The Distribution Trap

Why is it that U.S. manufacturers of all shapes and sizes allow themselves to be pushed around by discount retailers, to the extent that they often cede control of their own supply chains to the big boxes? The manufacturers "have little or no control over the distribution and sales of products in their home market," observe the authors of this new book. "They do not even have control over the price they can charge for their products." The simple answer, of course, is that the retailers have the money and the clout to demand pretty much whatever they want from their suppliers, whose success often depends on remaining compliant with the retailers requirements.

The authors -- Andrew Thomas, a professor at the University of Akron (as well as an IW contributing editor), and Timothy Wilkinson, a professor at the Montana State University -- focus on chainsaw manufacturer STIHL as a case study in how an American company can win market share and compete globally without selling to the big-box retailers. The key is focusing on service, and remaining close to the independent distributors who are the "face" of the company, rather than the impersonal big box.

See Also:
• How to Heal a Broken Supplier Relationship
• Supply Chains Push the Real Estate Rebound