Do you have a workbench? We’re not talking about a physical workspace, though. We mean a strategic framework that manufacturers and distributors should use to manage, analyze, and optimize their operations and supplier relationships. A “workbench” in this situation is a metaphor for a comprehensive set of tools and processes designed to enhance efficiency and profitability.  

With insights from John Gunderson of the Dorn Group, a seasoned expert with over two decades of experience in channel strategy and profitability, this blog will take you through the best practices you need to know in order to build a profitable workbench.  

The Changing Landscape of Distribution and Manufacturing

Today’s supply chain has shifted from local control to more centralized, corporate decision-making. Distributors are now compensated based on broader metrics like branch sales, gross margin dollars, and key performance indicators (KPIs). This centralization has led to more structured approaches to pricing, category management, operations, and logistics.  

Here are the top areas distributors and manufacturers need to focus on:

• Sales Effectiveness: Sales remain the top priority. Face-to-face interactions and building relationships are still crucial.

• Category Management: Managing supplier relationships and strategic business agreements is vital. This includes handling rebates, SPAs, and other backend deals.

• Pricing: Effective pricing strategies are essential for profitability.

Building a Strong Team

For distributors, having a dedicated team to handle category management and agreements is essential. This includes:

• Leadership: This leader is responsible for setting the vision and direction, ensuring that the team’s objectives align with the broader organizational goals. The executive sponsor provides the necessary support and resources, advocating for these functions' importance at the highest levels of the organization.

• Finance Leadership: Accurate accounting and accruals are fundamental to managing backend agreements effectively. Finance leaders within the team are tasked with overseeing financial transactions related to rebates, SPAs, and other strategic agreements. Their role includes ensuring that all financial data is meticulously tracked and reported, which is essential for maintaining transparency and avoiding discrepancies that could impact profitability.

• Channel Management: A specialized team that focuses on nurturing strong supplier relationships and optimizing backend deals. This team is responsible for negotiating favorable terms, managing ongoing supplier interactions, and implementing strategies that enhance supplier performance. They work to balance the interests of both the distributor and the supplier, ensuring that agreements are beneficial and aligned with market dynamics.

By assembling a well-rounded team with clear roles and responsibilities, distributors can effectively manage their rebate strategies and agreements, leading to improved supplier relationships and a profitable workbench.

Tracking Every Dollar

To maximize your success as a distributor, you need to meticulously track every dollar — every rebate, discount, and cost reduction. This precision is crucial not only for you but also for the manufacturer. If you demonstrate value and drive growth, manufacturers are more likely to compensate you well. Hence, claiming every dollar is imperative for profitability. Every detail matters; missing out on a rebate or discount can cost you significantly.

Scorecards and Supplier Stratification

Distributors and manufacturers must understand their roles within the distribution ecosystem. For manufacturers, knowing where you stand in a distributor’s tier system (preferred, approved, etc.) is crucial. This helps tailor your strategic business agreements and support accordingly.

Scorecards evaluate suppliers based on criteria such as market alignment, product expertise, and operational efficiency, helping distributors assess and differentiate supplier performance. This structured approach enables better resource allocation and informed decision-making. Supplier stratification further refines this process by categorizing suppliers into strategic and non-strategic groups, allowing businesses to prioritize and focus their efforts on key suppliers that drive significant growth and value.

For example, play the ladder game by strategically positioning yourself within your supplier network to move up in importance and secure better terms. By understanding your standing with top suppliers and demonstrating your value, you can improve agreements and gain more support. This approach, combined with the distinction between strategic and non-strategic suppliers, ensures that resources are allocated effectively, maximizing the impact of key relationships and fostering growth opportunities.

Enhancing Supplier Relationships

To effectively enhance supplier relationships, manufacturers and distributors must collaborate closely, focusing on optimizing inventory management and developing mutually beneficial rebate agreements. Assertiveness in negotiations is crucial. While aiming for a win-win outcome, distributors should be bold in their requests and ready to move on if a supplier cannot meet their needs. Regularly surveying suppliers for structured feedback can help refine SPAs and rebate management, ensuring that agreements are continually improved.

Maintaining clear and consistent internal communication about supplier strategies is essential for aligning organizational goals and avoiding conflicts. Additionally, distributors should constantly seek to innovate their approach by incorporating new elements like digital insights and customer behavior analysis. This proactive stance helps in adding value and driving growth, ensuring that supplier relationships remain productive and strategic.

Are You Ready to Build and Maximize Your Workbench?

To fully leverage your workbench, enhancing your processes and incorporating advanced rebate management software like Enable is essential. This technology allows for precise tracking of every dollar, ensuring you capture all available rebates, discounts, and cost reductions. Additionally, fostering strong collaboration is key; effective communication, negotiation, evaluation, and prioritization of suppliers will amplify your strategic efforts.  

By adopting these practices as outlined by Josh Gunderson, distributors and manufacturers will be strategically positioned to excel in a competitive environment, optimizing both their operational efficiency and financial performance.