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It was late in the research stage and early in the understanding phase
when Mike Marks, Mike Emerson and I were discussing our findings for our
book, Working at Cross-Purposes. One, businesses in a supply chain
worked at cross-purposes, even though they needed each other to succeed.
Two, there was little evidence that the sugarcoated theory of “win-win”
ever helped either party achieve any significant wins. The questions we
tossed around the table early on were not concerned with the validity
of the findings; it was whether or not senior managers would accept a
frontal assault to their cherished beliefs. Win-win was part of the American
business lexicon. If we all work together, we will all win, and shared
prosperity will be the result, executives believed. Our research proved
otherwise.
When we shared the initial findings with Ron Shriebman, the executive
director of the Distribution Research and Education Foundation, he was
encouraging. “This is what we want,” he said, “something
provocative, research-based and thought-provoking.” With his encouragement,
we continued working, writing and challenging our findings. With each
rewrite, the truth became more obvious—suppliers and distributors
should operate at cross-purposes. This was the only way for both to survive.
These cross-purposes were legitimate. We wanted to let executives at
both the supplier and distributor levels know that these cross-purposes
were both explainable and legitimate. We also wanted to develop some simple
guidelines designed to help these same executives manage the conflicts
that occur in a supplier-distributor relationship. There are many challenges
that exist in managing a supplier-distributor relationship. The challenges
include:
- Understanding that win-win is a myth, but mutual success can still
be a goal.
- Understanding the difference between critical issues and minor but
aggravating ones. We call them MBAs.
- Understanding the importance of the local rep in the equation.
The Win-Win Myth
Exploding the win-win myth was especially provocative. As I mentioned
earlier, it is such a stalwart cherished belief in American business that
it is often accepted without question or investigation. The truth is that
win-win can often cause more harm than good. When executives believe that
win-win exists and there is a shared prosperity, they start believing
in entitlements. Entitlements don't exist in today's business; just ask
the competitors of Wal-Mart who watched their longstanding suppliers cut
prices and bend over backward for the giant retailer. We realized we were
onto something with our “win-win is dead” thesis when we presented
our findings to a roundtable gathering of major manufacturers. One of
the participants, upon hearing our thoughts, exclaimed, “Boy, am
I glad to hear that; I always thought it was a bunch of bull. Finally,
someone had the guts to say it out loud.” We aren't saying that there
isn't still an opportunity for mutual success. In fact, mutual success
is important. However, it is easier to attain success when everyone realizes
that cross-purposes are part of everyday business. When all was said and
done, win-win led to false hopes and wasn't a very effective way to manage
a relationship.
Understand the Difference Between Issues
If legitimate cross-purposes exist, conflicts also exist. They are inherent
in the supplier-distributor relationships. In our research, we found ample
evidence to support this belief. Suppliers want broad product representation
and distributors want products that sell. Distributors want solid marketing
plans and suppliers want dedicated sales teams. The list goes on and on.
One key to effectively managing these conflicts is to determine which
are critical and which are minor.
Among the many guidelines to help executives operate in a world of legitimate
cross-purposes is this one: “Don't overreact to MBAs.” Early
in our research, we realized that high-performing organizations, intuitively
or otherwise, recognized which issues needed their immediate attention
and which issues simply fell into the MBA bucket. It is important to note
that “minor but aggravating” issues can derail the strongest
relationships. Both distributor and supplier executives should tread cautiously
when dealing with requests. What one party sees as trivial, another sees
as critical. Many of these MBA requests come from the supplier rep, which
brings me to my last topic.
Manufacturer/Supplier Representative
The supplier rep is a key cog in the wheel but generally is undertrained
and overworked. These reps are often the ones asked to deliver the bad
news to their bosses on the supplier level, and manage the ever-changing
demands of their customers at the distributor level. They are usually
in their positions for a short period and, just when they figure it out,
they are promoted or transferred. They are critical to the success of
the relationship, but are often the forgotten soldier when the relationship
sours. The rep position is usually filled with entry-level employees who
are put in the trenches with a lack of ammunition, skill and experience.
Yet they are a very important factor in the relationship. Successful distributor
executives understand this relationship is important and manage it effectively.
For example, they will help a rep make goals and quotas, as long as they
don't influence the long-term success of the distributor organization.
In fact, there were several instances in our research where the first
line distributor managers served as unofficial mentors to the local factory
rep.
The first line of communication for most distributors is with this local
factory representative. It is important to keep this line of communication
open at all times. Our research indicated that many terminal conflicts
between suppliers and distributors could have been avoided if the distributor
executive would have looked to the factory representative for early warning
signs.
Make it Work
Remember, as you analyze your own supplier-distributor relationships,
treat win-win as a myth. The concept is quaint and easy to embrace, but
in the end doesn't clearly define the complex relationships between suppliers
and distributors. Legitimate cross-purposes exist and it is better to
accept and manage them. When cross-purposes exist, some conflicts will
be important; some will be MBAs. Learn to tell the difference and manage
the conflicts accordingly. And, last but not least, understand the plight
of the local factory representative and manage the relationship carefully.
The first opportunity for resolution of many supplier-distributor conflicts
is with the factory representative. The ability to create a strong relationship
resides with the distributor executive. Take advantage of the opportunity.
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