Industrial buyers are, on the surface, very satisfied with the performance of their distributor suppliers. Sixty-seven percent of respondents to PURCHASING's 2002 comprehensive survey on distributor performance rate overall distributor service levels as either good or excellent. This represents a slight improvement from 2000 when 66% rated distributor performance as either good or excellent and a big improvement from 1996 when only 48% provided similarly positive performance ratings for their distributor suppliers.

Meantime, 58% percent of respondents to the 2002 survey rank distributor performance as equal to that of their manufacturer suppliers while a surprising 35% credit their distributor suppliers with higher overall performance than they give to their manufacturing suppliers.

But along with generally good ratings for distributor suppliers, respondents to PURCHASING's survey convey—in their scoring, their written remarks and through follow-up telephone interviews—a distinct undertone of dissatisfaction as well.

Telephone interviews with several scores of purchasing executives find many buying execs giving high marks to distributors for efficient order fulfillment, helping customers reduce inventory costs, and providing help in shortening order leadtimes. But for every purchasing executive who gives highly favorable reviews to his or her distributors for e-commerce capabilities, PURCHASING finds another saying the exact opposite. A similar dichotomy of opinion appears in how buying executives rate distributors' abilities to understand critical cost issues.

Along with all the good things purchasing executives have to say about their distributor suppliers, many also complain about things like inexplicable price increases, poor availability due to deep inventory reductions during the recession, rising numbers of delivery snafus, lack of technical assistance, botched communications, and unacceptable damage to goods.

The objects of these complaints are very often smaller-sized distributor suppliers.

To be fair to distributors, it's important to note that buying executives appear to have changed some of their supplier selection priorities (see charts on this page), which may be a function of the recent economic slowdown. Since 1999, for example, price, e-commerce capability, and total cost have all moved up in the rankings of what buyers want from their distributor suppliers. At the same time, quality has dropped a bit as a priority while availability and on-time delivery have remained unchanged.

So, does this mean the recent dive in the country's economic readings has triggered lasting changes in what buyers want from their distributor suppliers? Some answers to this question will undoubtedly begin to surface over the next 12-18 months. Meanwhile, purchasing professionals all along the supply chain will be monitoring the following areas of dissatisfaction:

• Prices. Distributor pricing is attracting the greatest amount of attention from buying executives these days. When manufacturers'prices are falling, purchasers say they rarely see pass-through reductions from distributors, especially for nonproduction items, where distributors'pricing tends to be more rigid than that of manufacturers during periods of economic change. When manufacturers'prices rise, however, buyers say their distributors can be quick to pass along hikes to their customers.
  
  The result, according to many of the purchasing execs interviewed by PURCHASING, is a serious cost squeeze for customers. For example, many, like Ron Biggs, purchasing manager at Tweco Products in Wichita, complain bitterly about the "quick pass-on of price increases," by distributors. "I don't know whether they're unable or unwilling to fight price increases," says the buyer for a small valve maker in Houston, but "it's been open season for the past few months." On many items, says the president of a small New Jersey-based electronics firm, "price and availability have nagged at us all year, forcing us into a serious cost squeeze."
  Many purchasing managers go a step further, suggesting their distributor suppliers are simply not fighting hard enough to keep manufacturers'prices in line.
  
  In a fair number of instances buyers suggest that most of the pricing problems they are facing fall into the leverage category—big companies fight price hikes, small companies don't have the clout and don't try. According to a purchasing manager at a pump maker in Mansfield, Ohio, her biggest problem with distributors is "they are not manufacturers. We can oppose manufacturers'price increases and often we win these battles. But distributors—especially small ones—are another story. They'll usually pass price increases along to us and tell us they can't do anything about it."
• Availability. The assistant administrator for an Ohio transportation company is like many other purchasing executives who complain about recent back ordering. "With business down, I expect fast service. Instead, many distributors seem to be reducing their inventories." The materials manager for a New England toolmaker suggests that availability problems are spilling over into a number of supply management areas—for example, "inventory, minimum quality standards, returned products, and newly imposed shipping charges."
• Delivery. Missed and late deliveries seem to be nagging buyers in many parts of the country. "[Distributors] need to meet delivery dates better," says the manager of information technology and materials contracts at Bechtel Bettis Inc. A fair number of buyers indicate that the number of missed and badly handled deliveries has been edging upward since the summer of 2001. A purchasing agent at Hamer Inc., for in-stance, reports times when distributor personnel appear to be either mishandling information about time of delivery or failing to ac-knowledge some purchase orders.
• Technical assistance. "Invariably I have to call manufacturers for real help—especially on steel products," says the purchasing agent for a roller producing company in northern Illinois.
  "In many cases it's a simple matter of poor communication from manufacturer to distributor, to end user," suggests Michael Burrell, who is a sourcing manager for Marconi Communications in Welcome, N.C. Nevertheless, suggest Burrell and many other buyers surveyed, lack of technical assistance appears to be a growing problem in their distributor dealings.
  
  In many cases, say buyers, the problem can be traced to the tight labor market at the height of the economic recovery in 1999-2000. Good sales help got hired away and many dictributor firms found themselves unable to train replacements fast enough. In many distributorships trained sales help is still at a premium.
  Still, a number of buyers say they are not so sure the lack of knowledgeable sales help is the result of unplanned circumstances. For instance, the purchasing agent at a Minneapolis capital equipment maker suggests that some distributors who once provided large amounts of technical assistance free—or at relatively low cost—are now selling their product knowledge.
• Communication. For many purchasing executives, the biggest problem area in dealing with distributors is more a matter of communication than technical assistance. Thomas C. Atwell, president of Chemical Products Co. in North Warren, Pa., for instance, has "simple wants...I want what I ordered, I don't want last minute substitutions." He feels that distributors could help by keeping him "informed on pricing of raw materials and delivery schedules."
• Damage. Compared with past years, minimization of damaged shipments has shown significant improvement in recent years, according to Purchasing's 2002 survey on distributor performance. Still many buyers list damage, returns, and getting the right kind of special packaging among the biggest problems they have in dealing with distributors. A number of buyers complain that despite long-term improvement in distributors'damage control procdures, there has been a sharp increase in damage problems since the fall of 2000.
• Cost control. Purchasing execs complain also that distributors are not doing enough to hold the line on costs. The purchasing manager for a Massachusetts capital equipment company, for instance, cites "poorly trained inside sales contacts, inadequate order processing systems, terrible phone systems, and lack of customer skills," for recent poor showings in controlling costs related to buying from distributors.