In these times of economic uncertainty, more and more jan/san distributors are keeping close tabs on where their cash is being tied up. And for most distributors, what’s gobbling up a hearty portion of their revenue is the amount of dead weight that is sitting in their warehouses.

Realizing that cash is being lost through slow moving and dead stock, most distributors have discovered that teaming up with wholesalers has enabled them to shed their otherwise burdensome inventory strategies.

“In economic times such as what we are seeing today, it is imperative for distributors to enhance their cash flow, improve inventory flow and reduce operating expenses,” says Bridget Chilicki, manager of marketing services and promotions for Deerfield, Ill.-based LagasseSweet.

With it extremely challenging to borrow money from lenders, improving a distributor’s cash flow is the single most impactful value that a wholesaler can offer distributors nowadays, says Carol Butler, vice president and general manager of Saalfeld Redistribution, Loveland, Ohio. In addition, buying from a wholesaler will significantly improve a distributor’s fill rates.

“This increases sales and more importantly, customer satisfaction,” says Butler. “This is particularly true in today’s market where predicting customer demand can be very challenging.”

A wholesaler’s role today is one of an asset manager who is enabling distributors to improve their cash-to-cash cycle by helping them quickly convert payment of goods purchased to receivables for goods sold. In pressing times like these, wholesalers are in a unique position to help distributors better manage their inventory and working capital.

Turning To Wholesale

More and more distributors are understanding how critical the cash flow equation is today and the value that a wholesaler can provide. Consequently, distributors that have otherwise shied away from using a wholesaler are now turning to them out of necessity during the current recession.

“Distributors are beginning to realize the value of working with a wholesaler rather than simply buying direct,” says Barry Hentz, president of Chicago-based R3.

There are several advantages for distributors to go the wholesale route, but the biggest from a financial standpoint nowadays is that wholesalers are helping distributors maintain smaller inventories.

Instead of having to meet order minimums by manufacturers, distributors are able to use wholesalers to purchase in small quantities, while also having access to a complete line of affordable products.

“When you’re regularly accessing a wholesaler, you have better inventory position to service your customers overall,” says Hentz. “You don’t have the stock outs while you’re waiting to place another direct order.”

Wholesalers also help satisfy special product requests that distributors receive from customers who insist on having a certain product, but from vendors that distributors don’t purchase direct from.

Doing business with wholesalers has also become more reasonable price wise.

In fact, the price gap between buying direct vs. buying from a wholesaler has dramatically shrunk, says Bill Sheppard, owner of Sheppard Enterprises, Oaks, Pa.

As a result, distributors have the ability to buy a variety of products from one source with very little upcharge vs. buying a large quantity from a manufacturer, he says.

Wholesalers also currently offer programs that drop ship products to distributors’ customers at no extra cost, says Donna Bruno, president of Logistics Corporation, Charlotte, N.C. By taking advantage of this delivery option, distributors are able to satisfy the needs of their customers instantaneously rather than rely on questionable lead times when purchasing direct.

Wholesalers are also providing marketing material for distributors. To help boost sales, distributors have access to wholesalers’ customized marketing of flyers and catalogs, which allows them to advertise and promote their products and services using the wholesaler’s resources — at no extra cost, says Bruno.

Procurement

With the current economic challenges, end users are looking for products that have the right balance of quality that they can rely on combined with a price point that saves them money.

Historically, distributors have taken pride in selling quality products at fair prices. However, because end users are scaling back on spending, distributors have been put in a predicament to provide the lowest priced goods. And as a result, some distributors have been forced to sacrifice quality for price.

“Things are very competitive in the marketplace and distributors are fighting for every order that they get,” says Hentz. “Those that have done a good job of providing consistent value are getting loyalty as a result. But with that loyalty, they recognize that their customers are facing tough times. So every penny is being pinched.”

In tougher economic times, price tends to be top of mind for distributors when making purchasing decisions. So, wholesalers are providing resources such as product guides, reference sheets and cross-selling tools that allow distributors to make sound procurement decisions, says Chilicki.

Wholesalers are also giving distributors the option to purchase quality products at cheaper prices than going direct in these trying times. In fact, distributors have more purchasing options than ever before as some wholesalers, in addition to offering major manufacturer labels, also provide cost-effective private-label offerings.

Wholesalers are also helping distributors gain market share by offering diverse product offerings.

Diverse Offerings

In times of uncertainty, wholesalers say distributors shouldn’t sit back and watch as their competition moves in on their business. In fact, most distributors are looking for ways to increase revenues and improve key metrics. To do this, distributors need to offer new solutions, says Butler. This typically includes offering a more diverse product catalog.

Because wholesalers have access to thousands of SKUs and various product categories from different sectors, distributors are able to pick up extra business by selling current customers more than just cleaning products. Distributors nowadays have the option of bundling items such as foodservice, safety products or industrial supply items together on one order, says Jeff Heeren, vice president of R.J. Schinner Co., Inc., one of 17 independently owned wholesalers that provide national coverage as RDA Advantage.

Distributors are also able to step outside their traditional customer base as wholesalers give them the ability to expand their available portfolio of products or expand their sales or business offerings to customers, says Jim Walker, general manager of R3 Safety, Wilmington, Ohio.

Wholesalers are telling distributors not to be afraid to expand their reach to customers despite these tough times, as there are substantial gains to be made.

“There are some great emerging products, they may be sold in areas you typically didn’t sell into but this is a changing time and you might find some great new sales avenues,” says Bruno.

For the most part, wholesalers will do the upfront grunt work, including creating customized flyers or catalogs for distributors when expanding into new categories, says Sheppard. All that is left for the distributor to do is focus on selling.

Weighing The Options

Some distributors are still on the fence as to whether they should go the wholesale route instead of purchasing direct from manufacturers. But if distributors want to increase their profits, better manage their cash flow, increase fill rates and boost their overall sales volume in this current economic downturn, wholesale may be the wiser option.

“One of the primary reasons distributors should be working with wholesalers is to tap into all the sales and marketing tools to expand their product portfolio,” says Walker. “It’s a fairly low investment with little or no inventory investment.”

Wholesale is most beneficial to small and medium size distributors as they can be guaranteed more personalized service, opposed to manufacturer’s resources that typically give more attention to their national or high volume customers.

But some distributors are still fearful that working with a wholesaler would jeopardize their relationship with manufacturers. That, however, is not the case.

“If a distributor is not analyzing the appropriate method of dealing with the logistic challenge of receiving products today, they should,” says Heeren. “Buying through wholesalers doesn’t mean that the direct relationship goes away.”

If deciding to go the wholesale route, distributors are best suited to team with a wholesaler that will view their relationship as a partnership with common goals.




POSTED ON: 6/3/2009