The D’s of Distribution

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In my experience of the distribution trade, the points of negotiation or trade-offs between the customers and suppliers are invariably one of the following
  1. Diversity (width of SKU’s)
  2. Delivery (time)
  3. Discrepancy (accuracy in order execution)
  4. Discount (price negotiation)
Let me elucidate each of these trade-offs and the interplay of negotiations which the entities concerned engage in.
Diversity (width of SKU’s)
The larger the SKU’s maintained at the supplier (distributor), the better is his ability to have a higher first fill ratio (FFR) w.r.t. to order of the customer. This creates a situation whereby the customer perceives the supplier to be reliable & well stocked. The offshoot of this is the scenario where supplier creates barriers to switching for the customer on account of better order servicing. Customers, on the other hand, are happy because their business downstream is addressed appropriately.
Delivery (time)
The essence of completion of every order is the time taken to service it. Given the fact that increasingly time is being treated as a trading currency alongside monetary aspects, we are looking at a scenario wherein the supplier who services the order the fastest, is the one who is at an advantageous position as compared to his competitors. Delays in order servicing provide a window of opportunity to competitors to step in and present viable alternatives to customers. Supply chains, both upstream and downstream, are increasingly getting integrated, and any slack by any of the players in the entire supply chain, puts timelines pressure on the supply chain.  Customers value time bound supplies as this creates opportunities for order creation and servicing downstream.
Discrepancy (extent of accuracy)
Mistakes in order servicing can blunt the advantages of the supplier w.r.t. diversity and delivery. There can be nothing more annoying for a customer to receive his goods which are not in conformance with his order. Not only it is a waste of time for the customer and money for the supplier, it leaves an unpleasant business experience. Accuracy in order servicing coupled with positives of diversity and delivery parameters , create a satisfying customer experience.
Discount (price negotiation)
While customers are always looking at more discounts and hard bargains, suppliers by focusing on points 1 till 3, are able to parry the discounts negotiation to a certain extent. This moves the negotiation to non-price parameters from price parameters, something which every supplier desires.
Views please….
 By: Sumit Singh
Dated: 14th Dec, 2014

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