Executive Summary 2

Both Sides Agree: No Commitment, No Trust
The findings of this E-Survey on the Barriers to Change reveals that lack of commitment to relationships and overall lack of trust are the greatest barriers to improved sales performance and profitability for both manufacturers and distributors.

In August of 2001, the Industrial Performance Group (IPG) published Report Card Update, the findings of a four-year study of manufacturer/distributor working relationships. This research reveals that problems in manufacturer/distributor working relationships are eroding sales performance and profitability.

Additionally, it reveals that most manufacturer/distributor working relationships operate on an informal basis. That is to say, these relationships lack common goals, plans, and mechanisms for dealing with conflict.

What’s interesting is that these findings come as no surprise to most of our web site visitors. What does come as a surprise is that little if any progress has been made toward improving these working relationships over those past four years.

Both manufacturers and distributors agree that problems in their working relationships are hindering sales performance and profitability. Why aren’t more people doing something about it? This question became the focus of an IPG E-Survey posted on our website in August, 2001.

There were two primary goals for this E-Survey. First, we wanted to determine the likelihood that manufacturers and distributors will take action to improve their working relationships. Secondly, we hoped to identify the barriers that keep manufacturers and distributors from improving their working relationships.

IPG received responses from 504 manufacturers and distributors from a variety of industries. When asked to indicate the likelihood that manufacturers and distributors will improve their working relationships during the next two years, one third of the respondents, 34%, believe the likelihood that this will happen is LOW.

Nearly half, 45% percent of E-Survey respondents indicate a MODERATE likelihood that the relationships will improve. Only two in ten, 22%, of respondents indicate that the likelihood is HIGH.

E-Survey participants were also asked to identify the barriers that keep manufacturers and distributors from improving their working relationships. Both manufacturers and distributors agree that the greatest barriers to improved working relationships are a lack of commitment to the relationship and an overall lack of trust between the two parties.

In addition, E-Survey respondents identify the failure to recognize changes in the market, the insufficient investment in people and technology, and short-term financial performance pressure as additional barriers to improved working relationships.

What does this mean? Quite simply, these findings indicate that NOTHING is going to change until someone in the working relationship takes action to improve the level of commitment and trust. No matter how good a plan or scenario may appear, without trust there is no commitment. Without commitment, there is no working relationship. Without a working relationship, there can be no improvement.

The good news is that changing the nature of manufacturer/distributor working relationships is much easier than most people realize. For many manufacturers and distributors, the hardest part of the process will be changing the way the working relationship is viewed and managed.

Taking Action
Manufacturers and distributors who are interested in improving sales performance and profitability by changing their working relationships can go a long way toward that goal by doing the following:

1) Establish clearly defined goals of the relationship;
2) Develop plans for accomplishing these goals;
3) Define the specific roles and responsibilities of both parties;
4) Link compensation to performance; and
5) Monitor progress and hold people accountable.

For more information about implementing any of the steps mentioned above, contact the Industrial Performance Group at 800.867.2778.

About the Industrial Performance Group
The Industrial Performance Group specializes on helping manufacturers and distributors increase sales volume, improve profitability, build customer loyalty by better managing the relationships, processes, and practices in supply chains and distribution channels.

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