This month I spoke with Bert Jorge, Dade Paper’s Director of Redistribution and Export Sales. Bert has over 30 years of experience in supply chain management and has worked for regional and national redistribution companies that sell foodservice and janitorial supplies. Bert joined Dade Paper in 2006 and has been instrumental in the company’s success and growth as a leading redistribution organization.
LC: Please explain the term “redistribution.”
BJ: Redistribution is a logistics model that takes place when a manufacturer sells large quantities of their products to Distributor A, in this case the “redistributor”, who then sells those products to the smaller Distributor B who in turn sells to an end user.
LC: How does adding an extra step in the supply chain provide value?
BJ: Redistribution provides benefits to everyone in the supply chain including manufacturers, distributors and ultimately the end users.
Manufacturers benefit by being able to penetrate new markets via a redistributor who has extensive geographic coverage. They can ship full truckloads into a given market rather than multiple, small shipments which saves both operational and freight costs.
The smaller distributors benefit by gaining access to a broad range of products from many manufacturers. It is more efficient to consolidate their ordering from one source, the redistributor. This eliminates the need to meet high minimum orders from the manufacturers and helps maximize inventory turns. All of these advantages lead to reduced costs and allow smaller distributors to offer competitively priced goods to the end users.
Here are a couple of illustrations that may help demonstrate the concept:
LC: I see how this model works, especially for distributors that sell thousands of different products which is common in the foodservice and janitorial supply industry.
BJ: Yes, the financial implications based on inventory turns alone make the business model work.
LC: What changes have you seen in this industry over the last few years?
BJ: Consolidation, mergers and acquisitions have been prevalent in our industry at the manufacturer, redistribution, distribution and end user levels. Another big change has been the increase in online sales from traditional and non-traditional distributors in the supply chain.
LC: How has that impacted the marketplace?
BJ: The small to medium size distributors are experiencing more difficulties in this new era of larger players along with online competition. But this landscape reinforces the value of redistribution. Change is always challenging, but change also creates opportunities for the companies that stay current with trends and are equipped to take advantage of the shifts in the marketplace.
And, as in many industries, margins are squeezed forcing companies to be more efficient and cut costs where possible.
LC: What advice can you offer?
BJ: Some redistributors and distributors have chosen to reduce costs by downsizing their sales force. However, this leaves a void in providing the consultative services needed, especially in the janitorial segment when we’re dealing with chemicals and machinery.
Online purchasing offers convenience and efficiency but without qualified people to answer questions and help customers solve problems, the end users may end up with products that do not work. To take cost out of doing business at the expense of not providing the required level of professional service, I believe, is a mistake. Blending technology and efficient operations along with excellent customer service is the key. It is not easy, but when done correctly everyone benefits.
Bert and his team of redistribution experts are available to consult with companies on the benefits of this unique supply chain model. He can be reached at email@example.com.