A Distributor's Role...
Occasionally, it is beneficial to remind our customers, our suppliers, and ourselves what role the distributor performs in the chain of commerce. Distributors – electrical or otherwise – provide a number of benefits to their customers and suppliers that justifies their existence and permits their profitability. If these functions are not performed, the distributor simply has no reason for existing.
A distributor assumes the function (and the related cost) of storing, handling, and transporting material to the point-of-use. Anyone who has ordered products through the mail should know that these “shipping and handling charges” are not insignificant.
When a distributor buys a product outright, the manufacturer’s cash resources are freed for continued use in producing more products rather than the warehousing of inventories. Imagine for a moment the average distributor’s lamp inventory. Multiply that space and cost by four or five hundred distributors. Then, further picture the size (and cost) of each of the three major lamp manufacturer’s warehouses needed to hold the necessary inventory ready for shipment to every market.
Credit is another cost that the distributor assumes. The distributor pools the cost of credit research and collection as well as the risk of default for the manufacturer. The manufacturer only has to deal with a controllable list of a few hundred-credit risks rather than a few hundred thousand.
Sales and marketing costs would rise to prohibitive levels if not for the economic achievements of distributors in representing multiple suppliers with a single sales force.
In addition to the services of storing, handling and transporting material to the point-of use, distributors bring a range of other services to the end user. Distribution provides users the ability to combine products on a single order that otherwise would have been purchased from multiple sources at significantly higher costs. Equally important, distribution provides the knowledge that makes such transactions possible. Product selection can be a time consuming process. Misapplications can be even more costly.
Distributors also add a range of specialized, valued services to their customers. Many of these may be particular to an individual distributor or customer. They run the gamut of activities from special deliveries, material handling including special packaging, cutting and paralleling cable, to such functions as part number maintenance, pricing service, EDI and web exchanges, and managing customers' inventory.
Costs exist. They are a real part in any exchange of goods and services. Costs can be reduced or shifted, but they cannot be wished away. Just as friction is a by-product of motion, costs are the commercial friction produced by the movement of goods.
In summary, distribution exists to reduce costs for both the manufacturer and the user of the products sold. If the distributor could not do this, how long would a competitive market allow them to exist?