How Much Are You Really Paying a Distributor?

We’ve all heard of the dreaded “middle man” and how they can increase costs, but manufacturing distributors fill an important roll in their industry. Find out if you’re getting your money’s worth.

The real cost of working with a distributor

As a kid, my dad would drive across town to his favorite music store to buy a guitar rather than ordering it directly for a better price. He valued the opportunity to “test-drive” various guitars ahead of time as well as the relationship he had with the shop owner. Knowing that only the best products were there saved my dad the hassle of shopping around, so he was willing to pay extra.

The same concept can translate to manufacturing and engineering.  There are distributors that build relationships with specialty manufacturing and engineering firms across the country so that when a client comes to them with a specific need, they can select the best provider for them.

Many times this benefits everyone involved because the customer gets the right solution, the manufacturer gets business that they might not have otherwise, and the distributor gets a cut for facilitating the match. The problem with this system is that most distributors advertise themselves as the manufacturer rather than a third party.

As the customer, how to you know if a company is a distributor and when to work with one?

Distributors do a lot of marketing.

Specialty manufacturers are typically focused on manufacturing rather than nationwide marketing campaigns. If you see online ads or flashy email campaigns promising engineering and manufacturing to fit every project, you may want to dig a little further into what they really offer. Since distributors don’t have to invest any resources in actually producing anything, they can focus solely on generating leads.

You won’t be communicating directly with the manufacturer.

When you begin the process, ask direct questions in regards to the manufacturer and their facilities.

If you aren’t in direct communications with the manufacturer, it is very difficult for either party to completely understand the project at hand. If your distributor leaves out a small detail or simply phrases a question incorrectly, the product may not be made correctly.

Maintaining a long term relationship becomes difficult.

Say well and the product is exactly what you wanted, you are now reliant on that distributor to maintain the relationship with the manufacturer. If they choose to no longer work together or your client file is misplaced, you run the risk of having to start over with a new manufacturer.

What are the costs associated with working with a distributor?

While you may benefit from a rate reduction that the manufacturer has worked out with the distributor, there are other costs associated with working through a distributor.

The outcome of your production is left to chance.  Mis-communication is very expensive in the world of manufacturing. Maybe your quantities were negotiable but the distributor never thought to ask. If you had ordered 234 rather than 220, your yield would have been maximized and the per-piece price chopped by 10%.  Or maybe the product is going to be mostly used outdoors and if the manufacturer had known that, they could have suggested a different material that was cheaper and better equipped for dealing with the elements. Those communication flaws can cost more than just a few pennies here and there.  It can mean the difference in the success or failure of the product.

How do I find the right manufacturer myself?

Many manufacturers have signed non-compete agreements with the major distributors so once you are a distributor’s client, there may be legal consequences for working directly with the manufacturer. It’s best to be educated from the start and do your research. Ask for referrals, call your local chamber of commerce, and search the internet for manufacturers that fit your needs. Even if you find one that doesn’t quite match what you’re looking for, give them a call.  They may know someone who can help. Most states have programs with the sole purpose of growing manufacturing.

Manufacturing Distributors have made a great impact on growing American manufacturing and supporting smaller companies. Understanding who you’re working with and knowing the right questions to ask will help you find the best manufacturing solution for your product.

Still not sure about how to find the right manufacturer for your product? Let’s chat. Our mission is to empower American companies to be successful.

 

 

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