Trust and Channel Data Sharing

“I don’t trust my suppliers with my data.”

This is the most common response from distributors when I tell them about the data sharing prediction from the new Facing the Forces of Change®: Lead the Way in the Supply Chain book. The research found that suppliers will get more visibility into actual customer demand because wholesaler-distributors will share more point-of-sale data.

Getting over the trust hurdle requires more than just faith in a supplier. I increasingly believe that wholesaler-distributors should only share point-of-sale data with supplier organizations that have rigorous internal security policies for data management.

Don’t Pass Me By

Trust worries fall into three basic categories:

1. “Suppliers will use the data to sell directly to my customers.”


2. “Suppliers will use the data to move my sales to another distributor.”


3. “When the channel manager changes jobs, he’ll take the data to a competitor.”

Personally, I believe that the first concern is overblown. Most customers (especially smaller ones) still prefer to buy via wholesale distribution. Few suppliers can meet the needs of high-service customers.

The latter two concerns have much more merit. The majority of wholesaler-distributors are privately held companies that have been operating in their markets for many years and often multiple generations. Most wholesale distribution executives have seen channel managers come and go. Based on the comments I’m getting, many have personally experienced the abuse of data by a supplier or by a particular individual at a supplier.

Making Collaboration Work

Collaborating with supply chain partners (from the latest Industrial Distribution magazine) highlights all of the key issues.

The article describes the point-of-sale data sharing between building materials distributor CH Briggs and 3M Corp, one of its major suppliers. (Observant readers will notice that I profile C.H. Briggs’ experience on page 45 of Lead the Way in the Supply Chain.)

Julia Klein, CEO of C.H. Briggs, points out the value of trust in her company’s 30 year relationship with 3M “When we were first asked [to provide POS data] we were hesitant, asking, 'Are you going to go around us? Are you going to sell direct?' They've never threatened to do it, they've never had a mistake they've had to apologize for, so we're comfortable in sharing that information with them.”

At the same time, 3M appears to have above-average data security policies. 3M's director of channel management said: “We have a very intense security policy internally. It's on a need-to-know basis only. Employees with access have to take training on appropriate uses of the information.”

Trust then Verify

In my talks, I highlight the income statement and balance sheet benefits that channel data sharing can provide to wholesaler-distributors. But at the same time, wholesale distribution executives need to proactively manage the risks of sharing data.

For example, the EDI transaction set 867 (Product Transfer and Resale Report) is the foundation of point-of-sale channel data sharing. Wholesale distribution executives should manage and negotiate which specific fields get filled in along with the level of detail provided. At the same time, pay close attention to the data security policies of key suppliers.

"Trust then verify" was President Ronald Reagan's maxim for arms negotiations in the 1980s. The advice applies to today’s channel relationships, as well.