Private Label – Distributor Requirements
There are three essential requirements for any distributor to be assigned an authorized geographic sales territory. These requirements have been found to be the keys to a successful partnership and sales building program for the product line. Buchanan Group can provide assistance in developing any one of these requirements should the prospective distributor desire input, training or referrals to develop this side of their business initiative.
A. Each distributor would be assigned a desired geographic territory in which they will market and sell Private Label products. The key to developing a viable customer base of funeral homes is to provide assurance that product will be available for immediate delivery at all times. In order to provide this assurance, distributors will be required to maintain an appropriate level of Private Label product inventory in their warehouses. The inventory levels need to take into account the lead time delivery from either the Chinese vendors or from one of the Private Label master warehouses.
B. It is recommended that distributors maintain a minimum of three to four units deep of every Core Line model in their warehouses. The business levels in each territory need to be monitored to determine the appropriate inventory levels in each territory. Buchanan Group can provide assistance in analyzing and developing an inventory re-order procedure that assures a high likelihood of available inventory for your customers.
C. It will also be important for an ongoing analysis of demand as there may be a need to stock non-Core Line product in your inventory. All distributors need to keep in mind that Buchanan Group will stock only Core Line product models in the master warehouses. Non-Core Line product needs to be ordered on full containers, or can be purchased with a shared Buchanan Group container.
2. Sales Force
A. It is expected that all distributors will hire and maintain an active sales force that is supporting the customer base. Preferably, this sales force is assigned exclusively to sell to and support Private Label product customers. However, this can be adjusted depending on the size of the territory and market potential.
B. Private Label will provide all of the necessary training and orientation for the sales force on the product line, pricing parameters and general customer service. Support is also available to work at local or regional trade shows.
C. Private Label will also provide assistance in identifying viable candidates, recruiting and hiring qualified sales personnel. Our history and experience has provided a good understanding of the types of sales personnel that would be most conducive to the business and would be most successful.
3. Financial Capability – Inventory
A. Distributors and funeral home customers who enter the business can expect to reap financial results fairly quickly. As mentioned above, the key to success if having the appropriate level of inventory in stock in order to service the customer base. Funeral homes expect product delivery very quickly and on a regular basis. Inventory will be the most important asset the distributor will have. To that end, the distributor needs to have the financial capabilities to purchase and maintain an appropriate level of inventory.
B. Normally, it is recommended that initial purchases of a full truckload of 72 units be entered. This will require an investment of $25,000 to $30,000. The terms on these type of purchases require a 50% deposit at time of order placement and the balance due in 30 days.
C. For those distributors buying containers to be shipped direct from the manufacturer (pricing advantages accrue on these purchases), the full amount of the purchase is due prior to the product being delivered. These distributors need to keep in mind that the lead time on container purchases are 75-90 days. Further, not only should there be a purchase of the initial container (s), but in order to maintain an active and rolling inventory, the distributor needs to enter orders on a monthly basis in order to avoid stock-outs. Private Label administration can provide assistance in designing an inventory program that services the needs of the distributor.
D. Generally, for a distributor who intends to sell approximately 50-60 units per month, an investment of $120,000 should be planned. This would cover the cost of inventory as well as the cost of warehousing. Again, Buchanan Group an provide assistance in analyzing the desired business model and determining financing options.
4. Other Requirements
A. Efficiency of operation is key to the success of the distributor operations. This means having a good order entry, product purchasing and product delivery process.
i. Distributors should make sure to have a good customer service/order entry and processing system. Funeral homes will order product at any time of the day, seven days a week. It is the standard in the business. Customers need to be assured that their order will be taken and promptly processes. Voice mail and email can be helpful, but experience tells us that direct contact to confirm casket orders is essential.
ii. Distributors will need to have an inventory management system that provides the information to plan product purchases and inventory replenishment. Due to the lead times on most products, purchasing in advance will be the standard purchasing method. Since on-time inventory is the key to success, closing inventory monitory will be an absolute necessity. Stock-outs will adversely affect business trends. Distributors can be assured Private Label will provide back-up inventory support on all Core Line product. Beyond that, the distributor needs to plan adequately.
iii. Distributors need to establish a suitable delivery structure. This may be in the form of a sprinter van or some delivery vehicle that can service the territory. It is recommended that a vehicle that can deliver up to four units be considered.
B. Accounts Receivable – It is expected that distributors will have system that would be used for billing of all sales. Be aware that the purchase of a casket from a funeral home will be used almost immediately. Traditionally, funeral homes are paid by their customers within a short time frame. As such, distributors should ensure payment from their customers within a maximum of 10-15 days. Whenever possible, payments should be expected at time of delivery.
C. Pricing – Distributors will need to complete a market study in the territories serviced in order to set a benchmark on how to price their product to the funeral homes. Selling prices need to cover not only the product cost plus an adequate level of profit, but distributors need to factor the costs of inventory carrying costs, customer service, warehousing, delivery, etc. Private Label can provide assistance on conducting this analysis.