trading network, Spence says his company has become a one-stop shop for its customers. In fact, because the network he belongs to offers a catalogue of millions of items, it has made it easy for OmniSolv to rationalize its own inventory as well as his trading partners — especially dead stock.

“At the end of the day if I’m helping distributors turn their inventory in today’s economy, that’s a huge benefit for them,” says Spence. “Worse case scenario, it has improved their turns and they made a sale.”

Partnerships via Internet trading networks also enable distributors to expand their offerings without adding additional warehouse space. For example, if a jan/san distributor forms a partnership with an industrial distributor, the jan/san distributor could benefit from offering its customers toolboxes that could be put together by the industrial distributor and vice versa, the industrial distributor could offer his customers cleaning supplies without the worry of storing chemicals.

Cross-industry partnerships like these have allowed Spence’s distributorship to increase sales.

“Not only does it help increase the sales of our oddball items, but it helps in protecting those accounts where we sell tons of our core business to,” says Spence. “Because we’re a part of this, it has secured our position in those accounts and it has increased our sales on this other stuff incrementally.”

Still Reluctant

Although OmniSolv has reaped the benefits of being a part of an Internet trading network, many distributors, especially those in the jan/san industry, have balked at joining.

“Usually you’ll have one or two or maybe a half dozen distributors that really try to utilize the technology and post a lot of items up there or look for items and scour for a deal, but actually it’s a very small percentage of the industry that actually adopts it and that’s always been the problem,” says Jason Bader, managing partner with The Distribution Team, a Portland, Ore.-based distribution consultant firm.

What has prevented distributors from joining an Internet trading network is the fear that they will lose control over who can see their inventory. A well-managed network, however, eliminates this concern by allowing distributors to set rules and establish their trading partnerships, says Bader.

Distributors are able to control who can see their inventory, how much inventory they want to show and at what price — and change the parameters from trading partner to trading partner. This way a distributor can block a competitor from accessing its information while allowing someone else limited use.

In order for any of the benefits noticed by other distributors to carry over to the jan/san distribution industry, Bader says jan/san distributors who might likely benefit most are those who belong to marketing and buying groups and can get other distributors to commit as well.

“In order for it to actually work, you have to have a core group of members from that particular industry,” says Bader. “Basically, you have to get a core group that wants to make this happen and will commit themselves to making sure they put their inventory up there.”

Once distributors have joined the network and have built a solid group of supporters, the benefits can be plentiful.

Benefits

When a distributor has a customer that asks for a product that typically isn’t in their product catalog, the distributor will typically do their best to find that item or a similar item for their customer, especially if it means more business. But when a distributor is trying to fill an order for a product that is not an everyday product, the worst part is the time that it takes searching and calling other vendors to procure the product. By being linked in to an Internet trading network, Spence says it eliminates the time-consuming task of past ways of searching.

“With the trading network we use, as we’re entering an order or a purchase order, it automatically, without us doing a thing, goes out and searches the network to see who has a product for that same specifications,” he says. “So it will report back to us in seconds and it will show us and we just click and order. It’s all electronic and the important thing is because these items represent so little of our business, we speed up that process in procuring those items instead of it costing us a couple hundred dollars to buy a $20 item.”

One of the early problems of Internet trading networks was that to be effective, distributors had to use the same item codes. However, today’s trading networks use a rationalized catalogue that allows distributors to maintain their own item codes.

So, for example if two distributors are selling the same product from the same manufacturer, they no longer have to worry about changing their own personalized item codes. That’s because when joining an Internet trading network, both distributors can have their inventory rationalized against the network’s database. So, there will never be confusion over an item code.

Internet trading networks offer distributors the ability to streamline the sourcing process, become one-stop shops for customers, potentially eliminate dead stock and increase sales. It also allows distributors to have a sense of assurance in the marketplace, says Spence.

“More than anything it’s being able to have that confidence when communicating with a customer, because you know you can get whatever product they’re asking for very easily,” he says. “And that confidence is seen by the customers out there.”




POSTED ON: 4/1/2009