Few subjects revealed such a wide range of opinion as when Packaging World asked readers about the effect of Web-based purchasing on packaging distributors or sales agents.
The comments were solicited in a telemarketing survey of buyers of packaging conducted for PW by Frambach & Co. (Milford, NH) in January. Many of the survey results are reported in Net Sourcing, a supplement to PW that accompanies this April issue. The study is qualitative rather than statistical; it includes in-depth interviews with 50 purchasing executives from companies around the country.
The purchasing manager for a California juice producer sees Internet purchasing accelerating the consolidation of suppliers. “The giants will eat the little fish,” he said. “It will be more driven by price and Internet capabilities. Instead of using a local company, if the price is better out of [a company in] New York, you’ll order from New York.”
A buyer for a California winery sees it quite differently. “I don’t think it will affect our relationship with distributors at all,” she reported. “The Web sites will be used for order entry, but there will still be a need for discussions and conversations [about products] and to solve problems.”
This view of a limited use for Web sites is echoed by the purchasing manager for a Southwest food processor. “The distributors and agents will still come to see you,” he said. “The ordering process itself will just become more streamlined.”
Virtually those same words were used by the buyer at a Midwest pharmaceutical manufacturer. While he believes it will “streamline day-to-day operations,” he said it won’t eliminate the need for human interaction. “People will still need to talk about processes and materials,” he stated. Another respondent felt Web purchasing will have other benefits. “It sort of completes the loop by adding inventory tracking,” said a buyer for a Midwest chemical manufacturer. “Most distributors feel positive about it. I think Internet buying will firm up our relationship with our distributors,” he added.
Another purchasing executive’s opinion had a community perspective. “We have such a good relationship with our distributors that I’d hate to see that change,” said this purchasing manager for a Midwest soft drink bottler. “It’s in the company’s interest to work within our community.”
A buyer with a Southern bakery company represented the response of many in the survey. “It will be interesting,” he said. “It could mean you would never see a person. But I don’t think that will happen because face-to-face contact is important and both sides want the reassurance that brings.”
A number of respondents expect Web purchasing to adversely affect manufacturers’ relationships with local distributors or with suppliers’ sales agents. “There will be less need for them to come in,” pointed out a buyer for a Midwest distilling company. Local purchasing, he said, is often done by the maintenance department, “and most large companies would like to curtail that and direct it through purchasing instead.”
Another predicted the loss of personal contact with local representatives, if buying converts to the Web. “I think it would nearly eliminate the relationship because communications would be all online. I don’t think that would be a benefit at all,” reported the purchasing manager for a Midwest food processor.
An even more dire prediction came from a buyer at a Midwest food ingredients manufacturer. “As more and more companies [do business] on the Internet, it will bring the death of small distributorships,” he said. He compared it to automobile purchasing. “More people will buy cars on the Internet and more dealerships will close. I think the same thing will happen to the small distributors.”
Sales representatives could become an endangered species, said the purchasing manager at an Eastern supermarket company. “Companies that offer online buying will cut back on their sales representatives,” he predicted. “Although there may be some pricing advantages, it will be detrimental long-term.” A Northeast purchasing agent for a major food retailer agreed. “I think Web purchasing would really take sales reps and distributors right out of the picture,” he said.
The senior vice president of purchasing for a national bakery headquartered in the Midwest expects the elimination of middlemen like distributors to generate the kinds of savings that will become irresistible. “The main reason to do electronic purchasing is to cut costs. That will mean bypassing local distributors and local suppliers to get those savings.”
It was obvious that many respondents had already given some thought to Web purchasing and how it would affect vendor relationships. A few of them thought that the functions that distributors and sales agents perform could be changed in the future with Internet buying, but not totally eliminated.
The purchasing manager for an Eastern meat packer admitted there will be “less need for sales reps in their traditional roles” because of Internet buying. “Their roles in the purchasing process may need to be modified,” she added. The
purchasing manager of a Northeast nutrition supplement maker agreed. “Internet procurement will exclude the sales reps. Or their role will need to change from order taker to account manager,” he stated.
The senior buyer at an Eastern pharmaceutical company agreed. “Distributors that truly provide value won’t be adversely affected,” he said. “Those that are technically oriented and provide extra value won’t see business diminish. But others will.”
The national purchasing manager for a Midwest food processor also predicted a changing role for sales reps. “Sales people will need to double as technical advisors or administrators. Their traditional [functions] will need to be expanded,” he said.
Finally, the purchasing manager for a food processor in the South saw the issue in human and personal terms. Face-to-face contact, she said, allows a buyer to “develop a sense of understanding and trust. And that will suffer when everything is done from behind a screen. Ordering from a vendor you know is one thing. Buying online from a company you don’t have a relationship with [is something] I’d be very skeptical about.”
In a lighter vein, the purchasing manager for a pasta maker in the Plains states sees a personal loss. While he sees some eventual savings in minimizing the role of sales reps in online purchasing, he lamented, “I won’t get to go to dinner as much though!”