While most of our customers work with Manufacturers’ rep agencies on a daily basis it seems that not everyone has a really good understanding of what a rep agency really is. You’ll read this to learn what a manufacturer rep is, what we do, and how we add value to your supply chain.
One great example of a customer not understanding what a manufacturers rep agency is, just happened today. Our Account Manager Miranda was calling to introduce herself to a customer and was asked if she was a broker.
She nicely said no, and began to explain what a manufacturers rep agency is, only to have the customer state again, “So you’re a Broker”?
Miranda then responded joyfully, “Can I send you our line card so you can see what we do?”
We talked about it, and because this seems to be coming up in some of our meetings, I thought the best thing to do would be to write about it to have a reference whenever someone asks “What is a Manufacturers Rep Agency?”
An Electrical manufacturers’ representative, also known as independent sales representatives or a sales agency, is a company that sells a manufacturer’s products to Wholesale, OEM, and other specialized customers direct from the manufacturer through the Principal-Agent Relationship.
When a manufacturer hires a manufacturers rep firm, this usually means that a contract is signed between the two companies, which empowers the rep to sell, or solicit sales for the manufacturer’s products as an agent in a defined territory.
This contract can be both in writing, verbal, or implied. When this contract is formed, the Manufacturer and the Agency enter into what is coined as a “Principal-Agent Relationship”.
From Investopedia, “The principal-agent relationship is an arrangement in which one entity legally appoints another to act on its behalf. In a principal-agent relationship, the agent acts on behalf of the principal and should not have a conflict of interest in carrying out the act.
The relationship between the principal and the agent is called the “agency,” and the law of agency establishes guidelines for such a relationship.”
In lamens terms, the law of agency and the principal-agent relationship means when you talk to someone from my Manufacturers Rep Sales Agency, you are legally talking directly to an agent of the Manufacturer.
When you talk to my agency, you are talking directly to the Factory sales force. Your products are ordered directly from the manufacturer, with all billing going directly from the factory to you the customer.
Typically, a rep agency will receive the purchase order and facilitate delivery of the products to ensure the factory ships out the order on time, and that the customer receives everything correctly.
Again, there is no change of ownership between the factory and the rep. All orders are direct from the factory the customer.
A manufacturer’s representative is the most widely used type of agent. Rep’s are utilized by manufacturers for many valuable reasons, including:
A Manufacturer uses a Manufacturers Rep sales agency to cut overhead costs, giving both the manufacturer and the customer a benefit of the cost savings. The manufacturer is able to pay a rep agency a small percentage of each sale, instead of having to pay a full sales team a salary plus a commission. A commission that is at least as much or more than the Rep Agency earns.
The cost of the manufacturer using their internal sales force is often costlier than working with a rep agency. With this in mind, the customer may also enjoy cost savings through a strong relationship with their rep agency.
From the Manufacturers’ Agents National Association, or “MANA“:
It’s estimated that the fully burdened cost of supporting an industrial sales territory with a factory-internal salesperson is $150,000 to $200,000 per year. And manufacturers sometimes find that high-value territories require more than a single one factory-internal salesperson to provide adequate coverage, which can double, triple, or even quadruple that cost.
Manufacturers who support their sales territories with manufacturers’ representatives often report achieving deeper market penetration than they could achieve with factory-internal salespeople and direct cost savings of 30-45%.
Each of our manufacturers’ are fabulous. They are nice. They are friendly. They genuinely care about helping our customers. With that said there are millions of customers and only a few manufacturers by comparison. The manufacturer can be the best of the best, but they just cannot possibly hope to stay in contact with thousands or millions of customers each month as effectively as a rep agency whose sole focus is to provide customer experience.
This is a major reason for the existence of the manufacturers’ rep firm. The manufacturers’ rep will do all of the selling, keeping in close contact with customers, giving the manufacturer much more coverage into the market.
As an example, at USA we have a goal of contacting over 10,000 customers per month. A manufacturer would have a hard time doing this well while also focusing on making quality products and getting orders shipped out efficiently. As reps, we focus on customer service, sales, and a relentless pursuit of keeping our customers happy while keeping in touch with them.
When there is a new market or a new product that a manufacturer wants to deal in, but the market is not fully developed, a rep agency is a marketing utility for the manufacturer. A rep firm is helpful for a manufacturer to penetrate the market in a cost effective manner. Considering the cost of marketing, the rep firm is out in the market doing all of the marketing for the manufacturer and only getting paid when they sell the product. Coming from the customer perspective, Reps are teachers giving them the inside scoop on new technologies keeping them in front of market trends. The manufacturer and the customer may leverage a manufacturers rep agency to build new markets and take advantage of new products, as
Coming from the customers perspective, Reps are teachers giving them the inside scoop on new technologies keeping them in front of market trends. The manufacturer and the customer may leverage a manufacturers rep agency to build new markets and take advantage of new products, as a rep agency typically costs the manufacturer less to employ than an in-house sales force while giving the customer a trusted advocate .
A Manufacturers representatives generally represent more than one manufacturer. One of the reasons we can represent more than one manufacturer is the products we represent are related or complementary, but not competing.
This takes a keen market knowledge as many manufacturers may have competing products, especially in the Wire & Cable industry, so it takes an industry expert to know exactly how to pair manufacturers giving the customer a one-stop shop.
For example, at USA, we have two portable cord manufacturers’. Initially, this could be seen as competing, except when you dig a little deeper you will see that one of our manufacturers makes SOOW portable power cord, and one makes SEOOW style portable power cord. They each have their own uses, and while they’re similar, they’re not exactly the same products. Because we have customers who require both of these types of cable we are able to represent both manufacturers.
They each have their own uses, and while they’re similar, they’re not exactly the same products. Because we have customers who require both of these types of cable we are able to represent both manufacturers in a non-competing basis.
This is the same story for our power cable manufacturers. One of our manufacturers makes their products and is the world leader in medium voltage EPR power cables. Another of our manufacturers primarily makes High Voltage TR-XLPE Power cables. Both of these styles are similar, but again, they are not the same. Having both in our portfolio lets us cover the full spectrum of wire & cable, letting USA be a One-Stop-Shop for Cable, Connectors, Conduit, and LED Lighting.
Conversely, When it comes to LED Lighting we have a situation that is exactly opposite of our stable of Wire & Cable Manufacturers. For LED Lighting we have a manufacturer who covers the entire spectrum of products, and our contract dictates that we will not represent another LED Lighting manufacturer.
Because our LED Lighting manufacturer competes well in every area of LED lighting, we don’t require multiple manufacturers who compete in multiple market segments in order to give our customers the best of the best. This goes back to the Principal-Agent relationship which requires the agent to refrain from putting themselves in a position that creates or encourages a conflict between their interest and the interest of their principal (Manufacturer).
Being a One-Stop-Shop helps our customer because they don’t have to remember what products we carry, and it also helps our manufacturers as customers may not know who to call, but when a rep has a full line they can dictate who is the best manufacturer to fill the need for each particular customer.
There are many “Master Distributors” who make Billions of dollars being the customers go to source or One-Stop-Shop that have figured out this is the best way to help Electrical Distributors, Utilities, OEM’s, and Specialty contractors, but a rep firm who offers a one stop shop gives those same customers much better price savings buying factory direct.
Being that a massive percentage of sales are drop shipments either from the factory direct to the job, or from the factory to a warehouse that is immediately delivered for a spot buy, there is a massive opportunity for a One-Stop-Shop rep agency to help our customers by being their easy button.
So we have learned what a manufacturers rep firm is not. We are not brokers. We are not re-sellers.
We learned what a manufacturers rep firm is. A manufacturers rep agency is by law, a direct agent of the manufacturer. When you work with a manufacturer’s representative, you are buying factory direct.
We learned that working with an agency adds many added benefits to both the manufacturer and the customer.
Hopefully, this was a quick, helpful reference for you on what a Manufacturers Rep Agency is, and how we at USA can help you improve your supply chain.
If you require any further information you may visit our website USA-AGENT.COM and Contact Us today for a quote from our market leading manufacturers. We offer a Unique value perspective as we cover the entire USA for our territory so wherever your job is located, let’s get to work!
Brandon Jonseck – President, USA