With more than two decades under his belt as an independent manufacturers’ representative, Greg Reynolds is not convinced that the traditional manufacturers’ rep business model is currently working for aerospace manufacturers’ agents.

Reynolds, president & CEO of Target Marketing Associates, Inc., Rocky Hill, Connecticut, describes the unique challenges manufacturers’ representatives face working in the aerospace industry that are perhaps not encountered by reps in other industries. Prior to a rep receiving commission payments, the aerospace industry sales cycle may take as long as 12-24 months and include factors such as 12-18 months to obtain customer approvals, 4-6 months lead-time to manufacture parts, and an additional two to three months to receive payment from customers. Many reps are independent sales agencies and they simply cannot afford to expend two years’ investment of time, money and expertise without being compensated.

The current sales cycle outlined above was the basis for Reynolds and several other MANA aerospace rep firms’ decision to create the OEM Aerospace Special Interest Group (OASIG), within MANA. The intent of the OASIG is to address many of the concerns independent agencies face working in the aerospace industry.

Reynolds, hardly a newcomer to working in the aerospace industry, began his career at Pratt & Whitney and subsequently joined United Technologies at its corporate headquarters. At United Technologies Corporation (UTC) and Pratt & Whitney, Reynolds held executive positions in Corporate Purchasing, International Business Development, and Customer Support. He earned his MBA degree while working at UTC, and subsequently received his Certified Professional Manufacturers’ Representative (CPMR) certification while operating his manufacturers’ rep business.

Reynolds has 36-years’ experience in the aerospace/defense industry and has developed more than 8,500 contacts at OEMs and aerospace suppliers. This has enabled him to offer his principals a cost-effective approach to developing sales within his customer base as opposed to principals bearing the total sales overhead cost of their direct salespeople calling on customers in Reynolds’ territory.

Increased Challenges

Reynolds states that the aerospace manufacturers’ rep business has become substantially more challenging since he commenced his business 23 years ago. He points to a number of marketplace changes that weigh heavy on the minds of aerospace agencies:

• Sales and Marketing

“Prior to the business becoming increasingly global, there was a significantly broader base of customers and suppliers to deal with.”

• Access to Customers

“When I first started in business, it was much easier to arrange appointments with customers. Currently, it is extremely difficult getting access to and understanding the key decision makers who are involved in making the final decision with respect to awarding major sales contracts. I do not think principals understand the obstacles reps face in developing high-dollar sales contracts in the aerospace industry.”

• Supplier Consolidation

“Major OEMs are reducing their supplier base as they seek to develop long-term agreements with world-class manufacturing companies.”

• Finding Qualified Principals

“Reps face challenges finding principals who have the required aerospace approvals and credentials necessary to compete for these contracts. Once the rep identifies a potential principal who meets these qualifications, the principal must embrace the rep model of selling.”

• Venture Capital Companies Acquiring Aerospace Manufacturing Companies

“This typically puts the selling efforts of reps at risk because venture capital companies generally prefer to utilize a direct sales force.”

• Developing a Fair Compensation Model for Reps and Manufacturing Companies in Developing Aerospace Sales

“The sales overhead cost of a direct salesperson averages between $150,000 and $200,000 annually. This overhead cost is a fixed cost of sales whether it is paid by the manufacturer in the case of an employee, or is assumed by the manufacturers’ representative. There are three options to dealing with this cost of sales:

• The manufacturer pays the cost when hiring a direct employee.
• The rep incurs this overhead cost when he enters into an agreement to represent the manufacturer.
• The manufacturer and rep agree on a method of sharing the sales overhead cost.

“It appears to me that if a manufacturer is willing to pay a direct employee a sales overhead cost of $150,000 to $200,000, it is in the manufacturer’s best interest to arrive at a formula to share the cost of going to market with a professional rep organization.

• Education and Communication

As a result of the aforementioned challenges, Reynolds emphasizes how important it is today for reps, especially in the aerospace industry, to communicate their value to prospective and existing principals.

It is for these reasons Reynolds contacted MANA with the goal of establishing a special interest group for aerospace reps. “My goal in this was to learn whether other reps serving the aerospace industry were facing the same challenges I was facing. Additionally, I was hoping manufacturers would develop a better understanding of an aerospace rep’s perspective regarding the costs associated with developing business in this industry.”

After speaking with MANA’s President & CEO Charley Cohon, and MANA’s Vice President and General Manager Jerry Leth, a survey was put together and distributed to others in the industry. The participating rep firms identified more than 40 issues which were categorized into four major areas:

• Market penetration.
• Sales commission.
• Working with OEM customers.
• Trends and issues impacting aerospace manufacturers’ reps.

The areas of concern the reps identified serve as the foundation for a series of teleconference calls among interested agents. Reynolds adds, “Our effort in focusing on these concerns was to focus on the issues that we could actually impact based on the networking and the experience of OASIG members. For instance, you are hardly going to change strategic decisions of major aerospace companies. What you can impact, however, is how rep firms need to change to operate more effectively in the current environment.”

Reynolds acknowledges that the group is working in uncharted territory. “However, the group is committed to utilizing their collective years of aerospace experience to develop solutions to these critical issues.” Despite the challenging issues aerospace reps are facing, Reynolds remains upbeat about future sales opportunities in the aerospace industry. “It is rewarding to see that the relationships aerospace reps have developed with their customers are still the key to successfully generating new sales.”

(As reported in the August 2015 issue of Agency Sales, “Should the OASIG succeed, we expect others to want to form similar communities with MANA. The caveat is, we’ll help you start it and we’ll support it, but you take responsibility for managing it. What we learn from these groups that works, we can pass on to make these communities a valuable resource for other MANA members.”

As OASIG continues its efforts, Agency Sales will monitor its activities and continue to report to the MANA membership.)

MANA welcomes your comments on this article. Write to us at [email protected].