Trust Issues Part 2 - Trust Me Maybe

Two Execs – One A Supplier, The Other A Distributor – Give Their Unfiltered Opinions

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What are the biggest reasons there's mistrust between ad specialty companies? Two execs – one a supplier, the other a distributor – give their unfiltered opinions. Plus, a business expert addresses some of the industry's trust issues and offers solutions.

More Than About Money

Bonni Shevin-Sandi

The division between suppliers and distributors is becoming functionally tenuous. As the lines blur, I think there's a real concern that one will make the other superfluous. I believe the current culture of mistrust has been shaped by factors outside the industry which have changed operations and misaligned incentives.

Cost & Interests. Our industry is experiencing changes in values and procedures. Customers are increasingly emphasizing the exclusivity of cost, and technology makes it possible to independently source and contact the lowest bidder. Suppliers and distributors are direct competitors. Incentives to circumvent traditional procedure, I believe, have created a significant principal-agent problem.

This problem occurs when one party – the agent – is employed by the principal, but may act contrary to his/her own interests, creating a moral hazard. Suppliers (the agents) and distributors (the principals) don't always wind up having the same goals and resource costs aren't equal. The creative process, factory relationships and safety assurances, for example, are measures that we, as suppliers, undertake to make sure that the product provided is the best possible. That effort is not always rewarded.

Stolen Designs. Often, in fact, effort is undermined by miscommunication or incomplete sales. The supplier is circumvented and the distributor benefits. When I go to a partner factory and see distributor names on boxes for products I advised on, I think there's reason for tension. I've seen items I have designed for distributors for a launch being manufactured by an opposing supplier or by the distributors themselves. Immediately, the partnership and trust is gone between my company and the distributor.

A Different Way To Deal. I think the way to improve trust is twofold. First, our industry should approach supplier and distributor relationships as partnerships. Also, our industry needs to address the definition of our total value proposition by reiterating that the bottom line is not the only component to consider. Experience and creativity are features that may have a higher cost, but produce a better product.

– Bonni Shevin-Sandy is the vice president of Dard Products (asi/48500) and the president of DDI International.

Why Can't We Work Together?

David Tate

Mistrust is an effect and it's being caused by both suppliers and distributors. We must focus on our belief system to change things. What do I see as the key problems? There are four.

Ineffective Communication. This is probably the largest cause of mistrust. Show me an issue and I can guarantee you that poor communication will be a huge factor, maybe the only factor.

No Collaboration. Our industry model appears to be sell-buy on the surface, but is really a collaborate-buy model. Too many companies fail to see this. How many sales are made to end-user customers without any collaboration with the very supplier who will make and deliver the products? The demands of a distributor can be so anti-collaborative that the supplier is immediately put into an adversarial position. Likewise, the supplier may have some circumstances that will prevent its staff from meeting distributor expectations. These circumstances would've been known in advance had there been some collaboration.

Distortions & Unprofessionalism. Suppliers too often misrepresent their stock positions or their capabilities and delivery times. Even when things seem to be perfect with an order, suppliers let their shipping departments screw it up because they don't have the same quality control processes for them. I frequently wonder, too, why suppliers inform distributors of a stock outage just as the order is supposed to print and ship. Accountability is lost, too. Sometimes suppliers miss critical delivery dates with no explanation and state products are CPSIA- compliant with no proof or documentation.

Distributors aren't free of blame either. They're too often guilty of placing unclear and inaccurate orders, making unreasonable demands, not following through and paying slowly. Finally, I think some suppliers and distributors don't do a good enough job of controlling their employees. Many trust problems are caused when individuals within organizations take their own approach to things that are not in line with what their company represents.

No Relationship. What does it all come down to? It's about partnerships. Mistrust is most prevalent when the distributor and supplier have not built a relationship. Period.

– David Tate is the president of Signet (asi/326636).

Break Down Barriers of Distrust

A consultant provides advice for how distributors and suppliers can positively work together.

Years of personal research have convinced Dave Horsager of one key point: A lack of trust is a company's biggest expense. "When trust goes down, costs go up," he says. As he's studied how businesspeople interact, Horsager has developed eight principles – he calls them pillars – that can build and restore trust. He applies some of them here to try to solve the issues mentioned in the essays above.

Set better expectations. Companies don't fail to communicate on purpose. Instead, salespeople and reps let ambiguity creep in and win out. "This is exactly why the pillar of clarity is so important," says Horsager, author of The Trust Edge. "If there are clear and specific expectations, a clear vision for how something will get done and a clear plan for follow- up, you'll have trust."

Going direct. If a company is breaking unwritten rules to increase profits, Horsager thinks the long-term damage will outweigh the short-term benefits. But it's not your role to be the police. Instead, put your energy into being the trust leader in whatever your niche is. "People will pay more for the trusted brand," he says. "It's way more important to be trusted than to be liked."

What do you do, though, if you've already lost trust because you've gone direct? "If you want to rebuild trust, make and keep a new commitment," he says. "Commitment is a huge problem for people, so it's a key pillar. Remember, don't apologize and think that fixes things. It's like saying ‘Sorry I'm late.' No, you're not sorry. If you meant it, you wouldn't have been late."

Ripping off creative ideas. If competitors or clients are stealing your designs, you have to confront them about it because this is at the core of distrust. It will linger and fester if you don't bring it up, making the trust levels deteriorate even further over time. "You can explain to them that they're going to incur relationship costs," Horsager says. "If you cut them off, it's going to take them a lot more time to do things in the future, which can have an effect."

Rogue employees. Do you have a few employees who cut corners or deceive clients and coworkers? The first thing you should do is "coach them up" and communicate to them directly how you expect them to act. If that doesn't work, Horsager advises showing compassion to the rest of your staff and your customers by firing the troublemaker. "I believe people can and do change," he says, "but sometimes the most compassionate thing you can do is just let them go."

>> Part 3: The Seamy Side of Business