Future of supply chain is a matter of definition

Value. It’s a small word. An innocuous one, even. But in the context of the ever-changing relationship between distributors and manufacturers in the catering equipment sector it means absolutely everything.

I attended an event recently where it was suggested that factors such as the global economy and the growing role of ecommerce were prompting manufacturers to review their route-to-market strategies more painstakingly than ever before.

One view is that in a market place where the internet has removed so many barriers and managing cost is top of every CEO’s agenda, the prospect of taking more business direct or entertaining sales channels that wouldn’t have been conceivable in the past becomes more appealing.

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I beg to differ. There are, after all, plenty of brands passionate about engaging more closely with partners and which are putting increasing amounts of business that way. The main reasons for this are that it is both economical and practical, achieves a level of coverage that would be impossible to attain independently, and provides immediate access to the sort of skills that, quite frankly, are not core to a manufacturer’s own make-up.

And this is where the issue of value does become applicable — and why value alone will be the factor which really influences the degree to which routes-to-market change in future. Because while dealers constantly have to examine the benefits they get from working with manufacturers, the opposite is also true.

One equipment manufacturer recently told me it looks for three key things in a potential dealer partner: whether it understands the product; whether it can grow the business; and whether it will pay on time. Fair enough. If those factors determine ‘value’ in the eyes of that manufacturer then the decisions it makes will reflect that.

Similarly, there is ongoing talk about the role of internet sales channels at the moment. Many manufacturers would argue that if an internet shop places orders, pays well, and does the business, then the ‘value’ it offers is pretty conclusive.

Others would contend that value comes from the sort of channel partner which is rich in engineering resources or operates a showroom, or simply has a track record of delivering first-class projects.

As much as dealers need to demonstrate their value to the end-user, increasingly they will have to do the same to the brand to justify their position in the supply chain.

Of course, one thing remains unchanged: this scenario still has to be reciprocated. If a partnership is going to deliver mutual value then both sides have to agree exactly what the definition of that tiny, five-lettered word means to one another.

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