The real 'hygiene factors'

Following on from last month's column about deliveries, stockholding and pricing being considered 'hygiene factors' for successful distribution companies, ACT's Anton Herbst asks whether they are, in fact, the 'hygiene factors' or if they should rather be considered the value-added services.

'Hygiene factors' are generally regarded as the entry-level service that an organisation provides for its customers.

As such, in the vast majority of markets the world over, they are the bare minimum requirement a customer has for doing business with one of its suppliers.

On account of that, the distribution game is all about providing a wide range of stock items to a reseller base at an affordable cost. Delivery, stockholding and competitive pricing have been tagged as 'hygiene factors'.

In order for them to be considered 'hygiene factors', however, they need to be universally available across the market, regardless of which distributor the reseller is dealing with.

Nevertheless, they're not: a quick look at the differentiators, even if only the consumables marketplace is polled, will reveal that not all of the distributors in South Africa offer the same services at the same level in each realm.

The majority of distribution players comply with the 'basic requirements' to a varying degree.

Where some offer very affordable prices, they seldom offer nationwide (and free) deliveries, nor can they be relied on to always have stock available. The same is true in reverse - where there are only a handful of distributors capable of meeting customers' 'dream' delivery and stockholding requirements, that almost always comes with some cost trade-off.

So the 'hygiene factors' or entry-level services so often taken for granted, aren't 'hygiene factors' at all. I would say they're in fact the value-added services - since it seems they are the primary reason some resellers are particular about which distributors they deal with.

The 'entry-level' for distribution is not decent delivery, stockholding and costing, it is honesty, integrity and sound business practice; a good quality workforce; sound information resources (such as ample advice, training and communication systems); and lastly, a comprehensive product range.

In many ways, these are the things that count in any business - in fact, they fall squarely under the banner of 'running a good business'.

I therefore believe these are the true 'hygiene factors'.

Even if a distributor was to offer the best delivery service, pricing and most comprehensive product range available, it would struggle to find customers if it had a reputation for insincerity, unethical behaviour, an incompetent staff body and zero communication with its customers.

Interestingly enough, the distributors that have focused on 'running a first-rate business' are those that are regarded as the South African industry's favourites.

By establishing sound business practices from the word 'go', they've been able to entrench solid business values in all of their employees and ensure their delivery, stockholding and pricing structures are the value-adds.

It's an interesting contrast from what is the norm in the international market and it won't always remain this way.

The South African distribution space will undoubtedly mature over the coming years, whether it's through existing players becoming more sophisticated or through international players bringing sophistication into the market with them.

Only when this happens, however, will the norm shift.

When no differential exists between the different players' delivery, stock and pricing strategies, other things will begin to matter and the 'hygiene factors', like the international market, will become what the market today believes them to be - deliveries, cost and stock.