How to Motivate Distributors to Collaborate With Suppliers
By: Emilio Macasaet III
 
“We are a local food and beverage manufacturing company. We sell our products through third party distributors for almost twenty years now. As the new sales manager, I am baffled why our distributors do not share information enough for us to develop a more customer-centric programs. They offer a host of reasons for not being collaborative. But I can sense they just do not trust us with those information. Kindly advise us how to influence or motivate our distributors to collaborate with us by sharing information and participating in our planning activities.” - John P.
 
A number of research literatures have emerged about the importance of collaboration and sharing of information amongst members in the supply chain. As a result, models continue to be developed to assess the effectiveness of collaboration and information sharing between the members of the supply chain especially in a supplier-distributor relationship. These research conclude that the efficiency of this dyadic partnership can significantly improve by developing long-term coordination and collaboration. Likewise, distributors who collaborate with their suppliers and customers, and share information and knowledge, tend to be more capable of competing effectively in the marketplace than those who do not.
 
Professors Va ?zquez-Casielles et al(2013) define strategic information as data processed and retained by distributors that have implications for companies’ long-term decision making. Moreover, this information is key to manufacturers (to carry out their market orientation) that employ indirect distribution channels and that need strategic information regarding customers, competitors and distributors’ strategic plans.
 
The professors further propose that there are two particular types of strategic information that the distributor may share with the manufacturer (i.e. external and internal strategic information). External strategic information includes data about customers (desired innovations, changes in sales systems, product quality improvement requirements) and competitors (price strategies, service improvements, developed innovations, potential competitors in the distributor’s commercial area) that have implications for companies’ long-term decision making. Internal strategic information refers to data processed and retained by distributors regarding the future planning of their activities (stock levels, assortment and price strategies, profit margins) and the future planning of customer segments (distributors’ key customers, new services provided, most valuable customers). The authors stressed that internal strategic information is of a more sensitive nature and distributors are less willing to share it.
 
The obvious lack of trust of distributors to share strategic information may be averted or minimized if suppliers institute structured measures and avoid opportunism. To augment the likelihood of collaboration, suppliers need to concentrate their efforts on the most relevant areas that minimize transaction costs and provide incentives to develop collaborative manufacturer-distributor relationships and create value for the customer. Here are some suggestions you may want to consider:
 
Be Market-Oriented.- Authors Kohli and Jaworski's (1990) define market orientation as the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it. Market-oriented firms will generate and use information more to effectively and efficiently satisfy customer needs than will their less market-oriented counterparts. Distributors, according to research, will entrust their information to a more market-oriented supplier. Another similar research finding from Professors Siguaw, J.A. et al, (1998) reveal that a supplier's market-oriented behaviors, directly or indirectly, affect all the channel relationship factors examined from the distributor's perspective, specifically the distributor's market orientation, trust, cooperative norms, commitment, and satisfaction with financial performance.
 
 
Include Information Sharing in the Distributorship Contract. - It is now common practice for suppliers to include in the distributor contract the responsibility of providing certain types of strategic information. Some of my suppliers in my distribution company pay me 1% to 2% of monthly gross sales invoice every time our company submits accurate and timely monthly sales reports.  Other suppliers even invest in platforms to electronically link the information system of distributors to their own system for real time information and analysis.
 
DevelopShared Norms. - Wikipedia defines shared norms as “informal understandings that govern the behavior of members of a society. In other words, norms are regarded to exist as collective representations of acceptable group conduct as well as individual perceptions of particular group conduct.” The shared norms, which focus primarily on long-term outcomes rather than short-term gains, may be established jointly during a formal meeting presided by management from both parties. There are written shared norms similar to a ’10 commandments of good relationships’ posted on office walls of distributors to remind them of that pact they hold with their suppliers.
 
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Emilio Macasaet III is a Partner and the Chief Distribution Strategist of Mansmith and Fielders, Inc., the only advocacy-based training and consultancy firm focused on marketing, sales, strategy and innovation. For feedback, write to
mentors@mansmith.netor log on to www.mansmith.net, for more information.