Mark Dancer: Collaboration is Critical for Keeping Pace With Industry Disruption

Editor’s Note: This Q&A is a follow up to a column by Mark Dancer, NAW Institute for Distribution Excellence Fellow, about the steps distributors and suppliers can take to reinvent their partnerships. The original column can be found here

Why is it important for distributors and suppliers to reinvent their partnerships?

When it comes to disruption by outside players, distributors and suppliers must work together to modernize the traditional value chain. Online marketplaces and other disruptors, like Amazon, are not seeking to put distributors or suppliers out of business, but to move business to their private platform. In that virtual space, the disruptor writes the rules of competition, monitors activity, and gathers data for competitive advantage. Suppliers and distributors share responsibility for a total customer experience and can leverage both customer shopping and product usage data to offer solutions that Amazon cannot match. Doing so requires that distributors and suppliers work together to reinvent the partnership around new roles, responsibilities, customer services, and compensation.

Why is collaboration key to developing solutions?

There are many reasons. No single distributor or supplier has the scale to create disruption-proof operational efficiencies or sales and marketing productivity. Large data sets are required, backed up by sophisticated analytic capabilities. Suppliers and distributors each own a piece of the overall customer experience, and that experience cannot be fully optimized without developing products and services that leverage each other’s capabilities. Finally, neither party has a lock on creative ideas. Disruptors like Amazon are constantly exploring ways to leverage their platform for competitive advantages. Collaboration is essential if distributors and suppliers have a chance at keeping up.

What does a successful partnership look like in the current market? Do you have any case study examples, particularly ones that touch on foodservice equipment?

Successful partnerships start with identifying new methods for improving value chain efficiency, productivity and customer experiences, then go on to align programs and policies to align strategies, investments, and execution. One example is sharing inventory and point of sales data in return for custom marketing programs and coordinated sales activities. In my ongoing research for the next “Facing the Forces of Change®” report published by the National Association of Wholesaler-Distributors, I have found examples of distributors that are giving their best supplier partners real-time access to point-of-sale and warehouse data. In return, suppliers are moving away from incentives that seek to drive distributors to carry inventory, and instead offering rebates, discounts and marketing funds for investments in digital technologies, brand building, and value selling competencies.

What are some key indicators or metrics distributors should consider to determine the health of their value chain?

The future of the traditional supplier-distributor value chain is not certain and change is happening in new and unexpected directions. During periods of change, the most important metrics are about tracking customer preferences and building new capabilities. For customers, metrics that combine quantitative measures of customer satisfaction with a qualitative understanding of why they change their expectations and behaviors are important. For capabilities, metrics that measure investments and utilization of e-commerce platforms, mobile devices, social media, and advanced analytics are essential. Combined, customer metrics help distributors and suppliers stay on top of change and move the partnership in the right direction, while capability metrics ensure that partners have the knowledge and skills to capitalize on opportunity and fend off threats as they arise. Measuring health is about ensuring that the partnership rises to the challenge. As the new rules of collaboration and competitiveness become clear, metrics can shift to measuring excellence.

How often should distributors and suppliers get together to re-evaluate their partnerships?

In terms of getting together in person, my answer is once. In today’s virtual and digital world, the value of gathering in a physical place should be used for the maximum effect. For the partnership, the best use of such a meeting is to demonstrate a commitment to collaborating, lay out a plan, set standards and measure of progress, and tell stories about current progress and future success. Outside of this meeting, before, after, and ongoing, getting together in the virtual world on conference calls, web events, and social media should be nearly continuous with both ad hoc and planned events. Getting together is essential and should be about progress not grandstanding. If both parties see the value and are willing to collaborate, getting together will be more organic than forced.

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