Over the years some distributors have failed to have a serious conversation with the manufacturers they represent about how POS data is used. Then there are some that asked:
“If I share POS data, what are you going to do with it…and by the way please be very specific”?
For the most part, distributors want answers to questions like:
- How do I grow sales? How do I really grow sales?
- How do I improve inventory turns?
- How do I improve in-stock percentage?
- How do I lower transactions and their associated cost? (and the list can go on)
And some distributors have been approached by manufacturers to let third party companies handle suggested purchases using an idea like Vendor Managed Inventory (VMI). The most notable third party supplier being Datalliance.
In many instances distributors look at manufacturer POS and VMI efforts as if the manufacturer wants to sell ‘their customer’ direct.
So, some manufacturers geared up and guessed at what the demand for their product was and manufactured accordingly. This meant that some manufacturers (let’s call this “Group “B”) changed their sales policies to saturate the market with as many distributors and as much product as possible. While other manufacturers (let’s call them “Group A”) looked at the market through a different set of lenses that told them what the real usage was for their product, so they could support their distributors and manufacture accordingly (let’s call this “demand forecasting”).
Distributors fought the mighty battle to keep from sharing POS data, only to realize that for them to compete, they needed a “special price” (SPA) for a like item from a competitor (plus the local rep needed a way to determine their commission.)
We now look at a market place that has excess product in the channel with some manufacturers dumping product below the active market distributor’s cost. Thus the gray and surplus market thrives. These companies fill some distributor’s orders with competitors product at sometimes much lower cost (helping distributors “value engineer’ or substitute product).
Forced stock levels
Some manufacturers think that their brand name is strong enough that they require various levels of stocking. While various products have different velocities, some are forced to keep slow moving items on the shelf. The result is that distributors tie up cash in non performing assets.
From a manufacturer viewpoint, distributors are tapping into companies like Wika, a manufacturer of pressure, temperature and measuring gauges, because of benefits like data sharing enabling Wika to tailor its just-in-time manufacturing to meet real demand (and improving their demand forecasting, hence reducing their work-in-process inventory).
Lean Manufacturers
This may not seem like much to many distributors, but having access to lean manufacturers can reduce inventory needs for distributors and the manufacturer, improve delivery time lines and increase everyone’s profitability. Some lean manufacturers claim that lean manufacturing, and the benefits created from demand forecasting through POS, can improve profitability by 20-30%.
The real story here is that distributors free up more cash and have better managed inventory.
Are you providing/receiving POS data? What are you using it for? How has it helped your business? Or, why aren’t you providing it to your larger or more important manufacturer?
3 Comments
Hmmmmm….Lean Manufacturers.
There is something to be said about just in time order fulfillment.
We are involved with several manufacturers and Datalliance. It continues to work well for us.
Even though we have our inventory fairly well controlled, friends of mine are still being pressured by their manufacturers, to stock specific items when they actually may not need it.
The opportunities resulting by sharing “POS” data is intriguing, especially for those distributors and suppliers who can use it to foster a “continuous flow” of product. My concern is that suppliers will view the latter as distributor justification for smaller/more frequent orders, and not understand the positive supply chain cost implications.
Howard, is right to a certain degree.There has to be a win-win on both sides.There may be a little larger issue here…and that is as the market continues to shrink in certain regions, distributors are ordering less as a way of conserving cash.
But “demand forecasting” for some distributors is impossible because of their market and the way they think about their market.
Many Manufacturers are consolidating who they sell to to get a more reliable demand forecasting which they turn into when and how much of a product to manufacturer. Of course there are other issues such as credit and the manufacturers evaluation of the distributor that play into the decisions.
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