Manufacturers and distributors both benefit from building strong relationships. In a world where margins are tight, companies have to use all resources at their disposal to understand each other, encourage collaboration and streamline the process of working together.
In a recent Twitter chat for USA Manufacturing Hour, participants discussed this very topic, led by host, Missy Moorefield from Southern Fasteners & Supply in North Carolina.
Types of Manufacturers
The discussion began with participants sharing what they thought the 3 types of manufacturers were and what the letters MTS, MTO, and MTA stand for.
Adam Baker from Schooley Mitchell in Pennsylvania said, “Make to Order is the only one that I know for certain - and that's only because of Sheetz amazing subs!”
Rebecca Prox from DSI/Dynamatic in Wisconsin said, “I probably should know, but I don't.”
Chris Giglio from Mfg Talk Radio in New Jersey said, “I know how you feel.”
Host Moorefield said, “Trust me, I get it... In other chats I've felt bad because I didn't know how to answer questions, even though I felt I should.”
Emily Kite from Obsidian Manufacturing Industries in Illinois said, “Well, I will sit this one out. I am stumped!”
Ruby Rusine from Social Success Marketing in California said, “No idea.”
Valerie Weber from Monofrax in New York said, “No idea. This is embarrassing.”
Amy M Anderson said, "What do these letters even mean?" Great question! And they undoubtedly mean something different to different audiences! Each industry, niche, audience, seems to develop there own acronym language!”
Whitney Koch from Welker Inc in Texas said, “I’m going to look that up.”
Kati McDermith, the Manufacturing Hype Girl in Illinois said, “I resisted the urge!”
Pavel Stepanov from VirtuDesk said, “I have no idea. Love to learn them all today from everyone.”
Dan Bigger from Optessa Inc in New Jersey said, “Make to Stock, Make to Order, and MTA?”
Host Moorefield said, “Nice, Dan! 2 outta 3 ain't bad.”
John Buglino from Optessa Inc in New Jersey said, “Make to Stock / Make to Order / Make to Assemble.”
Host Moorefield said, “AH-HA! We have a winner. Way to go, John!”
Jasmine Labelle from Velavu in Canada said, “Make to stock, make to order, and make to assemble!”
Nigel Packer from PelaTis Online in Wales, UK said, “Make to stock, Make to order, Make to assemble.”
Chase Bodor from Plastics Plus Technology in California said, “Made to order & Made to assemble are the ones I know.”
Host Moorefield said, “Here is what the letters stand for in terms of types of manufacturers:
MTS = Made to Stock. These manufacturers make a large amount of the product and store the product before the final sale of the goods.
MTO = Made to Order. These manufacturers only make products upon receiving orders from customers.
MTA = Made to Assemble. These manufacturers produce the basic parts of a final product. These basic parts can be quickly assembled together when the manufacturer receives an order from a customer.”
Types of Distributors
The discussion continued with what the 3 main types of distributors/distribution methods are. Participants shared their thoughts.
Bigger said, “Yup, nope. I don't know that one.”
Buglino said, “Direct, partner, and channel?”
Packer said, “What John said. *Taps nose*”
Host Moorefield said, “He's on the right track (which means you are too)!”
Bodor said, “John coming out of the batter's box slugging!”
Host Moorefield said, “You got direct right! Honestly, partner and channel may not necessarily be wrong. From my research I learned of quite a few different types.”
David Crysler from The Crysler Club in Michigan said, “Wholesale, Direct to Consumer (DTC), and Retail!”
Smartflow in Missouri said, “Interested in this because we're probably using more than one.”
Host Moorefield said, “There is/can be overlap in the different types!”
She continued, “What's funny (sad?), I work for a distributor but didn't know all the various kinds until I did my research for this chat.”
Ruby Rusine from Social Success Marketing in California said, “No idea about the rest but I am familiar with channel distribution because I've worked with the sales teams of our channel distributors in my past life.”
Prox said, “Learning as I go!”
Koch said, “Yeah, I did not realize there were different kinds until I read this question!”
Host Moorefield said, “That's what we're here for, right?”
She continued, “The three main types of distributors are:
Intensive = this type of distributor is used when a brand wants to permeate the market by selling in as many avenues as possible and the products are generally mass-marketed, affordable, and commonly used items. Example: candy bars that can be found in numerous supermarkets and big-box retailers
Exclusive = this type of distributor is used when a brand wants to limit the number of sales channels to create rarity and exclusivity of an item/brand. Example: a high-end, luxury shoe company only has flagship stores in major metropolitan areas.
Selective = this type of distributor is used when a brand chooses specific retailers to carry their products. The brand wants some rarity and exclusivity, but also a wider consumer reach. Example: a high-end luxury shoe company that has flagship stores in the major metropolitan areas, and also partners with higher-end department stores to achieve a wider consumer reach.”
Types of Manufacturer-Distributor Relationships
There are 2 types of manufacturer-distributor relationships: Tactical and Strategic. The next part of the chat discussed the difference between them.
Koch said, “Good question, good question…”
Michelle Riccetto from Brash Inc in Canada said, “Our guess is one is more for like immediate needs, the other is like more around long term planning needs and takes growth etc in mind ( hence strategy).”
Host Moorefield said, “Oh, you're very much on the right track!”
McDermith said, “I can't say I know the answer, but I feel like "tactical" doesn't sound as nice as "strategic."
Host Moorefield said, “While tactical isn't necessarily a bad thing, it is a bit more "standoffish" (??) than stategic.”
Prox said, “I feel like one is tangible, the other isn't. Am I warm?”
Host Moorefield said, “Yeah, I think you're in the ballpark! Not bad, not bad at all.”
Bigger said, “I should have cheated.”
Buglino said, “Tactical helps get the goods from A to B where strategic is a stepping stone from A to B.”
Host Moorefield said, “Look at you! You've got some really good answers. Honestly, this description is a good way to look at these 2 types.”
Smartflow said, “These 2 terms are so similar..”
Packer said, “Strategic = Long term planning Tactical = Medium term planning.”
Bodor said, “Wild guess - but one is essential and the other is "nice to have". Like you need the tactical distributor to reach existing customers, but can leverage strategic ones to reach new customers.”
Host Moorefield described the two types of Manufacturer-Distributor Relationships:
Tactical = this relationship tends to mainly be about increasing sales. The bottom line is the manufacturer makes the product and the distributor handles all marketing and other logistics for getting the product to the customers. There is little planning or data sharing between the manufacturer and distributor. This type of relationship is a good way for the 2 groups to see how well they work together before developing a deeper relationship (if developing a deeper relationship is, or potentially could be, the end goal).
Strategic = in this relationship, the manufacturer and distributor share goals and business ideologies for growing their businesses and building a better experience for their customers. The two groups work closely together on such steps as marketing, branding, and product development.
Benefits to Using a Distributor
Manufacturers have 2 choices for getting their products to customers: direct selling and using a distributor. The discussion turned to some of the benefits of a manufacturer using a distributor. Participants shared their thoughts.
Host Moorefield said, “Really - I don't think there's a wrong answer to this question, so feel free to throw all hats into the ring.”
Bigger said, “Shorter lead times as I would assume the distributors would be closer to your customers.”
Koch said, “That’s huge, especially these last couple of years!”
Host Moorefield said, “That is definitely one pro!!”
Brett from FreightPOP in California said, “Manufacturers using a distributor don't have to worry about housing their inventory, and they can also take advantage of the distributor's supply chain processes! They can also get products to customers quickly if they have distributors throughout the country.”
Kirsten Austin from DCSC Inc in Missouri said, “Distributors usually have warehousing, shipping and fulfillment down. Processing a lot of orders is an art, especially now order types have changed from Big Box to direct to consumer. LOTS OF SHIPMENTS.”
Labelle said, “Wider customer reach?”
Rusine said, “The distributor can help the manufacturer to gain access to new markets and to expand its customer base. The distributor can also provide valuable feedback to the manufacturer about customer needs & preferences. They know the territory better.”
Prox said, “For one: You wouldn't need space for inventory.”
Smartflow said, “It's easier for small manufacturers to use distributors. Distributors carry complementary product lines and know their customers because they are local and can visit in person.”
Cris A. Young said, “Bigger sales pipeline, more sales personnel, save on marketing.”
Bodor said, “Access to more customers (like the last slide said) and can facilitate the logistics. Also, aligning business goals can help each other grow.”
McDermith said, “Wider reach, and meet those minimums, I'm sure there are a ton more! I am all for partnerships that are mutually beneficial.”
Ingor van Rooi, the Networking Ninja said, “My knowledge on this topic is limited, but I imagine it would be for the same reasons one hires any SME (Subject Matter Expert), the most important reason being to reduce costs in the long-run”
Anderson said, “A distributor allows a manufacturer to concentrate on producing a fabulous product while the distributor handles the details of supplying the customer.”
Packer said, “Distributor can take bulk and do the storing and logistics for delivery to multiple end users. They deal with the vehicles and all related legislation, maintenance and fuel cost. Removes the need for your own fleet, drivers and logistics.”
Host Moorefield said, “There are numerous benefits of a manufacturer using a distributor. Here are just a few:
- If a manufacturer chooses to direct sell, then they need to hire staff to handle all the various pieces of the puzzle – from order fulfillment to customer representatives to marketing. While manufacturers may already have some of these positions filled (after all, a distributor is a type of customer), the positions would need to be a bit more specialized in dealing with various end-user customers.
- A distributor is better able to meet face-to-face with a customer. As the main point of contact with the customer, the distributor has a better understanding of the customer’s needs and can respond to those needs and solve any issues quickly.
- A distributor can identify trends in the market and pass that information to the manufacturer. If a manufacturer develops a new product, a distributor can reach out to their established customer base to promote and start selling the new product quickly.
- By using a distributor, manufacturers can save – both physically and financially – on storage space. To ensure they have products for their customers, distributors ensure they have appropriate storage space to hold product. This means the manufacturer can move their finished product quickly versus storing it in-house.”
Strengthening Relationships
The chat concluded with participants sharing how manufacturers and distributors can build/strengthen their relationship.
Buglino said, “Come through for each other when called upon!”
Prox said, “Constant and open communication, shared project management platforms, regular meetings and check-ins, actually taking care of each other as humans, not just businesses.”
Rusine said, “From my experience these are what we did: A5: Communication is key. Be clear about roles and responsibilities. Set realistic expectations. Work together to solve problems.”
Young said, “Communicate, share data.”
Paulie Rose from RCF Technologies in Missouri said, “Good communication goes a long way - as is true with all relationships!”
Bigger said, “Communicate and build a relationship that is not all about work, but mutually beneficial.”
Riccetto said, “Communication and being transparent. Mistakes happen, things go wrong, thats life. But being open about it and keeping each other updated shows mutual trust and respect.”
Koch said, “Product training. Point person(s) for the distributor to contact. Supporting each other on social media.”
Smartflow said, “I see a trend here. Talking to each other?”
Brett said, “Communication is key! Trust plays a huge role in any relationship, and one way they can build trust is by open and honest communication. They can also establish their goals and expectations early in the relationship so there are no grey areas moving forward.”
Kaia Fowler from Strat Mg in Illinois said, “A few ideas: Learn about each other's business culture, identify overlaps and differences (E.g. technology & communication preferences) Set clear expectations Communicate openly and frequently. Be kind and respectful!”
Host Moorefield said, “All of those are FANTASTIC answers!”
She continued, “There are many ways that manufacturers and distributors can build and strengthen their relationship. Here are some of the biggest ways:
- Communication is key! Both parties need to be open in all aspects of communication. The distributor needs to be clear about their expectations (and the expectations of the customer). The manufacturer needs to keep the distributor informed of any issues that may arise on an order.
- Recognize that the relationship is a partnership, not just a transaction. While the manufacturer/distributor affiliation is a vendor/customer one, the relationship goes so much deeper. In the fastener industry, sometimes we have to work closely with our manufacturers to create specialized parts for our customers. Due to the amount of communication that goes back and forth, a camaraderie is formed.
- Meet in person. In today’s world, most forms of communication will be done through emails and telephone calls. But wouldn’t it be nice to actually meet the person(s) you interact with on a regular basis?
- Attend events sponsored by the opposite party. Attending such events is a great networking opportunity and shows support for the party’s business. My company holds an annual golf tournament that is open to our employees and their families, our vendors, and our customers. And bonus: while this tournament helps us strengthen the bonds we have with our manufacturers, it also allows our manufacturers to interact with the end-users!
- Meet in person. In today’s world, most forms of communication will be done through emails and telephone calls. But wouldn’t it be nice to actually meet the person(s) you interact with on a regular basis?
- Attend events sponsored by the opposite party. Attending such events is a great networking opportunity and shows support for the party’s business. My company holds an annual golf tournament that is open to our employees and their families, our vendors, and our customers. And bonus: while this tournament helps us strengthen the bonds we have with our manufacturers, it also allows our manufacturers to interact with the end-users.”
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