Here are some tips when you are considering outsourcing your distribution.

CONSIDERATION: Marketing

OUTSOURCE WHEN:

• The market is fragmented / scattered and customers are difficult to find or to understand.

• Company lacks local market knowledge or access to local distribution.

• The company has only a few products.

• Most competitors sell indirectly and there is a good potential partner who has significant marketing expertise or virtual assistants in the industry.

• The company is still not well-known and established.

• Products are easily understood commodities – there’s no need for special explanation to customers.

• The selling cycle is short and orders per seller are typically small.

• It is not necessary to tightly control selling effort.

CONSIDERATION: Information

OUTSOURCE WHEN:

• Ongoing support activities are not important (i.e. technical support), and the company does not need customer information.

• Supply of product is assured.

• Monitoring sales performance is easier.

• Demand is predictable and the selling environment is stable.

• Short-term rewards are sufficient drivers of sales force behavior/

CONSIDERATION: Financial

OUTSOURCE WHEN:

• You want to control sales cost and minimize financial risk inadvertently caused by sales.

• The need for the sales force is temporary and inconsistent (i.e., if you are selling seasonal products).

• The threat of competitive substitution at the end of the distribution agreement is small.

• The company does not have a good billing and collective system in place.

WHAT ARE THE COMMON PROBLEMS IN OUTSOURCING DISTRIBUTION? HOW DO YOU PREVENT THEM?

Conflicts arise before the distribution agreement: during the implementation of the agreement; and after the distribution agreement has ended.

Essentially, the common problems of distribution agreements arise from unclear details of the agreement. Thus, to prevent these problems, it is best to discuss everything in detail and put everything on paper. Below are the common problems that occur that you can avoid by discussing and including in the distributorship agreement:

• Roles and responsibilities of both parties (be as explicit as possible to avoid misunderstandings)

• Procedures for all standard transactions (i.e., sales order, re-order, deliveries, returns, etc.)

• Procedure for extraordinary circumstances

• Joint planning procedures to consider the varying views of distributors and manufacturers to achieve the balance in effort some distributors want the manufacturer to promote the product more, while the manufacturer wants distributors to be less dependent on promotion and improve on selling skills

• Market information or business decisions to be shared with one another (i.e. competition, number of customers covered, customer behavior, etc.)

• Balance in Risk sharing, particularly in inventory management, ideal inventory level to satisfy demand, adjustment allowances

• Procedure to handle non-performance considering transition period allowance

• Procedure if either parties want to end the agreement, how handle remaining inventory, trade returns/receivables, etc.

It is very important to know the advantages and benefits of utilizing distribution channels. Find help from outsourcing companies, hire professional virtual assistant, lessen the load of your business and cut your cost expenses.