1. 1 Is It Time for a Wake Up Call? Distribution Conference Reno 2005

2. 2 Ed Runner E. C. Runner & Associates, Inc. 1 630 365 1898

3. 3 Is It Time for a Wake Up Call? A. History & Trends B. Important Issues Today C. Critical Decision Time

4. 4 A. History & Trends

5. 5 History- General Business 1955 Pent up demand. Pent up demand. Unlimited resources. Unlimited resources. Little world wide competition. Little world wide competition. Few government limitations. Few government limitations. No world class competition. No world class competition. End users lacked knowledge. End users lacked knowledge.

6. 6 Historical Distribution 1955 Distribution was transactional. Distribution was transactional. Distributors were small. Distributors were small. Distributors handled commodities. Distributors handled commodities. Barriers to entry were low. Barriers to entry were low. Distributors could be easily replaced. Distributors could be easily replaced. Distributors lacked funding. Distributors lacked funding. Channels often under-managed. Channels often under-managed.

7. 7 Today Distributor/manufacturer relations today have legacy issues in all industries. Distributor/manufacturer relations today have legacy issues in all industries. In the lubricant industry, we have more legacy issues than most industries. In the lubricant industry, we have more legacy issues than most industries.

8. 8 Generic Sales Channels Generic Sales Channels DMSEFSSIRCIR Mfr EU

9. 9 Sales Channel Each sales channel has advantages and disadvantages. Each sales channel has advantages and disadvantages. We need to be more objective to understand these. We need to be more objective to understand these. It takes real effort by all parties for a channel to stay healthy for your brand. It takes real effort by all parties for a channel to stay healthy for your brand.

10. 10 Comfortable Business Concern for Survival Change in the Channel

11. 11 Joint Success Issues High Trust High Trust Good product or service to sell. Good product or service to sell. Acceptable profit for dist & major. Acceptable profit for dist & major. Reasonably easy to deal with. Reasonably easy to deal with. A strategy for joint survival & success. A strategy for joint survival & success. Dependable primary contacts Dependable primary contacts Commitment to make it work. Commitment to make it work.

12. 12 A. History & Trends

13. 13 B. Important Issues Today

14. 14 Manufacturer-distributor relationships are no longer working. NAW Study NAW Study

15. 15 Conflicts There are a number of conflicts in place that threaten our profits and the survival of our brands.

16. 16 1. Sales vs Profit

17. 17 2. Long term vs short term

18. 18 3. Efficient vs effective

19. 19 4. Way we do things vs the need for real change

20. 20 5. My needs vs your needs

21. 21 6. Internal company politics distractions

22. 22 7. Being too passive

23. 23 8. Structure and organization vs strategy.

24. 24 Result: Need for clearer strategy focused on long term needs and on joint success. Need for clearer strategy focused on long term needs and on joint success.

25. 25 Sales channels are experiencing some critically important trends. But wholesaler-distributor and manufacturer partners dont agree on the implications of those trends. NAW Study NAW Study

26. 26 Market Forces-Today Buying groups. Buying groups. Distributor mergers or roll-ups. Distributor mergers or roll-ups. Integrated marketing. Integrated marketing. Hybrid channel efforts. Hybrid channel efforts. Traditional alternate channels. Traditional alternate channels. New alternative sales channels. New alternative sales channels. Web exchanges. Web exchanges.

27. 27 Getting More Profit Getting higher prices Getting higher prices Getting paid for extra value Getting paid for extra value Getting paid for services Getting paid for services Getting reasonable compensation Getting reasonable compensation Running a lower cost model Running a lower cost model

28. 28 High Profit Effort The company that does not create a plan that successfully motivates customers, employees, and channel partners to enthusiastically work together, runs the risk of having someone else create the plan for the market. The company that does not create a plan that successfully motivates customers, employees, and channel partners to enthusiastically work together, runs the risk of having someone else create the plan for the market.

29. 29 ProductInformation Company support Tech support Quality sales force AdvantageDifferentiation Better marketing Easy to deal with Rapid response Training Total Market Offering Needs to be superior TotalMarketOffering

30. 30 B. Important Issues Today

31. 31 C. Critical Decision Time

32. 32 Trends in Distribution Increased use of distribution. Increased use of distribution. End users reducing supplier numbers. End users reducing supplier numbers. End users smarter. End users smarter. Often old models dont seem to work. Often old models dont seem to work. Manufacturers using alternatives. Manufacturers using alternatives. Distributors have more choices. Distributors have more choices.

33. 33 Where We Fit in the Market Integrators AHTD Traditional Supply Catalog or web houses VALUE ADD MARGIN

34. 34 A Look At Competition A B C D Performance Price What will you do to move company performance value to the right?

35. 35 Reviewing Your Business Its not in the product. Its not in the product. You survive because youre different. You survive because youre different. You will prosper being compelling. You will prosper being compelling. How are you really different? How are you really different? What do you bring that is compelling? What do you bring that is compelling?

36. 36 Providing & Selling Value Trust Value Expertise Knowledge Brand Preference Differentiation Comfort Credibility Brand Recognition

37. 37 Manage This is a crossroads for many companies in the US. This is a crossroads for many companies in the US. Be sure we know what business we want to be in. Be sure we know what business we want to be in. Connect with customers better. Connect with customers better. Bring real value. Bring real value.

38. 38 # Distributors/ Manufacturer Profit Revenue Cost $ Number of Distributors MaximumProfits

39. 39 Voice of Customer CustomerSatisfaction, Loyalty, and Purchases Relate to Performance.CustomerSatisfaction, Loyalty, and Purchases Relate to Performance. 1 2 3 4 5 5432154321 Ratings II Importance

40. 40 You Want Proof You Want Proof Importance to Customer Current Performance High Low High Bring Valuable Information Reliable Performance Products Meet Specs Applications Knowledge Contact Frequency Easy to Deal With Acceptable Lead Times Accurate Invoicing Literature Advertising Resolution of Complaints Special Pricing

41. 41 We need a better balance between the long term vs the short term needs of all parties: the major, the major, the channel, the channel, channel partners, and channel partners, and the market. the market.

42. 42 High Profit Efforts Efforts to reduce duplication. Efforts to reduce duplication. Cost being taken out of channel. Cost being taken out of channel. Differentiation. Differentiation. Manufacturer and distributor can improve profit better working together. Manufacturer and distributor can improve profit better working together.

43. 43 Saturation Saturation of distribution hurts all but a monopoly. Saturation: Saturation of distribution hurts all but a monopoly. Saturation: -- distributors compete on price. -- distributors compete on price. -- customers value product less. -- customers value product less. -- hurts everyones profit. -- hurts everyones profit. -- limits funds for staff and value add. -- limits funds for staff and value add. -- customer support suffers. -- customer support suffers. -- the brand suffers. -- the brand suffers. -- everybody loses. -- everybody loses.

44. 44 A Modest Proposal Its time. Its time. The alternatives offer some real negatives. The alternatives offer some real negatives. Taking the best from other industries, the lubricant industry can improve significantly. Taking the best from other industries, the lubricant industry can improve significantly. Its reasonable. Its reasonable.

45. 45 Current Becoming More Valuable Current Value to Customer How Do We Increase Our Value? What Is Our Potential? We cant get improved prices or profits unless the customer sees value.

46. 46 C. Critical Decision Time

47. 47 Managing Partner Connections Attitude Remember, in addition to the message, we are also communicating attitude. Remember, in addition to the message, we are also communicating attitude. We represent our attitude and the attitude of the company. We represent our attitude and the attitude of the company. We can build the relationship, even in the midst of trouble. We can build the relationship, even in the midst of trouble.

48. 48 Bullseye Critical Issues Important Important Unimportant Growth

49. 49 Critical Success Issues High Trust High Trust Good product or service to sell. Good product or service to sell. Acceptable profit for dist & major. Acceptable profit for dist & major. Reasonably easy to deal with. Reasonably easy to deal with. A strategy for joint survival & success. A strategy for joint survival & success. Dependable primary contacts Dependable primary contacts Commitment to make it work. Commitment to make it work.

50. 50 Time for a Wake Up Call? A. History & Trends B. Important Issues Today C. Critical Decision Time

51. 51 Time for a Wake Up Call?