Coming off a century most remarkable for its pitched competitive battles, many business experts are predicting that this century, the 21st Century, will be more distinguished for its cooperative efforts. For years, we have been following a collaborative approach with customers and suppliers. Now we are extending that model to our distribution partners.
Manufacturers haven’t always had the best relationships with the distribution channels that sell their products to end-users and to others who apply them in real situations.
In some ways, that’s not surprising: there certainly is creative tension. Manufacturers, on the one hand, always want their channel partners to buy more. Meanwhile, distributors clearly understand that large inventories are expensive to maintain, especially for extensive product lines that have a multitude of options, but relatively few sales of any individual part number. And they ask what their manufacturers are doing to help them move products.
For my company there were several important reasons why we are bucking the trend and seeking closer relationships with our channel partners. First, with the breadth of our product line — drive and control products across almost every industry — we cannot reach all of our potential customers without their assistance.
Second, our most advanced products often need to be customized or engineered to achieve their full potential for providing sustainable competitive advantage. Thus our distributors have the opportunity to offer tremendous value to the customer. That’s why our first question to distributors is not, “How many sales engineers do you have?” but “How many applications engineers do you have?”
As a result, though we do not have the most distributors we are fortunate to have the best, most technically astute distribution partners in the industry. I consider them to be an extension of, and now an integral part of, our company.
I believe this level of cooperation and collaboration is unprecedented in our industry. We exchange information with our channel partners that many companies will not share even with their own employees, let alone another business. Some examples include:
- Sharing confidential information about margins, profits, investments, and plans for the future.
- Access to internal inventory, order entry, order status, and collaboration software.
- Close cooperation in applications engineering.
The last item is of particular importance because “applications engineering expertise” is one of our core competencies and one of our clear advantages in the marketplace. In essence, we are giving our distributor partners a share of the brand positioning we have built for ourselves over the past several decades.
The benefit to customers is significant: they get a technically advanced consultant within driving distance, who can access a world-class product development and manufacturing organization. The result? Solutions with engineering sophistication well beyond the reach of most of our competitors.
With the equivalent of a factory employee around the corner, they get much better customer service. Not only can our distributors help analyze the situation, they can provide the products and, in some cases, be there in minutes.
For distributors, the benefits are equally significant: we have clear understanding about how both partners add value for the customer. And, while the industry has been in the midst of a rather lackluster recovery, our sales through U.S. distributors have doubled since 2002. And I expect more of the same: in order for us to achieve our rather ambitious sales goals ($2.5 billion in North America by 2014), sales through distribution will have to triple.
In the collaboration model our organization routinely hosts distributors for tours of the corporate manufacturing and research facilities in Europe, introducing key distributors to top management. There are regular quarterly meetings for a council of leading distributors where they have direct access to company management. And we encourage them to stay in touch with the senior-level executives they meet to continually discuss ideas.
We believe that we have achieved significant sales increases, gained market share, and gained a higher level of product placement than our competitors among common customers as a result of these cooperative efforts. The secret is that we have attempted to foster a collaborative relationship with and between distributors. Specifically, we’ve granted them exclusivity in their territories, so that they don’t have to worry about competing with us or with another distributor.
And that depth and degree of collaboration, information sharing, mutual trust is unique: no other drive, motion, and control competitor is willing to provide these assurances to their channels and give them such a clear way to add value to their customers. In fact, some of our competitors have a business model with competitive distribution creating an almost adversarial relationship with and between distributors, preventing any significant information sharing.
We are totally committed to our partnerships. So our distributors are partnering with a company recognized globally for its collaborative relationships with distributors, customers, and suppliers. I believe it’s the best strategy for doing business as a technical leader in the 21st century.
Wolfgang Dangel is president and CEO of Bosch Rexroth Corp., a global manufacturer and supplier of drive and control technologies, including mechanics, hydraulics, pneumatics, as well as electronics and associated services. Visit www.boschrexroth-us.com.