Following the previous post, today we will be discussing 3 common problems encountered by suppliers when dealing with distributors:
- Lack of commitment towards timeline
- Time is money. Whenever a timeline is given to feedback about a product, we should honour the timeline unless there are some unforeseen circumstances. Often, suppliers get email commitment from distributors about internal assessment on a product. However when the timeline is approaching, no feedback is received, this is deem as a “not interested” response. Mutual respect is important in a business relationship. If the product is not of any interest to the company, distributors should at least have the courtesy to outrightly reject the supplier so that they can go ahead to get in contact with other partners that might be suitable for the portfolio. There are also instances where distributors did a good job by rejecting openly and recommended some other suitable partners for the product.
- Not being transparent about the intention from the start with regards to the information shared
- Upon signing a Non-disclosure agreement (NDA), confidential information including but not limited to formulation, manufacturing process and prices are exchanged for a favourable transaction after a detailed market research. There are instances where the shared formulation was “stolen” in a sense that it was patented under a different brand name in a local market without consulting the Principal. Another example is using the shared formulation to to manufacture a similar product which was initially shared so that they can check with local authority on the classification and registration route. It can be a upsetting situation which will cause mistrust and breach of agreement in which it will affect future collaboration and result in a more skewed agreement to protect one’s interest against the other.
- Playing “Disappearing” game
- Standing in the position of suppliers, we all get annoyed when there is no response and follow up concerning the next step which is usually registration of the product and placing the first Purchase Order. After one or two months of follow up, the distributors decided that it is no longer favourable for them and decided to disappear . It not only waste time but also the resources provided to support the distributors in obtaining the marketing authorization for the local market. In turn, the supplier has to start all over again to negotiate a new deal when the non interest could be communicated much earlier.
The supplier and distributor relationship does not always have to be a win-lose situation. By being open about the obstacles and feedback from both sides will help a lot in hastening the discussion of the commercial terms in the agreement as well as the marketing plans for the product.
The Reg Consultants Pte Ltd specializes in assisting companies to look for suitable partners/ support in mediating any commercial issues as a neutral party. We offer to register the products on a independent basis hence minimizing any ambiguity or power struggle between the two parties so that they can better focus on commerizling and obtaining more market share. Do come and chat with us for a non-obligated discussion for some insights.