Working at Cross-Purposes
Proactively managing the inherent supplier-distributor conflict
By Tim Horan
It was late in the research stage and early in the understanding
phase when Mike Marks, Mike Emerson and I were discussing our findings
for our book, Working At Cross-Purposes. One, businesses
in a supply chain worked at cross-purposes, even though they needed
each other to succeed. Two, there was little evidence that the sugarcoated
theory of "win-win" ever helped either party achieve any
significant wins. The questions we tossed around the table early
on were not concerned with the validity of the findings; it was
whether or not senior managers would accept a frontal assault to
their cherished beliefs. Win-win was part of the American business
lexicon. If we all work together, we will all win, and shared prosperity
will be the result, executives believed. Our research proved otherwise.
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When we shared the initial findings with Ron Shriebman, the executive
director of DREF, he was encouraging. "This is what we want,"
he said, "something provocative, research-based and thought-provoking."
With his encouragement, we continued working, writing and challenging
our findings. With each rewrite, the truth became more obvious—suppliers
and distributors should operate at cross-purposes. This was the
only way for both to survive.
These cross-purposes were legitimate. We wanted to let executives
at both the supplier and distributor levels know that these cross-purposes
were both explainable and legitimate. We also wanted to develop
some simple guidelines designed to help these same executives manage
the conflicts that occur in a supplier-distributor relationship.
There are many challenges that exist in managing a supplier-distributor
relationship. The challenges include:
- Understanding that win-win is a myth, but mutual success can
still be a goal.
- Understanding the difference between critical issues and minor
but aggravating (we call them MBAs) ones.
- Understanding the importance of the local rep in the equation.
The Win-Win Myth
Exploding the win-win myth was especially provocative. As I mentioned
earlier, it is such a stalwart cherished belief in American business
that it is often accepted without question or investigation. The
truth is that win-win can often cause more harm than good. When
executives believe that win-win exists and there is a shared prosperity,
they start believing in entitlements. Entitlements don't exist
in today's business; just ask the competitors of Wal-Mart who
watched their long-standing suppliers cut prices and bend over
backward for the giant retailer. We realized we were onto something
with our "win-win is dead" thesis when we presented
our findings to a roundtable gathering of major manufacturers.
One of the participants, upon hearing our thoughts, exclaimed,
"Boy, am I glad to hear that; I always thought it was a bunch
of bull. Finally, someone had the guts to say it out loud."
We aren't saying that there isn't still an opportunity for mutual
success. In fact, mutual success is important. However, it is
easier to attain success when everyone realizes that cross-purposes
are part of every day business. When all was said and done, win-win
led to false hopes and wasn't a very effective way to manage a
relationship.
Understand the Difference Between Issues
If legitimate cross-purposes exist, conflicts also exist. They are
inherent in the supplier-distributor relationships. In our research,
we found ample evidence to support this belief. Suppliers want broad
product representation and distributors want products that sell.
Distributors want solid marketing plans and suppliers want dedicated
sales teams. The list goes on and on. One key to effectively managing
these conflicts is to determine which are critical and which are
minor.
Among the many guidelines to help executives operate in a world
of legitimate cross-purposes is this one: "Don't overreact
to MBAs." Early in our research, we realized that high-performing
organizations, intuitively or otherwise, recognized which issues
needed their immediate attention and which issues simply fell into
the MBA bucket. It is important to note that "minor but aggravating"
issues can derail the strongest relationships. Both distributor
and supplier executives should tread cautiously when dealing with
requests. What one party sees as trivial, another sees as critical.
Many of these MBA requests come from the supplier rep, which brings
me to my last topic.
Manufacturer/Supplier Representative
The supplier rep is a key cog in the wheel but, generally, is under-trained
and overworked. These reps are often the ones asked to deliver the
bad news to their bosses on the supplier level, and manage the ever-changing
demands of their customers at the distributor level. They are usually
in their positions for a short period and, just when they figure
it out, they are promoted or transferred. They are critical to the
success of the relationship, but are often the forgotten soldier
when the relationship sours. The rep position is usually filled
with entry-level employees who are put in the trenches with a lack
of ammunition, skill and experience. Yet they are a very important
factor in the relationship. Successful distributor executives understand
this relationship is important and manage it effectively. For example,
they will help a rep make goals and quotas, as long as they don't
influence the long-term success of the distributor organization.
In fact, there were several instances in our research where the
first line distributor managers served as unofficial mentors to
the local factory rep.
The first line of communication for most distributors is with this
local factory representative. It is important to keep this line
of communication open at all times. Our research indicated that
many terminal conflicts between suppliers and distributors could
have been avoided if the distributor executive would have looked
to the factory representative for early warning signs.
Make it Work
Remember, as you analyze your own supplier-distributor relationships,
treat win-win as a myth. The concept is quaint and easy to embrace,
but in the end doesn't clearly define the complex relationships
between suppliers and distributors. Legitimate cross-purposes exist
and it is better to accept and manage them. When cross-purposes
exist, some conflicts will be important; some will be MBAs. Learn
to tell the difference and manage the conflicts accordingly. And,
last but not least, understand the plight of the local factory representative
and manage the relationship carefully. The first opportunity for
resolution of many supplier-distributor conflicts is with the factory
representative. The ability to create a strong relationship resides
with the distributor executive. Take advantage of the opportunity.
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