To start, it might be helpful to break down the two different types of transactions that distributors work with. There are the standing or straightforward orders that happen regularly. Someone has to call the customer or customers and write down their order. All the orders are compiled and sent to the producer or processor. These are fairly straightforward. Oftentimes the hardest part is getting people to place the order on time. My client and mentor says these transactions need “order takers”. Deep understanding of the product, the client, and the supply chain are not necessary.
Everything else falls into the second category. This is when a customer wants a new product, a vendor wants to move excess inventory, or someone has a special request. This is when the distributor's understanding of the products, vendors, clients, and markets is critical and if done correctly everyone ends up better off. The vendor made an extra sale, the client got a product they wanted, and the distributor made money and built good relationships. This is the part that is not easy and cannot be easily automated.
My Big Sale
I’ll walk you through the transaction I just finished to show you the complexity. A client emailed looking for 30 boxes or one pallet of a specific specialty product A. I emailed the vendor to find out the price and availability. The vendor has 33 boxes, but the minimum for an order is 60 boxes or two pallets. I order other products from this vendor, but since the product comes from a different facility in a different state, it has its own minimum.
I update the client and ask if there is anything else they would consider adding to the order. The client asks about four other products. Products B and C are pretty straightforward, we agree on the price, and I add to the order. That brings us up to 43 boxes. Products D and E get more complicated. D is priced above the client's reservation price and E has the wrong specs.
I go back to the vendor and ask if there is any flexibility on pricing for products D and E. They agree to a lower price on both products. There are only 7 cases of product E available, so we need something else to make the minimum. I asked the customer if they would take Product D at an even lower price. That’s a no go. They go back to the sale sheet and find Product F. It was out of stock.
This entire process has taken two days. It started on Thursday at noon and on Friday at 2pm, I’m still 10 boxes short of the minimum. Now that I have one client interested in this new line, my boss starts making some calls and finds some other customers that express future interest in this product. If this order goes through and we decide to place another order in the future it should be much easier than this, but that doesn’t help me today.
The Long Game
I won’t leave you in suspense. I was able to convince the vendor to waive the 60-box minimum for this order. They are taking a gamble on future business coming through, once the client uses the product. Plus, with more lead time, hopefully, we can grow the order next time and not scramble to make the minimum order.
The conversation didn’t end there. In the order confirmation emails with the vendor, they said we are still grading some of the meat. The inventory sheet we have is our best estimates and projections. However, when everything is graded on Monday it might look slightly different. If we have additional boxes that meet the specifications you requested, will you take more than the 33 boxes of Product A you requested?
This is the challenge and magic of distribution. Agricultural commodity specs and grading are subject to the laws of nature. We can plan and project, but what the final mix looks like will be unknown until the last minute. If the grading is different than expected, instead of me helping my client find a specific product, now I’m helping my vendor move extra boxes of something they didn’t expect to have. And agricultural businesses from specialty meat to greenhouse nursery supplies have to move everything before they perish or less it really threatens the viability of the entire operation.
-Michelle Klieger
( Whew! so much to take in from this.)
