The irony involves aftermarket manufacturers and their WD and retail trading partners. For years, sophisticated procurement practices combined with massive consolidation have enabled WDs and retailers to pit suppliers against one another in a feeding frenzy for their business. As a result, manufacturers find themselves competing for fewer and fewer opportunities, each offering less and less profitability. WDs and retailers are able to pick and choose the suppliers that offer the best pricing, take back the most returns, offer the best credit terms and succumb to the most ridiculous demands (remember Pay On Scan?).
That brings us to the not-so-funny potential reality for WDs and retailers.
While WDs and retailers have been "sticking it" to their suppliers, they might really have just been "sticking it" to themselves. To cite a recent example, let’s use Detroit. During the economic growth of the ’90s, carmakers were hard-pressed to keep up with America’s insatiable demand for new vehicles, and they took full advantage of these bright market conditions. These circumstances also allowed Toyota, Honda and Nissan to grow, finding opportunity in Ford and GM’s capacity constraints, as well as their own ability to make better products. All of this translated into massive buying power for the carmakers. As Ford and GM battled for market share, they pressured their own supply base to drastically cut prices, accept a greater burden of R&D and inventory costs, extend terms and share warranty expenses. Hyper competition among suppliers ensued, and their zest for high-volume contracts placed them at the mercy of their customers. Sound familiar? During that time, the lack of mutually beneficial supplier-customer relations lead to growing discontent among suppliers and dissatisfaction among the carmakers. Tensions rose and alienation grew. Today’s horrible state in which Ford, GM and their suppliers find themselves can be directly traced back to those regrettable times. These days, we find the aftermarket pursuing the exact same shortsighted path. If WDs and retailers continue to squeeze their suppliers, the results could have long-term, negative repercussions. The cost of supplying application-specific products in 30 minutes or less to a demanding motoring public is rising dramatically. Investment in information systems has not kept pace, returns are out of control, training deliverability and employee retention costs are on the rise, raw materials costs are going up at unprecedented rates and market share battles among house brands continue to add costs to the function of WDs and retailers.
If you’re a distributor, you will need help – lots of it. Like it or not, you’ll need healthy and vibrant suppliers to help you succeed. Off-shore manufacturers shipping rotors at 20 to 30 percent lower prices without any other form of support won’t be enough to help you overcome the increased cost of doing business.
So, the next time you "negotiate" a price decrease from one of your long-standing suppliers by threatening them with some off-shore product, ask yourself this: Are you "sticking it to the man," or actually "sticking it to yourself"?
