PART ONE

Manufacturer control. Improved profits. Dealer consolidation.  It’s been bubbling up for years, but these issues and the declining economy have recently forced manufacturers to take a long, hard look at their distribution systems and reliance on the “middleman.”

Or maybe not so recently.

In fact, the scenario outlined above is based on an incident that dates back more than 100 years, involving a dispute between coal companies and wholesale coal dealers. Read all about it: 
http://query.nytimes.com/gst/abstract.html?res=9B0DE5DE1438E233A25753C2A9659C94639ED7CF&scp=1&sq=middlemen+a+necessity#

Not old enough for you? Try this: Historians can point you back thousands of years to the ancient Lebanese town of Byblos, which successfully navigated waves of political change and competition by serving as the middleman for Mediterranean trade.

All of which just goes to show that when it comes to figuring out how to get goods from the manufacturer to the end user, there really is not much new under the sun. And, just as important, no matter how much you hear people debate the value of dealers and distributors, the truth is that the middlemen have been here, they are here, and they’re going to be with us for a long time to come.

Why? Because they provide an essential service.

The temptation to go it alone.

Relationships and access remain key to the process of selling and providing products. And whether motivated by issues of consistency, loyalty, service, or margins, the desire for manufacturers to maintain control over the entire distribution process is strong.

But before moving in that direction, each manufacturer must carefully weigh the true costs and benefits specific to their situation. Selling direct through corporate-owned distribution is not going to be the right answer in every case - or even in most cases.

And even assuming that one of those choices is the right answer in a particular case, there are still existing dealer or distributor relationships with whom to compete.

The reality is that while technology may speed up the transaction process and consolidators may reduce the number of outlets to deal with, the importance of the distributor process will very likely remain relevant and essential to growth for the foreseeable future.

Making both ends meet.

Throughout recorded history, manufacturers have faced the inevitable dilemma of how to grow their customer base beyond the local market. Geography, cost, and access limit a manufacturer’s ability to reach farther-flung customers.

Enter the middlemen - in modern times, dealers or distributors - who specialize in taking manufactured goods and delivering them from point A to waiting hands at point B, C or Z.

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True Fact:The captains of Byblos distributed numerous items including papyrus. The Greeksimmortalized the city’s name by calling the paper like product sold “biblion”.  In time the term was applied to any book written on papyrus, and early in the Christian era came to be reserved for the Christians’ most important book-the Bible.In the end, the middleman was remembered more than everyone else.Based on John Ballantine’s, Byblos: Middleman Of History, Saudi Aramco World, September/October 1964, Volume 15, Number 5

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It’s by no means a perfect system. Manufacturers have always struggled with finding the ideal balance of control, reliability, flexibility, and growth for their delivery chains. Not to mention making sure that they maintain contact with, and an understanding of, the customer at the very end of that chain.

So rather than wish they’d go away, manufacturers have to find ways to work with dealers and  distributors, and fully embrace the opportunities they present. In the (not-so-distant) past, this may have been as simple as providing rewards and trips. But those days are long gone.

Now companies must offer their dealers long-term value and market-based reasons to expand their product line and actively grow revenue for the manufacturer’s brands.

Fortunately, there are several proven, effective strategies that manufacturers can implement to minimize headaches and maximize rewards when working with dealers and distributors. See for yourself in Part Two of this article.

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Confidential Property of Group Newhouse, Inc.

 This article available in pdf format: Stuck In The Middle With You