Focus on supply chain innovation study advises faltering manufacturers

by Canadian Shipper

Manufacturers in the US, facing their 15th consecutive monthly drop, are being challenged to improve profitability by focusing more on their channel relationships.

Manufacturers can best survive the downturn by concentrating on supply chain innovation and generating greater value from their distributor relationships, according to a recently released study by the National Association of Wholesaler Distributors (NAW) titled Facing the Forces of Change: Future Scenarios for Wholesale Distribution.

“In most B2B industries, distributors are still the primary route to market. Manufacturers can survive the downturn by generating greater value from their distributor relationships.” said the study’s author, Adam J. Fein, Ph.D., president of Pembroke Consulting.

Based on responses from 1,600 manufacturers, distributors and customers across 50 industries, the study forecasts specific shifts in customer supply chain strategies that affect manufacturers and distributors.

This includes increased vendor rationalization programs and expanding Internet use for product sourcing and purchasing decisions.In the study, 83 percent of manufacturers and 86 percent of distributors surveyed expect customers to concentrate purchases with fewer suppliers by 2006. Over two-thirds of manufacturers and distributors also see customers aggressively enforcing national supply agreements over the next five years.

While Internet use will not be universally adopted throughout the economy, certain customers such as institutional buyers will increasingly use it to automate bidding while retail operations and contractors will use it less frequently.

“The current slowdown pushes customers to seek higher efficiencies in their supply relationships and buying processes,” explains Fein.

“Manufacturers can gain long-term, strategic advantages by partnering with the distribution channel winners that will survive vendor rationalization programs.”

The study further reveals 72 percent of B2B customers will value getting product information online and 76 percent of customers will use the web to identify new suppliers by 2006. As a result, manufacturers must be prepared with electronic content for either their own website or their distributors’ sites.

“Manufacturers can use technology as a tool to become more effective channel partners by bringing lower prices and improved service to customers,” concluded Fein.

Based on the research manufacturers should:

* Carefully evaluate the business needs of their distribution partners before implementing any new technologies or programs

* Proactively respond to growing technological capabilities of distributors

* Pay close attention to how customers want to purchase their products

* Provide product and marketing information in electronic format for customers

* Identify the likely winning distributors in a channel and create partnerships to retain customer access when customers are rationalizing vendors.

To learn more about the study visit

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