AMP makes linecard policy limiting distributors official

Electronic News, Sept 2, 1996 by Fred Guinther

Harrisburg, Pa.--AMP made official last week its new policy governing relationships with its network of industrial electronic distributors. The policy has been the subject of industry discussion since early this summer (EN July 1). A key feature of the policy is the limitation of authorized distributors' linecards to six competitive lines and the stipulation that only two can be "major competitors" of AMP.

At Richey Electronics, one AMP distributor mentioned by industry analysts in July as carrying three of AMP's major competitors--Molex, Berg and 3M--chairman/CEO/president William C. Cacciatore told Electronic News, "Within the next few weeks we will be coming to a decision on whether or not we will be able to comply with AMP's policy. It's a matter of determining which course is in Richey's best interests." Other AMP distributors were not available or declined to comment.

An AMP spokesman said that the connector giant had recently completed the sending of copies of its "18-point AMP Policy for Industrial Electronic Distribution" to its network of distributors, and was making the public announcement for the record now that "everyone is in the loop."

The company said the policy announcement follows the "earlier decision by the company to terminate relationships with a number of electronics distributors to narrow its distributor base," but would not specify which distributors are or will be affected. However, the spokesman reported, "Since January of 1996, AMP has narrowed its distributor base from 44 industrial electronic distributors down to a present number of 27."

AMP set a new linecard policy in June that limits the number of competitors at authorized distributor locations. It stipulates that AMP will not maintain the authorization of a distributor carrying more than six competitive lines, of which only two can be major competitors.

"These recent changes in our distribution line-up have been designed to strengthen business both for AMP and our distributors," said Dean R. Hooper, Jr., AMP VP for U.S. sales and marketing. "We are committed to seeing our distributors' business grow and believe the introduction of this formal policy is a good way to demonstrate our commitment to them.

"During the past 12 months, we've done a lot to improve AMP business at our distributors," said Mr. Hooper. "Now, we want authorized distributors to focus on AMP and carry a limited number of competing lines." Mr. Hooper asserted that AMP distributors now have additional sales opportunities as a result of having fewer authorized distributors in the marketplace.

The AMP spokesman said the policy is being made public at this time to emphasize internal changes it has made to strengthen distribution as well as the linecard limitations. He added that the complete text of the policy is available only to the distributors themselves.

Mr. Hooper pointed out that order minimums at AMP have increased. The new policy states that AMP will direct customers to distributors when their purchase requirements do not meet the minimum order value or when customers prefer to be serviced by distributors. "AMP has one of the largest and best-trained sales forces," he said, "but we want our customers to be able to get AMP products quickly and easily. If that is best accomplished through a local, regional or national distributor, then that's how it should be done. When distribution can assist with order fulfillment, it maximizes efficiency for AMP and our customers.

AMP also said that a compensation and reward system has also been created for its sales force, "designed to make the distribution channel equally rewarding as the direct sales channel for AMP salespeople." The new policy states that AMP will maintain a responsive "meet comp" service to assist in keeping its distributors competitive in the market. The company also says it intends to price protect distributor inventories during periods of price adjustments. Mr. Hooper added, "We are making these modifications to strengthen our business, and we will continue to make changes in the way we manage whenever it is necessary."

Distribution industry observer George Perris, president of Sierra Marketing Group of Rocklin, Calif., noted, "AMP's policy could set a trend in the industry. If other suppliers lay down similar edicts, a number of lines could well be dislocated and become available to distributors who have been looking for an opportunity to pick up major lines. In a way, it's like a return to former days when suppliers were not willing to share space on distributors' shelves with more than a few of their top competitors."