Stocking Distributors

September 17, 2010

Q: Do you see more manufacturers moving products through stocking distributors? How do they know who has the proper training, certifications and authorizations from the manufacturer?

A: Yes, I describe that under the heading of “channel disruption.” I can’t speak for all distribution companies, but the ones we partner with assure me that they have systems and processes in place to verify the authority that an integrator has to be a reseller of their products.

The goal is to maintain brand loyalty, but rely on a logistics company for inventory, shipping and payments. The ones I know can track all of the appropriate credentials and won’t give pricing to anyone not listed as such.

I think what has driven a lot of this is product availability and payment terms. Due to the nature of contracting, it’s not uncommon for the integrators to be paid 90 days from delivery and installation. The manufacturers simply don’t or can’t tolerate a contractor who waits until they are paid before paying them. Then, the whole credit hold thing begins and everyone is unhappy. The distribution model is one way to get the manufacturers out of being the bank.

The other driver is the cost of warehousing materials. Some manufacturers want to reduce their inventory at the factory and move that elsewhere. Contractors don’t want any inventory if they had their way. That dynamic has spawned the movement toward a distribution model that’s actually quite common in most technology markets. I think our industry was simply a late adopter of this fairly common model. — CW

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