The components distribution business is filled with acronyms, euphemisms, and other means of expression that people outside the industry might find odd. I've even thought that a drinking game could easily be built around an acronym challenge: Deliver a new acronym in a timely manner, or cite the meaning of one. If you fail, you take a shot.
Maybe I'll find some willing participants at the Electronics Distribution Show. For now, I have a word in mind: “rationalization.” This word, when used in conjunction with “distributor,” forms a euphemism for the termination of an authorized relationship between supplier and distributor.
It certainly seems less offensive to speak of a company's “distributor rationalization program,” rather than “mass termination of distributors.” In addition to taking a blow to their ego and image, distributors often face a significant loss in revenue and profit when they are rationalized. They are left with orphaned inventory, and they are exposed to the potential for layoffs. Distributor rationalization certainly seems like a textbook example of a euphemism, right?
A distributor rationalization program need not be traumatic, involve excessive risk, or offend in any way (bruised egos aside). A properly managed distributor rationalization program, when done in collaboration with a master wholesale distributor, allows terminated distributors to retain some or all of their business, continue to sell invested inventory, and retain staff.
Authorized distributors need not be terminated. For instance, suppliers can engage the affected distributors as authorized master resellers, with full marketing rights and warranty pass-through. Even if the supplier is not interested in a master reseller program, the master wholesale distributor (as a neutral third party) can continue to serve terminated distributors for the benefit of end customers.
Rationalization is sometimes painful for suppliers, too. Since many distributor agreements allow for inventory return in the event that the agreement is terminated, suppliers are often hesitant about making tough decisions to bring balance when a channel is suffering from acquisition-induced bloat or neglect, or when a change in strategy is mandated.
Since it is neutral and can reach thousands of distributors in different geographic and end-user markets, a master wholesale distributor helps ease the pain felt by manufacturers considering channel rationalization. Assigning saleable inventory to a master wholesale distributor allows the supplier to recover value for much of the product.