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52 FEDA News & Views OPERATIONS Team Up! Profit Up! Partners in Channel Cost Reduction By Tim Underhill, Underhill & Associates Editor's Note: Team Up! Profit Up! appeared in the 2001 July/August issue of News & Views following the release of the Distribution Research and Education Foundation (DREF) report "Team Up! Profit Up!" In it, distribution expert Tim Underhill makes the case that distributors and manufacturers must work together to help their customers reduce costs by addressing channel inefficiencies. Some topics are timeless—as are Underhill's solutions for tackling the challenge. Customers have always approached their suppliers to ask for a reduction in the price they pay or to request that they perform additional services. But, the last few years have seen a significant increase in the pressures customers are applying on their distributors for these reduced costs—and this trend is growing. It is not just because someone in the market always seems to agree to the customers demands, encouraging them to ask for more, but because the pressures on the customer's profits continue to increase and the cost of goods and services offers them the greatest perceived potential to reduce costs. e Center for Advanced Purchasing Studies (CAPS) estimates that on average 55 percent to 65 percent of a customer's revenues goes to the purchase of goods and services, and in one of the studies by CAPS, the vice president of North American Purchasing and Corporate Affairs for Honda Motor Co. estimated 80 percent of the cost for building a car THE NEW LEADERSHIP IN THE INDUSTRY'S ALLIED ASSOCIATIONS, FEDA, NAFEM AND CFESA, ARE EXPLORING PARTNERSHIPS ON VARIOUS INITIATIVES SUCH AS YOUNG PROFESSIONAL DEVELOPMENT AND EDUCATION AND TRAINING. PICTURED (LEFT TO RIGHT): CFESA PRESIDENT JOHN SCHWINDT, HAWKINS COMMERCIAL; FEDA CHAIRMAN MASON GREENE, HOTEL & RESTAURANT SUPPLY; NAFEM PRESIDENT JOE CARLSON, LAKESIDE MANUFACTURING.