Why Use a Redistributor?
Redistribution has been around for 50 years, but for many manufacturers it remains a bit of a puzzle.
We often hear three questions:
“Why would I put another middleman between my company and my middlemen (distributors)?
Think about it this way: Why don’t foodservice manufacturers have direct service relationships with every operator? You could take several orders per week from hundreds of thousands of customers, ship them a few cases on every order, then bill and collect on each delivery.
Likewise, operators would order directly from dozens (if not hundreds) of manufacturers every time they need product, then receive multiple small deliveries every day, then process and pay an invoice for every delivery. Ridiculous, right?
Obviously, distributors exist to consolidate all of that demand and supply and create great efficiency for suppliers and operators. They make it easy for manufacturers to serve hundreds of operators and easy for operators to use products from hundreds of manufacturers. And because distributors are geographically close to their customers, they greatly reduce order lead time and improve service levels.
Redistributors fill the same role, only one step back in the supply chain. Alpine allows you to efficiently serve your Western distributors by providing a single “Ship-to/Bill-to” location. And we provide all of those distributors access to your products from a single “Ship-from/Pay to” location. Everybody benefits from improved efficiency and reduced cost.
2. “What will happen to my distributor relationships if I convert them to Alpine service?
Manufacturers sometimes fear losing touch with their distributor customers or worse, alienating them by converting them to redistributor service. Experience has shown that distributors are overwhelmingly pleased to switch from direct sourcing to Alpine service as it eliminates order minimums and shortens lead time, increasing inventory turns and cash flow. Their attitude is “I’ve got an Alpine delivery every week anyway, why not put more suppliers’ products on it?”
Regarding relationships, it was one thing when a distributor Buyer was regularly phoning in orders to the same Customer Service rep at a supplier. There was the opportunity to create rapport and gain familiarity with people and businesses. EDI, portals, etc. eliminated that direct communication channel.
But the relationships fostered by manufacturer Sales people and their local brokers remain the same whether the distributor is serviced directly or by Alpine. Changing “how the product moves and who does the administrative work” does not impact the marketing, selling, and relationship-building role of the manufacturer in any way. In fact, brokers and manufacturer Sales people are freed from spending time on the details around order management, shipments, invoices etc. so they can spend more time on building relationships and the business!
3. “How do I know what redistribution is worth?”
This is the right question. Once manufacturers get comfortable with the concept of redistribution, they need to understand the financial impact of opening a redistributor and converting direct customers to redistribution service. And there are a lot of moving parts to the equation.
We feel strongly that all manufacturer stakeholders (Sales, Marketing, Supply Chain, Finance, CEO, etc.) need to have a shared understanding of the economics of redistribution in order to fully leverage the opportunity.
Broadly speaking, a manufacturer’s fulfillment costs have 4 main drivers:
Order Management (front end and back end)
Deployment Shipments from Plants to Forward DC’s
Warehousing Storage and Handling at Forward DC’s
The total cost can vary significantly by customer, geography, and order size.
Redistribution can reduce or eliminate some or all of these cost drivers, depending on the specifics of the program. In addition to cost reduction, redistribution provides new growth potential by making your products easily available to hundreds of distributors.
Alpine will provide Excel templates to help you quantify your Direct fulfillment cost by order size, then compare side-by-side the P&L impact of serving customers directly vs. through Alpine.
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