It seems that dealers and distributors tend to come up in economic conversation whenever the subject of “getting rid of the middleman” surfaces. With a sales value of $2.8 trillion in the U.S. economy alone, we know distribution remains big, but it still gets less attention than manufacturing or retailing in management journals. For example, Fortune's 2003 feature on “Global All-Stars” didn't include a category for distributors or dealers.
Yet despite this lack of attention, we know this: Whoever thought they were “getting rid of the middleman” failed to do a very good job. Why is this true in home building? Dealers and distributors play an essential role in the fragmented, complex home building supply chain. Considering this proposition, I'm using this column to set the stage for a series of future articles that will focus on strategies for building a successful distribution business in the dynamic home building industry. It is quite possible to remain a profitable, growing dealer or distributor despite the sometimes fierce pressures from manufacturers, larger end-customer builders, and competitors. But it takes more than size, hard work, a sales campaign, or even deep supplier relationships.
Rather, success will come from focusing on one of three distinct strategic roles for dealers or distributors, and providing new services to customers and suppliers by leveraging the Internet and using innovative concepts of collaboration and coordination.
In short, the “middleman” is here to stay in home building because supplier, trade contractor, and builder fragmentation remains high, a wide variety of products and information are required to build homes, and new segments of potential customers are emerging that open up opportunities for dealers or distributors to add value in the supply chain. —Symbius Corp. (www.symbius.com) is a leading supply chain management consulting firm for the home building industry. The second installment in this series, appearing in June, will focus on three business models that dealers and distributors can use to improve business value.