Some suggestions please

Discussion in 'Growing and Managing a Business' started by NTXHeat, Feb 14, 2011.

  1. NTXHeat

    NTXHeat
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    Quick: How do I convince a manufacturing company that online distribution is a must when their current dist. chain is more important to them?

    Opening an online dist. company and I have a manufacturing company that is interested yet here are the problems:
    1)They want us to carry an inventory because their processes are not set up for small orders
    2)They are interested in becoming active in our promotional/markdown plans to ensure they do not disrupt their current WD's.
    I am meeting with the board in a month and I am struggling on what avenue of approach to take here.
    Here is what I have now as some billets to hit during the meeting:
    • Striving for a win/win situation between manufacturer and web dist.
    • Online sales data and analysis within the U.S. for previous year.
    • (Sample biz) Increase in sales from no online distribution to having a company distribute online for them-- Simply what an online distribution can do for them
    • Obviously review our biz plan, objectives and goals as a company
    • (I have never 'observed' their manufacturing process)- Offer services and time to evaluate their manufacturing process to get a better idea of how they work.

    YET! A little information for who they are... Older men that are a bit stuck in their ways (lack of better words). It is EXTREMELY important to them to not undercut their current WD's- fine with me but I dont want to carry an inventory and I would rather not have another company become involved in my pricing scheme. Am I thinking incorrectly in this?
     
  2. Fergal

    Fergal
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    Welcome to our Business Forum NTXHeat. One thing I would do is research the manufacturing company's competitors and take a look at what they are doing online. When you meet the company tell them what the best of their competitors are doing and stress that they need to start selling online or they will lose out to their competitors.

    I can understand the company's concerns and appreciate that it is vital to them that they do not upset their existing distributors. Their business probably depends to a large part on those distributors and it is important to respect that. Given the fact that they also don't want to supply you with small quantities, it might be possible for you to work with one of their distributors. That way the company doesn't need to start handling smaller order quantities and at least one of their distributors will also benefit from the arrangement. Do you think that's something that could work?
     
  3. NTXHeat

    NTXHeat
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    Interesting points

    Thank you for your reply! I didn't think of any of this... Here are my initial thoughts on what you have suggested..

    • Outside of asking the company who they distribute to- would you have any ideas on how to find this information?

    • Including another distributor: doing this would cut into some of my profits as well since the third party would have a mark up on it. You have any thoughts on how to suggest doing this without killing our profits? I mean the inventory they suggested us carrying is their top 8% selling products... In the long run that would be a good amount of loss- yet at the same time we wouldn't be paying for storage etc.... Suppose I am just thinking out loud here and wanted to keep it going because this is an excellent idea!
     
  4. Fergal

    Fergal
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    Personally I'd have no hesitation in asking the company who their distributors are. They have already told you that they don't want to sell in small quantities, but they will still want your business so they will be happy to see you buying from one of their distributors. Failing that you could do some research on Google and that should lead you to the distributors. If you contact a distributor in that industry and they don't provide the particular product you are looking for, ask them if they know anyone who does.

    When purchasing a product you can generally get lower prices by purchasing larger quantities and the other side of this coin is that you pay more when purchasing smaller quantities. But as you say there are other cost savings associated with purchasing smaller quantities and your overall aim will be to keep your total costs as low as possible, while at the same time maintaining a positive cash flow. You might want to do a little forecasting to compare the total costs of purchasing larger quantities at a low price to being able to place small orders.

    If you do purchase through a distributor, try to get quotations from more than one potential distributor, so that they have some competition for your business, thus giving you greater negotiation strength and an increased chance of getting the best deal possible for your business.
     

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