In 2022, as hundreds of container ships waited off the California coast to unload – distributors were increasing inventory levels to hedge against ongoing supply chain trials. Even for items they didn’t typically carry in the warehouse, distributors would stock up just to be there for their customers.
As markets began their slow calibration to a new form of normal, distributors remained in a constant state of flux, continually adjusting their sails for each new headwind.
We wanted to further understand the unique challenges facing distributors today, including how the shifting economy had affected every link in their supply chains. So, we asked NetPlus Alliance distributor members to share their experiences. As a result, our second-quarter 2023 Industry Outlook report, an exclusive benefit for members, was full of insights like:
- “You cannot sell from an empty wagon. He who has inventory will win in this market.”
- “I have customers who have been waiting a year for warranty repairs because we can’t get the parts.”
- “Rentals of heavy machinery are up due to customers not being able to buy new.”
Product availability wasn’t the only problem. Price increases, partly due to the tight supply, further complicated the landscape. Moreover, supply chain challenges were stifling growth and challenging loyalty, as customers had to go wherever they could to keep business rolling.
Thankfully, cargo holds have begun to fill back up again, and the seas we’ve been sailing have seemed to smooth out – somewhat. According to an article from SupplyChainDive, freight rates have fallen from record highs, port congestion has eased, and pandemic-related factory shutdowns are starting to decrease in frequency.
In most markets, distributors’ confidence is slowly growing in the ability to get the product they need to serve their customers.
While the supply chain risk hasn’t gone away, we do see the factors driving volatility starting to wane in impact. Some NetPlus distributors have reported improved lead times, better fill rates, and increased product availability resulting in sales improvements.
“Manufacturers and vendor inventory has mostly improved, which has affected our own inventory levels; we don’t have to overstock. We can start moving our inventory levels back down without having to worry about manufacturers running out of inventory or volatile costs.”
Has this been your experience?
For independent distributors outside of NetPlus, these may not be shared experiences. While some distributors may see some improvements in areas like inventory levels, there are just as many struggling to find balance. Some have even experienced a worsening in inventory levels, largely due to significant lead times and backorders.
Why Are Some Distributors Feeling Relief While Others Are Feeling the Pressure?
There’s no simple answer as there are many variables that play into this equation.
By and large, we have noticed the distributors that have invested in technology and improved processes are often the ones seeing the greatest improvements. These distributors have turned conflict into opportunity. They’ve invested in their supplier relationships and customer communication to reduce the element of surprise that was making it harder for everyone to keep moving forward.
Market disruptions are here to stay. How are you managing your organization’s response?
NetPlus Alliance Helps Members Build Supply Chain Resilience
NetPlus Alliance is an industrial and contractor supplies buying group that facilitates partnerships between distributors and manufacturers. With five generations of industrial leadership at the helm, our sole focus is on our members’ and supplier partners’ growth and success.
Here are three ways a partnership with NetPlus helps distributors build supply chain resilience and plan for growth:
1. Product Category and Line Expansion
Over the past couple of years, many NetPlus members told us that they had expanded their product offering to provide alternatives to customers when manufacturers couldn’t get products. They also wanted to help customers who may not have been able to get products from competitors.
In addition, a broader or deeper product offering means distributors can sell more to a customer, capture more wallet share and strengthen the relationship.
We have invested in a Category Expansion Committee, a member-driven group that provides the Development team with feedback on suppliers and product categories. Another initiative includes a Supplier Spend Analysis that will uncover opportunities for conversions and consolidation to in-network vendors — resulting in a bigger rebate check for distributor members.
2. Broader Supplier Base
One distributor member credits membership in the NetPlus buying group for enhanced supplier access to suppliers. “NetPlus broadened our approach to sales and has given us a good network of suppliers we never had access to. Being able to get certain products has helped solve the problem we had before when getting into new accounts.”
NetPlus adds about 15 new suppliers annually by expanding existing categories, building new categories, and replacing some underperforming suppliers. We limit the number of suppliers in each product category to maintain value for our preferred suppliers. Consistency is valuable, and we enjoy many supplier relationships that go all the way back to when NetPlus began almost 20 years ago.
3. Better Supplier Relationships
The closer you can work with your supplier partners, the better you can serve your customers and meet their needs today – even amid disruption. NetPlus Alliance provides a platform to cultivate supplier relationships and deepen connections beyond just one person in an account to open more opportunities and provide a backstop for challenges.
That relationship starts with attending the NetPlus Annual Meeting each year, where distributors and suppliers hold more than 2,500 meetings to strengthen positions in core categories, explore new opportunities, and plan for the following year.
Jay Amstutz, president at NetPlus member Ohio Power Tools, said: “At the Annual Meeting, we were able to connect with several of our existing vendors and build a plan for rapidly growing our partnership over the next few months. Within the first year alone, we saw an increase in our business and profitability that would not have been possible without NetPlus. To top it off, we received a rebate check.”
Our Growth Plus joint sales planning program is another excellent tool to strengthen relationships. Partners embark on special activities, marketing initiatives, and training programs that sharpen the distributor’s product knowledge and selling capability. Suppliers also benefit from Growth Plus with access to new markets, increased distributor engagement, and targeted marketing for maximized impact.
NetPlus Alliance helps our distributors and suppliers continue to best serve their employees, customers, and communities for years to come. Let us know how we can help you grow.
