Hello nawrs,
Thank you for your question.
It would seem that the answer here will have many variables and might
well depend on the industry in question. In my experience, this
question may not have a definitive answer and will need to be
carefully evaluated in light of the specifics to your unique business.
You have asked for a listing, and as you may realize, there will be
quite a few articles available online on this subject. I will try to
pull a few excerpts on the better articles and provide a listing of
others you may wish to view at the end.
That being said, I set off to see what the experts might have to say
on the subject. I searched "direct sales force vs distributor" and
found the following:
The Hardwood Flooring Industry discussed this quesion at
http://www.ntlfloortrends.com/CDA/ArticleInformation/features/BNP__Features__Item/0,2915,18744,00.html
.
Going Through Distribution Channels vs. Buying Direct
They say, in part:
"Direct selling really offers only one potential advantage - a low
price - to lure the dealer/contractor into purchasing from the upstart
manufacturers. What an original concept! But you may find that sweet
prices without local support may leave a bad aftertaste if, and when,
a problem arises with the product.
...The following items constitute just a few of the many advantages
you can enjoy by joining forces with your local distributor.
Inventory.
Successful distributors realize that, to earn and retain business,
they must keep on hand a wide variety of your day-to-day products in
their inventories.
Technical training.
Distributors have ready access to manufacturers for assistance with
product information and organizing seminars. They also act as your
liaison with the manufacturer if and when a product problem arises. In
addition, the distributor's staff is local and at your immediate
disposal to help assemble a customized mix of products that will fit
your individual needs. Like you, they are fully aware of the market
conditions in your area and the requirements for a successful
installation.
Multiple locations.
This is another advantage for the dealer/contractor. Products that may
be temporarily unavailable locally can and will be transferred from
another branch to fulfill your pending installation needs.
Showroom selection centers.
This, in itself, is highly desirable to a new or start-up contractor.
The overhead cost of a showroom is borne by the distributor. In
addition, the distributor's displays are current and maintained by
trained individuals who are dedicated to customer service. This allows
the contractor to concentrate his efforts on measuring, scheduling and
supervising his installations, instead of staffing his own showroom
and waiting for potential customers who may never arrive. "
***************************************
An interesting article on the value of local distributors vs factory
direct for this industry.
Symbol, UK, a mobile computing manufacturer, dicusses the "channel
marketing" concept in a article at
http://www.symbol.com/uk/News/09-08-98_1.html .
"In the Beginning There is the Manufacturer ....." Beyond that
beginning, lies a potential network of partnerships and business
relationships that managed effectively, can have a major impact on
success...
The manufacturer's job is to get their product into the market place.
Organisations hoping to achieve that goal generally start by selling
direct to their market. Why? They created the product to meet an
identified customer need. They understand its capabilities and know
what it can offer. Therefore, they can probably talk to the market
more clearly than anyone else.
However, organisations evolve. As they grow they start to look at
their long term strategy for getting products to customers - extending
their route to market . They examine ways for their products to
penetrate different market sectors and niches. Depending on the
products and the relative size of the organisation they may explore a
number of channel options.
At the same time they analyse the added value potential. Can an added
value proposition enable products to penetrate new markets? When
considering this added value, they look at potential partners and what
they can offer. Quite simply they are examining the 'value-chain', or
starting to swim in the channel. "
You might find this article of interest.
***************************************
A very good financial analyses of this question appears at
http://www.commktga.com/why-reps0003.htm , from the Communications
Marketing Association, a wireless industry group:
THE ECONOMICS OF OUTSOURCING FIELD SALES
"Ask any rep, and you'll learn that one of the hazards of the business
lies in being perceived as too successful. Recent estimates in the
high tech industries put typical yearly costs for a direct
salesperson's salary, incentives, office, travel, and other support
services in the range of $260,000. (in commodity businesses, they may
run a little less.) The sales in a given territory grow to the $4
million point, and the sales manager pulls out the calculator. With
what the outsourced sales firm is being paid (and commission rates
vary widely by industry and circumstances), it seems possible to hire
and support someone dedicated to the company full-time.
Good arithmetic. Faulty reasoning. The calculation ignores the costs
borne by the representative, as well as the administrative and
facilities costs that will have to be added at the manufacturer's end,
both in the territory and the home office. Also often overlooked is
the likelihood that the outsourced team, with its multiple sales
personnel and regional systems, will grow the territory faster than
can a single direct individual.
Do read this article.
***************************************
Elliot M Black and Associates, a Chicago area marketing and management
firm has an article at
http://www.embainc.com/articles/us_marketplace.html entitled
"ACCESSING THE U. S. MARKETPLACE"
Here, they address the fact that the US is a large enough and diverse
enough market that different segements may need to be addressed in
different modes of distribution. They provide a very good outline of
points to be considered and evaluated including:
DISTRIBUTION
There are three basic types of distribution channels found in the U.S.
Direct to user, where manufacturer/marketer offers the product on a
direct basis to the end user - be it consumer or industrial.
Direct to reseller, where the manufacturer/marketer sells to the
dealer/distributor who in turn interfaces with the end user directly.
Multi-level channels, where the manufacturer sells to a
wholesaler/distributor, who in turn sells to a
reseller/retailer/dealer, who in turn sells to the end user.
STRATEGIC ISSUES TO BE CONSIDERED
When evaluating entering the U. S. marketplace there are several
strategic issues to be considered.
The size of the market for the product/service.
Primary target market -- who are the customers for the
product/service.
What is the nature of the distribution channel to get the
product/service to the end user.
Who are the major competitors and what are their strengths and
weaknesses. What strategies do they employ to the marketplace.
What are the trends in the marketplace. What is happening both near
and mid-term.
***************************************
-An article on marketing Food Products through Direct Sales vs
Distributors or Brokers appears as a pdf file here:
dare.agsci.colostate.edu/extension/amr98-04.pdf
-Austrade Technology has an article on choosing ditribution methods at
http://www.austradetech.com/business/partners.htm . They investigate
differences between Channel Partners, Direct Sales and Startegic
Partners and link to more in depth discussions.
-A search at Harvard Business Online for "distribution" produced a
list of 469 articles and publications that can be pruchased in hard
copy or downloads at
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/includes/search/search_results.jhtml;jsessionid=IEOCHICTP5SSACTEQENR5VQKMSARUIPS?term=TH_304&browseType=r&_requestid=17514
-Another very good and current analysis of the benefits of outsourcing
a sales force was written by Dash Network Corporation and is available
as a Word Document here:
www.dashnetwork.com/why_outsource_your_sales_team.doc
-Another variable in this discussion is addressed in an article on 18
Benefits to Outsourcing Field Sales at
http://users.rcn.com/fmprenda/Outsourcingweb.htm
"Companies with adequate resources to fund captive sales organizations
are newly stimulated to recruit manufacturers' representatives as a
practical approach to downsizing."
-An article on "Going Global" disusses how the Internet may replace
local distributors for some companies and will effectively lower the
price of an item by eliminating the overhead of a local distributor.
http://www.glreach.com/eng/ed/art/rep-eur4.html
****************************************
Searching further for "measuring value of wholesaler OR distributor"
and "value of wholesaler OR distributor -added +measure OR quantify
OR assess" produced the following results:
-EBN at http://www.ebnonline.com/supplements/extras/story/OEG20000126S0035
has an article on measuring the value of distributors:
"In today's competitive electronics marketplace, OEMs expect
distributors to do a lot more than just stock and ship components.
Kitting, warehousing, and device programming are now routinely viewed
as distributor responsibilities.
Some distributors function as prime OEM contractors to provide
full-service manufacturing, testing, and delivery services. To
compete, a distributor must at the very least offer a comprehensive
program of supply-chain management. And of course, Internet services
such as purchasing and order management are de rigueur in the
Information Age. In fact, value-added services now encompass a vast
and growing range of options..."
-An interesting and somewhat related paper I came across is by the
Census Bureau and targets measurement of electronic business:
Measuring Electronic Business: Definitions, Underlying Concepts, and
Measurement Plans
Thomas L. Mesenbourg
Assistant Director for Economic Programs
Bureau of the Census
http://www.census.gov/epcd/www/ebusines.htm
You may find this interesting reading.-
-Supply Chain Brain at
http://www.supplychainbrain.com/archives/12.01.sourcing.htm?adcode=15
discusses the value added of ebusiness to the distributor supply
chain:
"Experts predicted that e-commerce would put the squeeze on
distributors. Instead, it has been their salvation…provided they bring
value to the supply chain. "
Further searching for benefits of wholesalers or distributors
uncovered:
-Performance measures and metrics in a supply chain environment
www.sandiego.edu/~cds/SCS/
Performance%20Measures%20and%20Metrics%20in%20SC.pdf
This is one of the papers I have been able to uncover that discusses
both the need and a method of evaluating performance in a supply
chain.
-In Supply Chain Metrics at
http://216.239.33.100/search?q=cache:R2SIkEwgU6QC:www.logisticssupplychain.org/articles/pdfs/SCM%2520Metrics1.pdf+wholesaler+OR+distributor+%2Bmeasure+role+in+supply+chain&hl=en&ie=UTF-8
, the author notes that "..meaningful performance measures that span
the supply chain may not actually exist."
-The Performance Measurment Group at
http://www.pmgbenchmarking.com/public/news/pr_avnet.asp , announces an
alliance to quantify supply chain performce:
"Waltham, MA and Phoenix, AZ (October, 2001) The Performance
Measurement Group, LLC, the benchmarking subsidiary of management
consultants PRTM, announces a strategic alliance with Promiere, a
suite of information and services offered by Avnet. Promiere delivers
a seamless flow of accurate, component and market information within
the context of a collaborative work environment that helps customers
optimize their supply-chains. The Promiere-PMG alliance provides
suppliers and customers with an industry-standard benchmarking program
enabling them to evaluate their supply chain performance against
median and best-in-class companies worldwide. "
The Performance Measurement Group, LLC was formed in 1998 to offer a
pioneering benchmarking service in core business process areas. Our
service gives participants confidential, customized benchmarking
analysis online. Hundreds of companies use PMG's Performance
Scorecards to measure their performance relative to best-in-class
companies and identify opportunities to improve their business
practices and use of IT. PMG's Performance Scorecards are based on
PRTM's leading thinking from 25 years of work in core business process
management.
PMG’s services are the most cost-effective way to access critical
information to better manage your business. Built on over ten years of
benchmarking studies conducted by PRTM, our databases contain the most
in-depth and complete set of benchmarking data available in the market
today.
PMG currently offers the following services:
The Product Development Performance Scorecard
The Supply Chain Performance Scorecard
The Service Supply Chain Performance Scorecard
They may be a valuable resource for you.
-SAP Software at http://www.sapinfo.net/public/en/article.php4/Article-188783ce245b2827a5/en
produces a product called mySAP Supply Chain Management
This article mentions in part:
"...Within six months, Marico has managed to reduce this stock out to
20%. "It is a great achievement for us," declares Kamath, "because
this 10% reduction in stock out means a corresponding increase in
revenue." What's more, the monitoring functionality of mySAP SCM APO
allows the effectiveness of each distributor to be measured, and helps
pinpoint the reasons for any changes. "
-"An Emprical Investigation into Supply Chain Management" from the
Darden Graduate School of Business, University of Virginia at
www.emeraldinsight.com/pdfs/199992.pdf
offers interesting insights into changes roles and selection of supply
chain partnerships.
Finally, searching - distributor OR wholesaler +value supply chain
+measure OR metric - uncovered:
-Industry Week
Value-Chain Report -- Measuring Supply-Chain Performance
http://www.iwvaluechain.com/Columns/columns.asp?ColumnId=724
-Another page at Industry Week lists links to artcles including:
Value-Chain Report
Demise of the distributor? Not for Swagelok.
Much has been written recently of the pending disintermediation of
industrial distributors in the value chain. However, writing off the
distributor may be premature. Successful distributors are evolving
from the traditional role of component/product supplier to true
business partner, using in-depth knowledge of their customer's
business to reduce the customer's overall operating costs. In a recent
survey by Purchasing magazine, 84% of industrial firms responding
indicated that they are increasing their sourcing of MRO purchases
from distributors. The same survey indicated that 93% of purchasing
managers rate distributor suppliers as excellent or good.
http://www.iwvaluechain.com/Columns/columns.asp?ColumnId=611
-Quantitative Approach to Supply Chain Relationships at
www.ifama.org/conferences/2001Conference/
Papers/Area%20VI/Norina_Lidia.PDF
says:
The objective of this research wa to develop a methodology to define,
measure and rank supply chain relationships.
******************************************
As you can see, there are thousand of articles, reports, software
packages and presentations online that deal with the value and
benefits of wholesalers and distributors in today's supply chain. I
trust the above will offer you a good representation and lead you to
the information you desire to decide on your business model.Do read
the full content of the above links that appear to address your
specific needs.
If anything above is unclear, please do ask for clarification.
Best regards,
-=clouseau=- |
