The American Veterinary Distributors Association would like to introduce you to the Power of D — the value distributors bring to the supply chain in the animal health industry. Some feel that consolidation at the distributor level has reduced the Power of D. Don’t be fooled.
Though distributors are fewer in number than in years past, the volume of products and dollars flowing through the channel is greater than ever. Here’s a reminder of how manufacturing companies benefit from the Power of D.
Sales and the Power of D
The true strength of the Power of D is in customer relationships. Without exception, veterinary practice relationships are the biggest asset a distributor brings to the supply chain. Getting your products to distributors exposes the veterinarian to a multitude of products that they might not otherwise see.
Distributors have bi-weekly contact with their veterinary practice customers. They build relationships that would be both difficult and very expensive for manufacturers to duplicate. Because of their closer relationships, the distributor representatives have a better understanding of veterinary practice needs and provide a level of service that is more focused on the veterinary practice.
In a recent survey of veterinary practices, decision makers were asked about their purchasing preferences, seven out of ten decision makers said they preferred to order from distributors, having them handle the entire transaction, including billing and shipping.i
Inventory and the Power of D
In addition to sales relationships, distributors add value by managing inventory. For manufacturers, that value manifests itself in terms of fewer shipments in larger quantities. Containing costs through consolidation is at the core of the distributor’s existence. It’s much more cost efficient for a manufacturer to send distributor five pallets of freight than to send 500 boxes to 500 different veterinary practices.
Veterinarians chose to work with distributors because they provide a larger selection of products from a variety of manufacturers and offer advice on what products will work best for their individual patient needs. They like the fact that distributors provide objective advice about particular products. This knowledge and expertise helps the manufacturer get their products in front of a larger number of veterinarians than they would have access to independently.ii
Cash Flow and the Power of D
Credit and collections factor into this equation as well. Because distributors shoulder this responsibility, manufacturers do not need the personnel, systems and equipment necessary to provide and track credit for thousands of businesses. Fewer, more reliable accounts mean reduced risk associated with financing receivables, while collecting on them sooner. Sharing the costs of inventory and distribution provides opportunities to control overhead and capital investment.
Most practices are ordering online from their distributor partners and rate the ease of ordering, tracking, inventory and billing as key factors in why they chose to work with a distributor.
Veterinarians also like the prompt delivery and ordering systems that distributors provide them along with flexible return policies and no requirements for minimum purchases that are often required by purchasing directly from manufacturers.iii
Veterinary Practices and the Power of D
A discussion of the Power of D is not complete without mentioning what it means to veterinarian practices. Distributors must justify their existence on both sides of the supply chain. Their services to veterinarians provide manufacturers with knowledgeable veterinarians and well-trained staff members able to effectively move products to the consumer (pet parents).
For veterinary practices, the Power of D includes:
Inventory Management. Veterinary practices can order quantities they can turn rather than ordering a six-month supply because of manufacturers’ minimums. This makes running lean and profitably a reality. Faster inventory turns lower buying costs and free up cash.
One-Stop-Shopping. The average distributor stocks more than 30,000 skus from more than 400 manufacturers. Veterinary Practices don’t have to spend time searching for products or ordering from dozens of different sources.
Storage Costs. Veterinary Practices don’t have to pay rent on space that is not generating revenue for them. Just-In-Time delivery gets them product when they need it so there’s no need for warehousing.
Market Information and Solutions. Distributors are in constant touch with market activities, trends and prices. They can offer advice and solutions on management issues and keep veterinary practices apprised of industry news and trends to help them run a better practice.
Merchandising. Distributors bring in point-of-purchase materials to help veterinary practices maximize sales and efficiently use their office space.
Regulatory Compliance. Distributors maintain a supply chain compliant with current federal and state regulations that pertain to handling products in accordance with many federal and state agencies, such as the DEA, FDA, EPA, and individual state Board of Pharmacies where they conduct business, to name a few. They bring knowledge and expertise to licensed veterinarians that help them maintain their own compliance when handling and selling regulated products to consumers.
Beyond the services is the bond between distributors and veterinary practices. Veterinary Practices know that their success means success for the distributor. There is a level of trust that comes from years of working together to ensure success.
Surveyed veterinary practices have more frequent visits (six or more times per year) from their distributor sales representatives than manufacturer representatives and felt they were better at understanding the unique needs and goals of their practices (80%). This provides for fewer hassles and headaches so the veterinarian can focus on running the practice and treating patients.iv
You Can’t Avoid the Cost
You can avoid the distributor, but you can’t avoid the costs that distribution absorbs on your behalf. Without a distribution network, you should be prepared to deal with small, fragmented shipments of product, your sales representatives competing among increasing numbers of direct sales reps, all fighting for less and less time with decision makers, as well as collection problems and transactional costs and rising customer expectations for fast delivery, product returns, and customer service. Are you equipped to be in thousands of veterinary practice locations, keep them stocked and get them product when they need it? Can you serve as a consultant and confidante on a broad spectrum of industry issues? Can you duplicate the bond that distributors and veterinarians share from years of mutually beneficial relationships?
In the end, distributors can do all of these things more efficiently and more economically. That’s the Power of D. Put it to work for you.
iVeterinary Product Distributors and Manufacturers: Executive Summary of a Survey on Preferences and Opinions of Purchasing Decision Makers in Veterinary Hospitals, The Wedewer Group and VetMedResearch.com, research sponsored by AVDA (2016)