4.3.4 Distributor integration
The integration of the firm's business process with that of an independent distributor is the other kind of partnership approach that is emerging as a new business model. Distributors form an essential link in the firm's marketing channel and are often the repository of vital market information. In the case of manufactured goods, distributors or dealers not only sell the product of the firm, but also perform vital functions like after sales service, financing and promotion.
The traditional role of the distributor is now being challenged, however, as competition in the marketplace requires greater service level and a quicker response time. A suboptimal performance by the distributor, like inadequate technical service or inventory stock out, would adversely affect the firm's brand image. The isolated way in which each distributor managed these critical issues is now giving way to new business models where a number of distributors, at the behest of the partner manufacturing firm, are linked in a horizontal alliance in order to share resources at times of crisis or shortage.
The concept is similar to the concept of risk pooling by retailers or warehouses at the same echelon. Both inventory and services can be made available over a number of distributor zones. As each distributor is usually an independent business, it is logical that there would be resistance in sharing resources unless an adequate compensation mechanism was worked out. Additionally, as this kind of arrangement would result in the concentration of certain expertise or resources at certain distributors, the fear of becoming a secondary distributor is also a legitimate concern for many distributors. The leadership of the 'brand owning' manufacturing firm will be tested in bringing a workable distributor integration to fruition. Refer again to Reading 8.4 for a description of Saturn's JMI programme which essentially works in this principle. Additionally see Example 6-16 in your text.
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