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Two Good Reasons for Manufacturers to Use Wholesaler Redistribution
Sanitary Supply manufacturers enter into wholesaler redistribution programs for one or both of the
following reasons:
1. To reduce costs
2. To build volume
The cost-reduction opportunity stems from the recognition that customers who submit small, infrequent
orders cost a lot more to serve than those who submit regular large orders. As we shall see, these costs
extend far beyond the freight premiums generated by multi-stop outbound loads. And although present-
day accounting systems sometimes fall short of clearly quantifying these costs, there is growing awareness
of the importance of digging below “company averages” to understand the true cost of serving these
customers.
Of equal or greater interest to manufacturers is the opportunity to penetrate new distributors that would
not be available through direct service. Wholesalers serve a wide range of accounts that are hard to reach
via traditional supply chains. These include not only small distributors who lack the volume or space to
meet order minimums, but various “non-mainstream” distributors who are often unknown even to the
local sales force. The value of this access to incremental volume is another important factor in the cost/
benefit calculation.
Successful manufacturers have designed and implemented wholesaler redistribution programs which
accomplish both objectives.
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