Manufacturer and distributor relationship

Manufacturer distributor relationship

manufacturer and distributor relationship

With concerns over supply chain stability, manufacturers and their distributors must work together.'s Mike Keating illustrates steps. The manufacturer-distributor relationship is mutually beneficial but difficult to manage. Read more to find out how to maintain this important. This paper aims to investigate the extent to which relation-specific investments undertaken by the distributor favor the presence of various governance structures .

The second section discusses the theoretical model. Thirdly, the methodological procedures followed in our study and the results found are presented. Finally, the last section shows the conclusions, limitations, and suggestions for future studies. Theoretical Background The literature about knowledge transfer explores how acquisition of knowledge may improve performance in the supply chain, including manufacturer and other actors in the supply chain.

Conceptual and empirical arguments may expand the notion of performance monitoring in the supply chain. It challenges the assumption that monitoring others can degrade a relationship and it can be negatively viewed from the perspective of those being monitored.

manufacturer and distributor relationship

The knowledge theory of the firm has attempted to understand the existence and organization of firms as resulting from the creation, acquisition, appropriation, and management of knowledge by individuals and organizations Grant, ; Nonaka, The processes of knowledge creation and acquisition are related to the context. The mechanisms of creation, appropriation and knowledge transfer allow the firms to store specialized knowledge that are integrated and transformed within their boundaries Grant, Prior studies like X.

Li and Chandra explored the existing challenges for knowledge integration in complex network management especially in geographically dispersed supply chains. Nevertheless, Nonaka, Toyama and Nagata identified different types of knowledge creation that are related to tacit or explicit knowledge.

Socialization occurs when there is only tacit knowledge exchange. On the other hand, knowledge creation, identified as internalization, is present when the existing explicit or formalized knowledge creates new tacit knowledge. In this case, internalization is present in activities like learning-by-doing, training and exercises. The processes through which firms organize and transfer knowledge are the most valuable in understanding the nature of the relationship between the manufacturer and other partners, like distributors J.

Manufacturer-Distributor Relationship

Routine visits are used by firms to create and transfer tacit knowledge among them, because these allow organizational members and other external partners to share experiences, express their problems, and learn better ways to perform tasks J.

At the same time, there are also other forms of knowledge creation and transfer, such as formal meetings, negotiation processes, formal training sessions, and informal interactions, among many others. As a result of these interactions, Modi and Mabert showed that knowledge transfer throughout the supply chain may improve performance.

Li, Liu and Liu found that co-operative activities improve knowledge acquisition by the manufacturer from the distributor.

manufacturer and distributor relationship

Thus, Frazier stressed that, as distributors play a central role in generating sales for manufacturers, the latter should transfer an amount of tacit, explicit knowledge on products and their benefits, and "encourage intermediate persons to process and integrate such knowledge to enhance their capabilities" Frazier,p.

Model Development and Hypothesis The proposed theoretical model is based on the organizational knowledge approach. It considers that the manufacturer relies on the distributor to sell its products.

The presence of asymmetric information between seller and buyer or manufacturer and distributor may influence the second to behave opportunistically, diverging from the manufacturer's goals and increasing the need for monitoring by the manufacturer. However, by monitoring the performance of the distributor, the manufacturer becomes involved and interacts with the distributor in order to ensure the proper development of tasks by the distributor Y.

Zhou, Zhang, Zhuang and Zhou showed that relational governance combines relational norms and collaborative activities. This interactive process, in turn, helps the knowledge transfer processes from the manufacturer to the distributor, which may increase the knowledge base of the distributor and improve its performance.

Knowledge-sharing activities between manufacturer and its distributors can be an important factor affecting overall supply chain performance, as found by Hult, Ketchen and Slater in their study about how information-sharing and face-to-face discussions can improve supply chain performance. Figure 1 illustrates our proposed model. The reasons are explained by certain activities that demand investments and efforts, and are not perceived as useful or worthwhile by the distributor.

At the same time, the manufacturer can invest in activities, such as monitoring the distributor's performance or training its team Y. In the case of the manufacturing-distributor relationship, the manufacturer can be viewed as the principal actor and the distributor as the agent. Although the manufacturer and the distributors share the same goal of maximizing sales of the manufacturer's products and the distributors may diverge in the way that these products are sold.

In this case, for example, distributor may "carry insufficient inventories of the manufacturer's products, carry and promote competing products, set prices above or below the preferred range, advertise and promote the product inappropriately, train sales personnel improperly, fail to provide after-sale services, etc.

In both cases, monitoring distributor performance may be a required activity conducted by the manufacturer to ensure proper distributor behavior, especially in the case of intensive technology products, which incur high investments in production and distribution.

This monitoring activity gathers information that can be used to qualify distributors in a close-looped process. In this aspect, knowledge transfer is central. It implies a constant process of evaluation and feedback between manufacturers and their distributors, maintaining the information flow between the companies involved in this process and stimulating information-sharing behavior.

Monitoring distributor performance helps manufacturers to keep track of flaws in distributor activities related to the product and consequently to prepare actions to deal with those flaws.

A next step in performance evaluation is cooperation. Cooperation helps to develop trust and at the end to improve performance Huemer, Tacit knowledge acquisition Tacit knowledge acquisition is dependent of the activities conducted by manufacturers that require interaction and direct involvement with their distributors. Lloria and Peris-Ortiz stated that network configuration influences knowledge transfer.

Within this focus, Tseng showed that manufacturer's knowledge capability, supplier relationship management and corporate performance are related.

Manufacturer-Distributor Relationship 101

Similar situations may occur when the relation between manufacturer and distributors is explored. Influenced by lean management andkeiretsu configuration, transferring employees between companies is a common practice in Japanese organizations. This practice seeks to create a supply chain identity and mechanisms for knowledge transfer from manufacturers to suppliers. As an example, Toyota transferred more than employees per year to the suppliers throughout the 90s J.

For manufacturers and distributors, the hardest part of the process will be changing the way their working relationships are viewed and managed. Manufacturers and distributors develop and support core beliefs about the purpose of their working relationships and how these relationships should be managed.

These beliefs are passed on from one generation of management to the next. Over time, management teams tend to forget why they believe what they believe. Yesterday's good idea becomes today's policy and tomorrow's mandate. People also come to believe that what they don't know isn't worth knowing. This is how industry participants come to believe that their circumstances and problems are unique.

manufacturer and distributor relationship

Unless these perceptual barriers are recognized and addressed, manufacturers and distributors will be unable to deal with the primary barriers to better working relationships: How Did These Beliefs Evolve?

For the past fifty years, the basis of competition in most industries has been high quality products at low prices. The value proposition product-pricing-availability-information was defined by manufacturers. The distributor's role was to provide market coverage, hold inventory, and process orders. Over time, however, most industries evolved to a point where all manufacturers made quality products and they all had low prices. When this happened, manufacturers and distributors began looking for ways to improve profitability.

Another MDM report explains how distributors can achieve social media marketing success. Industrial Distribution recently outlined how supplier relationships can be better managed with enterprise resource management, and Web 2.

manufacturer and distributor relationship

The National Association of Wholesaler-Distributors' latest Facing the Forces of Change research study says manufacturers and distributors are demanding that their partners speedily deliver targeted analytics. Enterasys is a provider of wired and wireless network infrastructure and security products and systems.

Cloud solutions like Channelinsight allow Enterasys to consume and share information at a much faster pace," Petlon continues. Channelinsight is a key part of Enterasys's channel strategy. One example is cloud-based applications that provide quick access to new functionality without additional IT-related investment, such as an e-commerce platform that allows for channel expansion and increased service to customers and suppliers.