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> Out of change and chaos comes opportunity

Source: Electronics Representatives Association, The Representor Fall 2019, Executive Commentary

by Walter Tobin, ERA CEO
T: 617-901-4088

We have experienced change since the formation of the manufacturers’ rep model, the development and formalization of franchise agreements with distribution and the rise of a multitude of electronic component manufacturers.

Our industry is experiencing a lot of changes just since Aug. 1 — a new global distribution association is being formed, a major semiconductor manufacturer is terminating a global distributor, another semiconductor manufacturer is deciding to “go direct” and away from the rep model in almost all of its North American markets, etc. So much change in such a short amount of time, right?


When did our industry NOT experience change? We have experienced change since the formation of the manufacturers’ rep model, the development and formalization of franchise agreements with distribution and the rise of a multitude of electronic component manufacturers.

Distribution went through a tremendous consolidation beginning in 1980 with two major distributors acquiring over 50 other distributors over the next 30 years or so. Do you think consolidation in the channel is over? Not at all! There will be continued mergers and acquisitions (M&A) moving forward as distributors continue to move into new geographies and garner new franchises via acquisition … so stay tuned!

The manufacturers continue to go through tremendous merger activities in order to acquire new technologies via buying another manufacturer versus developing the technology internally. This merger activity allows for a quicker time-to-market timeline and a boost to shareholder value.

What about the reps? They are also experiencing their own M&A activities due to their desire for larger geographic territories or the desire to gain access to additional manufactures via buying another rep company versus trying to add manufacturers one at a time. Once again, time to market and a quick ROI is driving this activity.

But wait! Is there any downside to all this M&A activity? Of course.

The first impact is the toll that it has on the people — our fellow industry citizens. One of the main goals of any merger or acquisition is to try and capture the combined revenues of both organizations while eliminating the redundant expense. Sort of a nice antiseptic way of saying to lay off people.

Another area that needs to be sorted through is technology or manufacturer conflict. When a distributor acquires another distributor, there are manufacturers who will not “share the shelf” with one of their competitors. Thus, they may terminate the new combined company. Same is true when a manufacturer acquires another manufacturer. There may be a small/medium area of conflict that needs to be rationalized internally.

Manufacturer mergers have had a major impact on the manufacturers’ rep network. Manufacturer A buys manufacturer B; there is a rep “bake off” between the A’s rep and B’s rep; however, the manufacturer wants to choose rep A but they have manufacturer C that has a SMALL conflict with manufacture A. If the chosen rep wants to get/keep manufacturer A/B, they need to terminate manufacturer C – even if C represents a major source of revenue to them and the conflict is so small so to perhaps not even matter in that particular territory! So conflict has been a major product of all of this M&A activity.

Perhaps the biggest impact of the M&A activity has been on the customer. Does anyone even think of the impact on perhaps the most-important person in our industry? Our customers do not like surprises or change They like predictability and consistency. When a rep, distributor or manufacturer changes the sales/engineering coverage of a customer, it usually causes a near-long-term impact on the customer. Some customers work through the changes and in fact may become a stronger or more loyal customer to the new entity. Others may decide to “vote with their feet” and walk away to find a new manufacturer, rep or distributor. We should always keep in mind the impact on anything we are proposing to do on the customer.

So … where is the opportunity that comes out of all of this change and chaos?

It rests in your hands! It is up to YOU to lead your organization though this matrix of challenges. YOU need to continue to “skate where the puck is going” and stay ahead of change … continue to reinvent yourself and your company so YOU will be the winner in any of the M&A activity.

Do you have a strong hiring practice that allows you to continue to “restock the pond,” bringing tomorrow’s sales leaders into your organization? Do you have a formal succession plan in place?

A major way to remain relevant is by differentiating your rep company, distributor or manufacturer so the customer simply cannot afford to remove you from their supply chain. Reps can do this by providing a total solution to their customers’ needs through their manufacturers; provide design services via associated selling linking different technologies into a total solutions selling approach versus advocating one manufacturer at a time. Customers want to get total design help versus one socket at a time … be that rep who delivers this.

Distribution can differentiate themselves by developing unique product offerings; interconnect value added manufacturing, cable assembly, crystal programming, etc. They can also develop a strong design-in model either internally using their own FAE teams … OR … by partnering with the rep community and delivering total solutions selling to their mutual customers. Once the solution is designed in, the distributor can set up a strong supply chain model ensuring risk-mitigation and continuity of supply along with a best-in-class OTD and quality measurements. What good is the best engineering solution if the customer cannot get the product on time? After all, nothing happens until the product is shipped to the customer!

Bottom line: Do not sit back and wait for all this to blow over. It never has and never will. Learn to differentiate your company from your competition. Make it almost impossible for someone to eliminate you from their sales model.

Finally, keep the customer in your camp. At some point, a new organization will ask its customers who should be the new rep or distributor. You want them to pick YOU! This will only happen with lots of hard work and tough skating to where that puck is going … be there before your competition!

Skate away …

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Out of change and chaos comes opportunity

Winter 2017 Executive Commentary

Out of change and chaos comes opportunity

by Walter E. Tobin, ERA CEO
p: 617-901-4088

It’s time to cut the chains, to turn the page, to forgive and forget, and to recommit to work together as one team, rep and distributor, because it is what the manufacturer wants!

The election is over and now we can begin to go about a more normal daily existence while watching a new president take over the USA. Regardless of what your party affiliation is, at least the election is OVER!

Over the past few weeks, we have seen a major manufacturer eliminate its entire rep network and begin to rely solely on its “to-be-hired” direct sales teams and their channel.

We have also seen a major manufacturer eliminate its entire distribution support team, eliminating the ability for the distributors to do any demand creation, thus reducing the distribution margin to “fulfillment only” in 2017.

Mergers and buyouts continue on the semiconductor side with another major acquisition underway — immediately after this newly acquiring company has just swallowed another semiconductor company.

So what does this all mean to us and what can we do about it?

Frankly, not a lot, other than to continue to work hard to demonstrate our strong value proposition as a manufacturer, rep or distributor. It’s time to strut our stuff! Show ALL how we deliver a strong value proposition to the CUSTOMER on their behalf.

Someone once said, “If you get the customer into your tent, everyone else will follow!”

So how can each one of us work harder or better or smarter to get this done? Perhaps we cannot work any harder. After all, there are only so many hours in the day.

Can we work better? I am not sure. Can we do better territory planning, better pre-call planning, better overall preparation, more calls per day, etc.?

Can we work smarter? How so? Can we take advantage of better productivity tools, software enhancements to our daily lives in note taking to PC transformation, better use of YouTube videos on our websites, etc.?

One way to work smarter is to collaborate better with our new ERA member constituency — distribution.

Oh, I know that we have always been (or supposed to have been) working together — the reps and the distributors — but have we really? We often hear, “We are both competitors to each other! How does that work?” Competitors on a specific socket at a specific customer, for sure. On agreed-to customers and agreed-to sockets, however, we are PARTNERS. Together, we are stronger in front of the customer and in front of our common manufacturers.

It is time for us — reps and distributors — to unite, to stop being lone rangers trying to go it alone at the customer, to show the manufacturer who “has the juice” with the customer.

Who cares who gets the credit when a new design is won or a new order is booked? We WON IT, TOGETHER! Manufacturers should be thrilled that their reps and their distributors are working together, for this is the sales model that they have designed and one that they want to see work!

I know that this is not easy. Each one of us has an example of how someone violated the sacred trust of selling and took an order direct versus putting it through the partnered distributor. OR how a distributor ended up booking the socket in another competing supplier on its line card versus the rep’s line. We carry all of these transgressions around like the books around Jacob Marley’s neck, and we continue to bring them up as the reason why a rep will not work with a distributor or a distributor will not work with a rep.

Guess what? It’s time to cut the chains, to turn the page, to forgive and forget, and to recommit to WORK TOGETHER as one team, rep and distributor, because it is what the manufacturer wants!

All rep commissions and distribution margins come from the manufacturers. We get NO revenue from the customer. It is critical that we keep the manufacturers HAPPY by working hard TOGETHER to mutually hit the sales and marketing goals set out by them.

As Ben Franklin said, “We must, indeed, all hang together or, most assuredly, we shall all hang separately.”

Let’s commit that 2017 is the year of collaboration and create opportunity for our rep company and our distribution company for our common manufacturers out of the chaos that appears on the horizon. We have no other choice. We want to reduce or eliminate any more surprises in 2017!

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