The Representor - Fall 2007

From the Top
Answering demands by a mega-customer
by Dave Rossi
Empire Technology Group, Skaneateles, New York, ERA President

In mid-August, a major customer (let's call the company XYZ) exerted pressure on its key suppliers to eliminate their rep sales relationships in favor of factory-direct personnel. XYZ sent a cryptic e-mail to its suppliers, lauding the suppliers' important contributions to XYZ's admirable supply chain performance, only to then ask the suppliers to develop and present a direct sales model alternative. The suppliers were asked to respond within two weeks and to be ready to make the transition by year's end.

Obviously, this communication generated major concerns among those suppliers and their reps. ERA's first notification of this issue came from a member rep firm.

As has been the case in the past when this type of pressure is applied by a mega-customer, ERA gathered information from reps and principals. When sufficient information had been gathered, our CEO, Tom Shanahan, wrote a letter to the XYZ executives who were identified (by someone within XYZ) as the appropriate contacts. The letter respectfully emphasized the benefits reps provide to both customers and suppliers and reminded the recipients that XYZ had itself successfully used reps to sell its products. The letter also requested a meeting with XYZ executives to allay any concerns about their suppliers' continued reliance on reps to serve the XYZ account.

During the last two weeks of August, ERA reps received a copy of that letter plus several updates on the status of this situation. Our reps also were sent resource material to be provided to any principals who needed support responding to XYZ's request for a direct sales model.

(NOTE: For some years, we have encouraged reps and manufacturers facing similar challenges to use the many resource materials available on a CD titled, Outsourced Field Sales: Adding Value for the Customer. It was developed by ERA and published by our Manufacturers' Representatives Educational Research Foundation [MRERF] to serve as an aid to both reps and manufacturers facing questions from customers about the value of reps and the reasons manufacturers sell through reps.)

We subsequently learned that no one from XYZ would be responding to Tom's letter because the decision had been made to call in the company's key suppliers, one at a time, for meetings in which each supplier would be given the opportunity to "justify" its continued use of reps. We were asked by reps directly involved in this chain of events to discontinue our efforts to arrange a meeting with XYZ executives, and we honored that request.

As this issue of The Representor goes to press, we know of one manufacturer that agreed to XYZ's demand for a direct sales relationship, but that was because the supplier was already making a transition to a direct staff to work with XYZ before the initial request was ever made. We also know of one major supplier that defended its use of reps and is continuing its relationship with XYZ as it was. We trust that other suppliers are being equally successful in their efforts to continue their rep partnerships with XYZ, and we remain ready and able to assist any company that asks for our support.

On a final note: The XYZ request to suppliers to develop a direct sales model included, as one justification, the statement that such a move would "limit the potential for confidentiality breaches." The inference is that reps present a confidentiality risk, and on behalf of every rep in ERA, we must strenuously object to that implied characterization.

If there were a comprehensive study conducted on sales personnel stability and information sensitivity, we are confident that reps would, in most cases, be proven to be both more stable and more information-sensitive when compared to factory-direct personnel. The difference is that reps are not striving to be promoted and transferred out of our territory. Hey, our territory is our home!

Confidentiality breaches are unethical and a violation of the non-disclosure agreements (NDAs) between customers and the suppliers and/or reps doing business with them. As professional reps, we do not and can not tolerate breaches of confidentiality, and ERA's Code of Ethics is clear about our responsibility, stating: "Representatives will respect the confidentiality entrusted to them by principals, distributors, customers and fellow representatives."

ERA reps and our legal counsel, Gerry Newman, are reporting significant interest right now regarding NDAs, and that is why Gerry is developing a program session on this subject for our 2008 ERA Conference. Let's use that opportunity to have an open dialogue between reps and manufacturers about our mutual and moral obligations. The outcomes can only help us all better protect our customers and each other.

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2007 Electronics Representatives Association (ERA), Chicago, IL 60611
Originally printed in the Fall 2007 issue of The Representor
Cannot be reprinted without the permission of the Electronics Representatives Association (ERA)