Chain of Thought

Escape Business's Bermuda Triangle

Proprietary is a loaded term. To technology manufacturers it's a selling point, implying superiority and properties that can't be matched by competitors. To some users of that technology it's a tool vendors use to trap them in an exclusive relationship—thus giving them the ability to command confiscatory prices.

Place a technology distributor in the middle and you have the makings of a Bermuda Triangle of distrust—out of which no winners can emerge. That is, unless, the three parties in this triad treat their relationship as something proprietary in itself—something that gives each one of them a competitive advantage none of them could achieve by themselves.

This kind of thinking follows the wisdom of modern supply chain management. Competition between companies is out. Supply chain vs. supply chain is the ticket to viability.

That's what I'm hearing from material handling equipment distributors (most of them members of the Material Handling Equipment Distributors Association) as I talk to them for an article to appear in MH&L's April issue. It's also reflected in a new book called CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs, by George F. Brown, Jr. and Atlee Valentine Pope. The authors are founders of Blue Canyon Partners, Inc., a strategy consulting firm. It was how these authors address the touchy issue of costs that made me conscious of a new attitude taking hold among equipment distributors.

“Taking costs out has to be looked at from a systems perspective that goes far beyond what each of the firms can do on their own,” these authors write. “Over and over, we've seen examples where the possible savings from creative approaches has dwarfed any gains that could have been achieved by even the most aggressive price negotiator. Manufacturers and distributors have to map the costs associated with their relationship and the cost to serve in their markets, and figure out where they can increase efficiency and take the savings to their bottom lines.”

But it was the following passage that got me to thinking about how that word “proprietary” needs to be rethought:

“The channel organization [distributor] typically fears that the manufacturer will ‘cut them out by going direct,' especially as an end customer begins to buy more and more. And the manufacturer fears that the channel partner will try to ‘substitute another product or even their private label brand.' We believe that the way to ensure stability in terms of end customer planning involves … never allowing end customer ownership to become the elephant in the room that no one is willing to mention.”

The reticence to communicate that characterized proprietary relationships between OEM and customer and between distributor and customer is succumbing to the OEM/distributor/customer triad. For that you can thank the generational adoption of social media. This is what Bill Rowan, president of Sunbelt Industrial Trucks of Dallas/Fort Worth told me:

“As people use these tools in their personal life, they want to communicate in a similar fashion in their business life as well. In 10 years when the 25-30 years olds are 35-40 and in management positions, we will no longer recognize many of the ways we would communicate in the 80s and 90s. From the dealership side, the techs can look up manuals, schematics, etc. on-line without having to return to the shop. They can communicate with the OEM experts while right in front of the equipment.”

That's the promise of social media for customers. But Jason Milligan, vice president and general manager of Hy-Tek Material Handling's Mobile Equipment Division in Columbus, Ohio put it in more severe terms for fellow dealers who cling to the old business model:

“As younger people continue to be promoted into positions of leadership relative to forklift fleet and maintenance activities [at customer sites], the more critical it will be for dealers to have a solid social media and e-commerce capability. So if there isn't a current plan in place one should be considering options now for a full roll out in the next two years.”

Sounds like it could be a lifeline out of the Bermuda Triangle for struggling businesses in any industry.

Related Editorial:

Building, Maintaining and Measuring Strong Relationships with Your Suppliers

Buy/Lease or Rent?

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