Key problems facing industrial distributors

Key Problems Facing Industrial Distributors James A. Narus N.MohanReddy George L. Pinchak This article reports on N survey of the problems ,fuced by industrial distributors. Five major problem categories ure identified and managerial implicutions ure derived from the findings.

INTRODUCTION The study of distribution channels is at a turning point. Academic research, which focused on economic issues (e.g., functional allocation and institutional structure) during the 1950’s and 1960’s and on behavioral issues (e.g., power, control, and conflict) during the 1970’s and 1980’s, has been termed a “disjointed collage” of theories and concepts [2, 121. Scholars are calling for new directions in channels research and the improvement of research methodology [2, 121. Practitioners, who downplayed the importance of distribution during the 1960’s and 1970’s, are witnessing its resurgence [6]. In several industries (e.g., chemicals, electronics, and power transmissions), economic conditions have spurred the rate of distributor sales growth to levels which exceed those of domestic manufacturers and the United States (U.S.) Address

correspondence to:Jamca A.

Western Reserve University,

Cleveland.

Narus. School Ohio 44106.

Indusrriul Marlietin~ Managemen/ 13, I39- 147 (1984) 0 Elsevier Science Publishing Co., Inc., 1984 52 Vanderbilt Ave.. New York. New York 10017

of Management. Case

Gross National Product (GNP) [ I, 91. Observing greater portions of their sales through distributors, manufacturers are scrambling to learn more about distribution channels [6, 10, 111. From both the academic and practitioner perspectives, revitalized interest and new research direction for the study of distribution channels are needed. The purpose of this article is to identify topics from industrial distribution that can furnish new direction to channels research and practice. Fostering the view that academic theory and research should address practitioner problems, this article develops these topics from a survey of industrial distributor problems. Discussion of the study concentrates on the problems faced by five types of industrial distributors and reports commonalities and differences. Managerial implications and research topics are derived from the findings. A Description

of Industrial

Distributors

As is the case with a number of institutionul concepts in marketing, there is confusion over the nature and activities of industrial distributors. For the purposes of this article, a market-bused definition of industrial distributors will be used. It is: all wholesalers who sell the majority of their goods and services to industrial, commercial, and institutional customers, the government, builders, and farmers. Table 1 provides summary statis139 00I9-850 I /84/$03.00

TABLE 1 1977 Industrial

distributor

SIC Code SO2I 503’) SO5I 5052 SO63 5065 so74 5075 5078 508 I 5082 5083 50x4 5085 SO86 5087 SOY3

statistics’

Distributor

% of Sales to OrganIzational Customer9

Types

S2.4%

3.023

materials

58.53

s .7X5

Furniture Construction

Number of Firms

Number of Employees3 3 I.372 60,741

Metal \erv,ce center?,

63.2%

4.730

Coal and other minerals

64.1%

517

Electronic equipment

76.7%

7.IY.s

YY.468

lOl.Y60 4.787

Electronic parts

.50.X%

4,174,

42.655

Plumbing and heatmg equipment

67.2%

4,943

52.1 I3

Warm air heating and air conditioning equipment

51.2%

2,244

2s .002

Refrigeration

equipment

56. I%

893

Commercial machincs and equipment

50.4%

0.460

Construction and mining equipment

76.4%

3.313

Farm and garden equipment

X2.8%

12.767

9 .X07 02.857 76. I34 I25.567

Industrial

machinery

63

I I .?SS

12Y.SlX

industrial

supplies

75.6%

7.380

I lO.3Y3

Profes\lonal cquipmcnt

79

5,08X

(92,517

Service cstablishmcnt equipment

60.7Q

5.227

35,760

Scrap and waste materials

65.6%

6.588

x2.314

5111

Printing

7X.3%

731

24,23X

5112

Stationery supplies

5x. I%

4.364

3Y.Y33

5113

Industrial

5X.6%

2.610

JO.017

5152

Cotton

56

5161

Chemicals and allied product\

72.2%

Farm supplieh

60.3%

SlYI

and writing

paper

& pcrwnal hervicc paper

‘i; %

%

Totals ‘Source: ington. D.C.

/Y77 Cerwts of W/de.wle

Trtrde.

Voluvw

I, Swnmur~

md

1979. The data prwented is for ‘merchant wholesalers’

Sd?jrcr

23x J.7YS A I3 107 121.532 Stutistics.

U.S.

Sales (x$1000)

3.235 52.9 I I 121.285 I .374.x04 Department of Commerce. Wa\h-

which is the povcrnment classification

for whole~alcrs and

distributors. ?Percentage figures include salca to industrial.

institutional,

commercial. government, builders, and agricultural customers. Not

included arc sales to con~umen. retailers, other wholesalers. and exports. ‘Employment

a\ of March 12. 1977

tics for those distributors who match this definition. In terms of channel activities performed, “The industrial distributor is a full-service middleman who takes title to the product sold, maintains inventories, provides credit, delivery, wide product assortment, technical assistance, and may even do some assembly and manufacturing [8].”

JAMES A NARUS, Marketing at Case

Ph D. IS an Assistant Professor Western Reserve Universtty.

N. MOHAN REDDY, IS Cox Marketing at Case Western

Doctoral Reserve

of

Fellow In lndustrlal University.

GEORGE L. PINCHAK. is AssIstant Professor of Management at Lake Erie College and Ph.D. CandIdate in Operations Management at Case Western Reserve University.

140

Unique Nature of Industrial

Distributors

Distributors differ from industrial manufacturers in several important ways. 1) Distribution is a rvorking capital intensive industry. Without production facilities. inventory, and accounts receivables represent on average 90% of distributors’ assets. Short-term debt and retained earnings are relied upon heavily to finance these assets 19, 131. 2) Distribution is rnarket driven. A distributor’s inventory is likely to include several hundred to several thousand unique products. Because of limited resources, a distributor’s inventory must reflect the needs of customers. In addition, a distributor’s sales are closely tied to the economic vitality of the local marketplace. 3) Personal selling is a principal activity of distributors. Between 35% and 45% of all distributor employees are members of the sales force [ 141. 4) Distribution is characterized by srnullrr businesses. The majority of industrial distributor firms have annual sales of less than $ IO

million. Most are privately held companies, the owner/president [ 1, 51. Growing Importance

of Industrial

managed by

Distributors

It was estimated in the mid-1970’s that between 15% and 20% of dollar sales and approximately 75% of unit sales for all industrial products were made through distributors [7]. Industry analysts now predict that an even greater proportion of industrial products will be sold through distributors during the next decade [ 1, 6, lo]. Greater reliance on distributors by manufacturers and end users has been attributed to environmental trends; specifically, spiraling interest rates, prohibitive inventory carrying costs, accelerating sales calls and transportation costs, increasing accounts receivables levels, greater imports, and expanding service requirements of end users [lo]. These trends have encouraged manufacturers to concentrate on large accounts and/or new products where they can effectively exploit economies of scale in production and transportation and their technological expertise. For end users, these forces have motivated them to pursue just-in-time inventory strategies which call for

arbitrarily because we believed they would provide reasonable diversity and span many types of industrial distributors. The sample frame of industrial distributors was aggregated from the tndustriul Distributor Directory and the Million Dollar Directory. Systematic random sampling was utilized to assemble a mailing list from the sample frame [4]. A total of 937 questionnaires or roughly 178 per distributor type were mailed. Each questionnaire was addressed to the name of the president and/or principal owner of the firm. There were no follow-up mailings. QUESTIONNAIRE DESIGN. Trade and academic publications were reviewed to develop a preliminary list of distributor problems. Indepth personal interviews were then conducted with 10 Cleveland area distributors to reduce the list to a manageable number of important problems. Twenty-two problems were identified in the interviews. A three-part questionnaire was then devised. The first part required distributors to rate the 22 problems on a scale ranging from “ 1, not a problem” to “7, a very important problem. ” Blank space was provided for respondents to specify any other pertinent problems. Fi-

What are the common encountered by industrial small orders, rapid delivery, and accompanying services. As a result, the requirements of both manufacturers and end users are being met by distributors to a greater extent than ever before. The time is ripe for renewed interest in the study of industrial distributors. THE STUDY Method In order to identify topics which can provide new direction for distribution channels practice and research, a survey of industrial distributor problems was initiated. RESPONDENT FIRMS. To make the research task more manageable, five types of industrial distributors were surveyed, rather than all 23 listed in Table 1. These were: general-line industrial supplies distributors, and four specialists-bearing, chemical, construction equipment, and electronics distributors. These five were selected

problems distributors?

nally, classification questions sought information on: annual sales, number of basic product lines carried, number of manufacturers served, number of employees, percent of products held on consignment, value-added services rendered, and asset distribution. ANALYSES. Descriptive statistics were calculated for all classification questions. To rank the importance of distributor problems, means and standard errors were determined. A series of univariate ANOVA and Scheffk Multiple Comparison Tests were run to derive insights on particular distributor types. Twenty-two ANOVA tests were utilized to determine whether or not problem rating means were equal across the five-distributor types. For those problems where means were not shown to be equal, Scheffk Multiple Comparison Tests were conducted to discern the nature of differences across distributor types. FOLLOW-UP DISCUSSIONS. Results were presented at three seminars in the Cleveland area during the first 141

TABLE 2 Distributor

respondent

characteristics Distributor

Bearings

Characteristics

Chemicals

Types

ConstructIon Equtpment

Electronics

General-Line

Mean pcrccnt of aaxta accounted for by: 60%

32%’

57%

S4%

Equipmcnt

1’1

Y%

6%

1%

All others

33%

SW

37%

12%

3s4

Median number of employees

30

55

35

25

Sl

Mean number of “basic product line\”

25

30

x

30

so

Medum number of manufacturers served

60

2.5

IO

70

300

Percent of distributor\ holding product\

30%

28%

10%

76%

Inventory

60% 5%

33%

on consignment

461 distributors had annual sales volume between $ I million and $10 million. Respondent firms employed a median of 35 individuals. Inventory was the principal asset of all companies. On the average, 53% of distributors’ assets were accounted for by inventory. Distributors had a median of 30 basic or principal product lines and served a median of 60 manufacturers. Products were carried on consignment by 42.5% of respondents. A summary of these distributor characteristics appears in Table 2. Seventy-four percent of all respondents furnished at least one of the value-added services identified during the interviews and listed on the questionnaire. Value-added services, as they are called by distributors, entail nontraditional distributor activities. most notably product modification and fabrication, which enhance the manufacturer’s product offering. Of those who provide at least one of the services listed, 90% supplied two or more. An accounting of these services is given in Table 3.

quarter of 1984. The 66 manufacturer and distributor managers who attended were asked for their interpretation of the findings. These insights were used to develop managerial implications and research topics. Survey Response RESPONSE RATE. Of the 937 questionnaires mailed, 70 were returned unopened from companies which had either moved or declared bankruptcy; thus, the sample size was reduced to 867. A total of 461 completed and usable questionnaires were returned for a response rate of 53.2%. This compares favorably to recent channels surveys which have had response rates between 16% and 47% [ 31. By distributor type, response rates were: general-line industrial supplies (46.3%), bearings (47.6’%), chemicals (.54.60/c), construction equipment (59.90/o), and electronics (58% ). RESPONDENT CHAKACTEKISTICS. The majority of the

TABLE 3 Respondent

characteristics

continued Percent of Dlstnbutors

Service

Chemicals n = 72

ConstructIon Equipment n = 118

Serwces

General Line n = 88

Bearing n = 85

Electronics n = 98 X).4’/,

Contract warehousing’

31.2%

1I .9%

46.6%

11.2%

Chemical compounding’

69.3%

0.0%

2.3%

0.w

Fabrication

30.6%

1Y.554

21 .hQ

lS..iU

23.5%

32.2%

11.X%

11.1%

35.7%

Y-1. I %

30.7%

25.X’%

2X.6%

5.7%

1.2%

8.3%

Product as~emhl)

1%

Repair work

I I.

Instrument testing of product quality

26.4%

‘Contract warehousing rcfcrs to the leasing of warehouse spxc Tompounding

142

Providing

i\ the mixing of chemical\

29.7% for cu\tomcr inventory

to form another wbstancc.

0.0%

l6.3q

RESULTS

TABLE 4 Problem rating means

Mean importance ratings for the 22 listed problems are presented in Table 4. Findings from the univariate ANOVA and Scheffe tests demonstrated considerable agreement across distributor types on the relative importance of these problems. For 13 of the 22 problems, results led to the conclusion at the (Y = .05 level, that problem rating means were equal across distributor types. A summary of common problems and differences will be given below. Distributors added 74 other problems on the blank spaces provided. The most frequently mentioned and revealing “write-in” problems were: employee productivity is low and attitude toward work is poor (57 mentions), unethical practices of competitors (28), too many distributors per trading area (25), and little assistance or cooperation from manufacturers (22). Common

Distributor

Problems

Based on a review of the mean ratings tests, the writein questions, and seminar discussions, five principal and common distributor problem categories were identified. Unstable economic conditions was seen as the most pressing distributor problem. This can be observed in the high ratings given to “customer production and purchases are off” and “late payment by customers.” Seminar participants agreed with this, expressing apprehension over interest and inflation rates, customer plant closings, and government deficits. Intense competition among distributors was considered the second most important problem. Support for this statement can be furnished by: the high importance ratings given to “intense price competition” and “setting prices” and the number of write-ins for ‘ ‘unethical practices by competitors” and “too many distributors per trading area.” High sales call costs were viewed as an important problem by all distributors. During the discussions, distributors stated that the outside sales force traditionally generated most of their sales. With sales call costs rising rapidly, distributors find themselves forced to reformulate their selling practices. Employee productivity appears as the fourth most important problem for all distributors. “High labor costs” had one of the highest mean rating scores. “Employee productivity is low and their attitude toward work is poor” received the greatest number of write-in responses. These findings were reinforced in the discussions by distributors who stated it was difficult to find capable employees who would work hard at their jobs. Manufacturer-distributor working rela-

Problems I.

2. 3. 4. 5. 6. 7. 8. 9. 10. II.

12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.

customer purchases off intense price competition high interest rates late payment by customers customers switch distributors for slightly lower prices high cost of outside sales force high labor costs finding new employees manufacturer return policies training new employees motivating inside sales force manufacturer discounts too low dumping* by distributors keeping track of inventory keeping catalogs up-to-date setting prices slow delivery by suppliers data processing dumping by manufacturers competition from manufacturer owned distributors finding suppliers of new products pirating of employees by other distributors

Means’

95% Confidence Interval

5.86 5.68 5.47 5.17 5.13

20.28 kO.18 20.25 ‘k-o.22 k0.24

4.69 4.65 4.41 4.42 4.31 4.16 3.87 3.77 3.74 3.68 3.66 3.34 3.1 2.87 2.9

20.25 kO.27 20.25 k-o.27 20.19 20.20 20.25 20.22 20.24 20.24 20.23 20.24 20.25 20.22 to.22

2.78 2.38

20.26 k0.26

‘Rating scale used: I, not a problem to 7, very important problem. aDumping refers to the sale of product below full cost to eliminate inventory.

tionship problems represent the final common concern. This is mirrored in the high means for “manufacturer return policies” and “low discounts given by manufacturers.” “ Little assistance or cooperation from manufacturers” received many write-in comments. Discussions concluded that the biggest problem with manufacturers was unsatisfactory return policies; specifically as they dealt with the amount of annual product returns, product defect returns, and returns of discontinued products. Poor communication was attributed as the principal cause of manufacturer-distributor working relationship problems. Differences

Among

Distributors

Of the 22 problems listed in Table 4, only nine showed significant differences (at the (x = .05 level) in mean importance ratings when examined across distributor types. In those nine cases, Scheffe Multiple Comparison tests showed that general-line industrial supplies, bearing, and electronics distributors rated problems similarly. Chemical and construction equipment distributors did not 143

TABLE

5

Scheff6 multiple comparison

test results Means by Drstrlbutor

Type

Construction Problems High interest rate\ Customers Finding

awitch distributors

for slightly

Equipment

Electronics

5.07

4.52

6.451.

5.37

5.41

4.95

1.61

4.73 4.90”:

new cmployces

Motivating

Chemicals

lower pricca

new employees

Training

Bearrngs

the inside S&S force

3.X6

4.4x

3.72

4.04

4.61 :’

4.4Y”

3.64

3.33

4.56”

4.65>‘4,y2-” 3.6X

3.03

4.04

4.35

3.55”’

track of inventory

4.24”

3.25

3.18

4 I I ,+-

3.YY

Keeping

catalqa

3.70

3.65

2.95

4.19’.

2.74’;

I .Y7

I .94

2.63’-

4.09-’ 2.69%

Pirating

by distributors up-to-date

of employees

by other dtstributors

For each problem listed. means marked with an “*” the remaining

distributor

Line

5.44’.

Keeping

Dumping

wcrc found to be significantly

grcatcr tat the 01 = .OS level) than the menn\ for

types.

differ significantly (at the (Y = .05 level) on seven of those nine problems. (see Table 5.) Responses to the characteristics questions and seminar discussions revealed other differences among the five distributor types which stem from the nature of operations. These observations are now combined to form a brief descriptive profile of each distributor type. Gene&-line industrial supplies distributors handle the largest number of product lines, deal with the most manufacturers, and have the greatest number of employees per firm. Their problem ratings differ from the other distributors on employee and inventory management issues. For instance, general-line distributors rated problems of training new employees, motivating the inside sales force, pirating of employees by other distributors, keeping track of inventory, and keeping catalogues up-to-date, higher than chemical and construction equipment distributors did. They also rated customers switch distributors for slightly lower prices, as a more important problem than construction equipment distributors did. Beuring distributors are specialists; however, they carry many nonbearing lines. Product knowledge is key to sales success because personnel must recommend product substitutions regularly. As with general-line distributors, bearing firms rated finding new employees, motivating the inside sales force, pirating of employees by other distributors, and keeping track of inventory as more important than chemical and construction equipment distributors did. A unique situation in the bearing industry was described in the interviews. The quantity of bearings imported into the U.S. has increased in the past ten years giving rise to a new type of business, one which 144

4.09

General

imports large quantities of bearings and competes directly with domestic manufacturers. Although these firms match the traditional definition of distributors, they do not consider themselves distributors. Chemical distributors have the lowest percent of total assets invested in inventory. A greater investment must be made in storage tanks, delivery trucks, safety equipment, and drumming equipment because of the nature of chemicals. Product strategy is constrained by a limited number of container types: rail cars, tank trucks, drums, or pails. Compared to the other distributors studied, products sold by chemical distributors are more likely to be low unit gross margin and high turnover items. None of the problem rating means for chemical distributors were found to be significantly higher (at the cx = .05 level) than the means for the other types of distributors. Construction equipment distribution involves three businesses: new equipment sales, replacement parts sales, and repair work. For many firms, the second two businesses are the more lucrative. These distributors require considerable storage space, elaborate and expensive repair equipment, and a well-trained crew of mechanics. Construction equipment distributors carry the fewest basic product lines and hold the greatest number of products on consignment. These distributors rated high interest rates and dumping by other distributors (selling below full cost in order to reduce inventory) as more important problems than the other distributors. Electronics distributors are relatively new firms. Most have come into existence within the past 25 years. They are part of a highly profitable growth industry. Rapidly changing technologies and product obsolescence make this a high risk business. Distributors carry a broad selec-

tion of products because most components are highly specialized items. Compared to products sold by the other distributors, electronics components are more likely to be high unit gross margin and low turnover items. Electronics distributors rated finding new employees, motivating the inside sales training new employees, force, pirating of employees by other distributors, keeping track of inventory, and keeping catalogues up-todate, as more important than chemical and construction equipment distributors did. In summary, bearing, electronics, and general-line industrial distributors rated employee and inventory problems as more important than chemical and construction equipment distributors did. These differences are at-

pressed their greatest concerns over the unstable economic conditions. Although little can be done by either manufacturers or distributors to influence the economy, both can take steps to insure distributor survival during economic turbulence. The most basic way is to improve distributor management of working capital (i.e., inventory and accounts receivables). This can be accomplished through training seminars, financial planning assistance, and a concerted effort to keep distributor inventory and receivables at reasonable levels. A second buttress against the wiles of the economy is the development of strong, long-term working relationships between manufacturers and distributors. Such relationships develop from mutual respect, meaningful communications, and

Inventory return policies are a major manufacturer-distributor working relationship problem. tributed to the nature of the distributor businesses. Bearing, electronics, and general-line distributors more closely match the traditional notion of distributors; that is, they can be viewed as analagous to hardware stores in the consumer marketplace. Chemical distributors vary because of the physical nature of chemicals, the limited number of package sizes, fixed asset requirements, and high inventory turnover. Construction equipment distributors differ because of the importance of repair work and replacement part sales, the required investments in repair facilities, and the low turnover rate for original equipment. DISCUSSION Survey results were presented at three seminars on distribution. Inputs and comments from participants helped in the formulation of managerial implications and academic research topics. Managerial

Implications

Manufacturers and distributors can use the findings of this study to improve the performance of the distribution channels in which they participate. Distributors ex-

genuine concern over the other firm’s well-being. Sound working relationships reduce distributor’s apprehension about carrying inventory and encourage them to give added marketing effort to the manufacturer’s products. The distribution industry is marked by intense competition. To reduce the negative aspects of competition, distributors were encouraged by seminar participants to learn to compete on nonprice bases. This entails offering better services and a range of products targeted to particular market segments. Manufacturers can assist distributors to better compete in the marketplace by producing products that offer value to end users, providing reasonable discounts, and furnishing useful promotional support and co-op programs. Manufacturers can also minimize injurious competition by not franchising too many distributors per trading area. The study indicates that the high costs ofu sales cuff will make sales force productivity a key challenge for manufacturers and distributors during the next decade. Seminar participants predicted the following changes in selling practice: more limited use of the outside sales force, greater reliance on the inside sales force, an increased use of direct mail and merchandising techniques, and the restructuring of sales force compensation. Manu145

facturers and distributors can improve distributor sales force productivity by: introducing new selling techniques such as telemarketing, conducting more joint sales calls, and utilizing marketing research to a greater extent to target sales calls. Improving employee productivizy looms as a major task for distributor management. Two recommendations were offered during discussions to assist with this problem: increased employee training and incentive compensation. Training programs for distributors are especially needed in the area of product handling, selling, and employee motivation. The managers also believed that incentives (e.g., bonuses, commissions, and participation in decision-making) will play a more central role in employee compensation programs. Distributors described inventory return policies as the major manufacturer-distributor working relationship problem they faced. Distributors interviewed would like to see manufacturers clearly state and be more generous with their policies concerning the amount of inventory which can be returned annually, the return of defective products, and returns of discontinued products. Distributors also stated they would like to see the more extensive use of written sales agreements. In such contracts, the rights and responsibilities of both manufacturer and distributor would be spelled out. One final insight for manufacturers concerns subtle differences among types of distributors. The study pointed out that operational differences exist among the industrial distributors studied. The differences should be considered in the channel strategies of manufacturers who market through or plan to market through several types of industrial distributors.

INTENSE

Distribution is a very competitive industry because many of the products sold by distributors are commodities and because they must vie for sales not only with similar firms, but also with producers, manufacturers reps, and brokers. One observation made during the discussions was that distributors often forego premiums they could gain for the high level of service they offer. This suggests the need for a detailed reexamination of the value-added by industrial distributors and pricing practices. Among the questions to be resolved in such a study are: 1) What is the valueadded by industrial distributors to manufacturer offerings? 2) How can distributors determine the value of the services they offer to their customers? 3) What are the alternative pricing strategies and methods available to industrial distributors? and 4) How should distributors set service levels’? HIGH SALES CALL COSTS. With sales costs reaching prohibitive levels, a thorough study of the nature and function of the industrial sales force is required. Principal focus should be placed on methods to improve sales force productivity. Among the questions to be answered are: I ) How are current economic trends affecting the role of the industrial sales force? 2) What are the tasks now performed by the sales force ? 3) How are sales force tasks being allocated among inside and outside sales people. technical reps, and manufacturer reps? 4) How are sales forces being compensated? Such research would be invaluable to both manufacturers and distributors because it would assist them in the restructuring of their sales efforts. EMPLOYEE

Topics

The industrial distributor problems identified in this study can be employed to devise research topics for further academic channels research. Based upon discussions, research topics and questions are summarized for each major problem category. UNSTABLE ECONOMIC CONDITIONS. Industrial distributors are acutely sensitive to fluctuating inflation and interest rates and levels of customer production. Research on the impact of these factors on distribution channel performance is needed. Specific questions which should be addressed include: I) How should channel strategy be modified during times of economic turbulence? and 2) Under what economic conditions are industrial distributors the most appropriate distribution channel? 146

PRODUCTIVITY.

lems are not typically points

Research

COMPETITION.

Although

researched

employee

by marketers,

prob-

this study

to topics

for needed work. Discussions revealed that current times are witnessing a revolution in incentive systems. Many firms are experimenting with new incentives such as, bonuses based on completion of specific tasks and worker participation in decision-making. Research on incentive systems is called for to assist distributors in increasing employee productivity. A second area for research is the use of computers and electronic equipment. A basic question to be answered is: Has the use of computers and electronic devices improved employee productivity (especially as it applies to marketing)? MANUFAC?.UKEK-DIS~.KI~UTOK SHIPS. on

Although

behavioral

considerable

channel

WORKING research

was

RELATIONconducted

issues during the past decade, much remains to be done. A top priority is the development of a comprehensive framework to integrate pre-

vious findings. Seminar participants stated they would like to see research that would help them to better manage the working relationship. Other critical issues to be addressed are: 1) What factors lead to successful working relationships? 2) How do these factors interact? and 3) How can working relationships be improved over time? The study revealed a number MISCELLANEOUSTOPICS. of other topics for research. The first related to distributor marketing information systems. Distributors currently use the computer largely for transaction processing and inventory control. Tremendous work is needed to develop marketing information systems for distributors. Research in this area can contribute to the solution of two of distributors’ critical problems, intense competition and employee productivity. Finally, there is a need for a descriptive study of distributor industries. Although distributors were shown to be similar in most ways, subtle differences were detected. Research which documents differences and derives the strategic implications of those differences is needed.

strategy, the analysis of value-added by industrial distributors and pricing practices, a detailed study of changes in industrial sales force organization and functions, a review of incentive compensation systems, the determination of factors leading to successful manufacturer-distributor working relationships, and the development of distributor marketing information systems. REFERENCES I. Arthur Anderson, Inc., and 16-18.

2. Bowersox,

Changing business practices and academic research trends are revitalizing interest in the study of industrial distribution channels. This article sought to generate new topics for research through a survey of industrial distributor problems. Based on a study of five types of industrial distributors, common problems were identified. The top problem categories were: unstable economic conditions, intense competition, high sales call costs, employee productivity, and manufacturer-distributor working relationship problems. From the managerial perspective, the findings call for: improved distributor training in the areas of working capital management and marketing, a reevaluation of selling practices, new employee incentive systems, and long-term manufacturer-distributor working relationships. Finally, topics identified for academic channels research are: an examination of the impact of the economy on channel

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