Contractually integrated systems for the marketing of industrial supplies

Abstract

Increasingly competitive pressures during the past decade have caused both industrial buyers and suppliers to search for new economies and means for achieving greater profitability. Industrial wholesaler-distributors have responded with a variety of contractually based “systems” that are designed to simplify customers' purchase of supplies while ensuring distributor profits. The two main varieties of such Systems are popularly called “Blanket Orders” and ”Systems Contracts,” but the latter are more comprehensive extensions of the former. Specifically, Systems Contracts imply a total commitment by a distributor toward solving his customers' supplies problems. Such agreements typically involve a shifting of the supplies warehousing function back to the vendor, where items are then automatically reordered by plant-level users as opposed to purchasing agents. Rounding out the System is an extensive array of vendor-supplied services: 24-hour item delivery, computer-processed item usage reports, a control feature, and vendor consultation and problem solving. The Contract effectively links buyer and supplier together in a harmonious, profitable relationship.