"Value-added is the distributor and its manufacturer partner working together to make their customer more profitable."   ~ Tim Underhill

There are several ways distributors can impact a customer's profitability. For example, they can affect a customer's revenues, assets, processes and expenditures, plus provide additional services that directly affect the bottom line.

To help you get started on the road to adding value, here are some brief definitions of each type of activity:

Revenue-focused
Revenue-focused activities help a customer generate more revenue. They can be as varied as identifying a new product or market for a customer, suggesting a new process that enables a manufacturing customer to reduce turnaround time, increase output or get back on line more quickly.

Asset-focused
Asset-focused activities help a customer lower its asset costs. For example, when a distributor provides just-in-time delivery, establishes a vendor-managed inventory program or provides storeroom management services, it helps the customer's bottom line by reducing the amount of inventory (assets) that customer must keep on hand.

Process-focused
Process-focused activities are those things that help a customer put in place new processes that lower costs. Examples include providing online or Internet ordering capability, establishing an onsite bar-coding system to track tool usage, utilizing electronic data interchange (EDI) or electronic funds transfer (EFT) to lower process costs.

Expenditure-focused
Expenditure-focused activities impact the price that a customer pays for products and services. Product substitutions, price protection or rebate programs, reducing freight costs and volume purchase agreements are common examples of ways that distributors can reduce a customer's expenditures.

Service-focused
Service-focused activities are those services provided by distributors that help customers lower costs. For example, distributors may provide 24-hours-a-day, 7-days-a week delivery service, engineering support, predictive maintenance, safety training, kitting/pre-assembly, tool repair or other valued services.

Other
There are likely many other ways that your company impacts total cost of ownership that don't fit neatly into the above categories. For example: your ability to reduce legal liability.

These are just some of the ways distributors add value every day. But adding value is only the beginning. The next step is to demonstrate and document that value.

Click here to learn the four-step process for demonstrating how value-adding distributors can impact a customer's total cost of ownership.

back to top