The fear and conflict once part of ordinary business in the distribution channel emerges as commonplace in the manufacturing rep community today.
Some of us can remember the days not so long ago when there was an unwritten distribution rule of conflict avoidance: a distributor could not have three of the major semiconductors at that time on their line card all at once. This was perhaps to avoid product conflict and to garner sufficient share of mind from the distributor — or simply a means of controlling the channel.
Then, the rule became: no North American-based distributor could sign an "off-shore" [meant to cover any Asian] semiconductor supplier or risk being terminated by a North American semiconductor manufacturer. Then the rule was tested: A major distributor signed up an Asian semiconductor manufacturer to test the "rule" and was immediately terminated in nine branch offices by their major American semi manufacturer partner. It took this distributor many months to regain all of the branch franchises.
As distribution became consolidated over the last 20 years into the landscape that we have today, it became virtually impossible to comply with or to avoid either one of these two "rules." At the same time, the major distributors became stronger and more-powerful in the industry and less likely to be leveraged by a single manufacturer. Hence, the rules slowly vanished and disappeared forever.
Today, we now see consolidation happening at the supplier level. At a recent Rep Council meeting, we counted over twenty major acquisitions/mergers among the manufactures over the past five years. In the past 12 months, there have been a few blockbuster deals that no one really saw coming but that have resulted in the same old shelf-sharing and share of mind issues – but not inside of the distribution sector this time. It feels as if we are taking a trip right back to the future!
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