NAW's “Facing the Forces of Change” study offered distributors plenty of food for thought.
The recently published Facing the Forces of Change study dominated the program at the 2011 National Association of Wholesaler-Distributors (NAW) Executive Summit, held Jan. 25-27 at the Fairmont Hotel in Washington, D.C.
Published every three years since 1982 by one of NAW's research partners, this year's study, “Decisive Actions for an Uncertain Economy,” focused on business strategies that distributors need to master to grow their businesses in the post-recession era. Guy Blissett of IBM's Institute for Business Value managed this year's Facing the Forces of Change study and conducted four panel discussions with eight distributors at this year's conference. The panels focused on four of the study's key findings: the expanding role of services; differentiating with analytics; leveraging human capital; and information technology.
While some of the study's findings reinforced the evergreen need to concentrate on core basics of customer service, Blissett said it will teach distributors that they must really strengthen their relationships with customers by looking at them in new ways outlined in the research. “It's not just seeing a customer 1-5 times a week,” he said. “It's about the types of conversations you have with them and really trying to understand their businesses and processes.”
Kathy Mazzarella, executive vice president and COO, Graybar Electric Co., St. Louis, Mo., and Joseph Nettemeyer, president and CEO, Valin Corp., Sunnyvale, Calif., discussed value-added services they now offer customers. Mazzarella said Graybar focuses on services its customers don't want to do, cannot perform effectively, or want to outsource. She said one challenge is that its branch managers are often very product-focused and may not know how to customize a package of services for customers.
In addition to managing an industrial distributor with operations in nine Western states and integrating the 26 acquisitions the company made since he came to Valin from Emerson Electric in 1990, Nettemeyer has developed centers of expertise in automation, calibration of instruments, process heating, filtration and oilfield services. The company also builds websites and conducts e-mail marketing and fulfillment campaigns for customers if they don't have that expertise in-house.
Each of these centers offers customized packages of fee-based services for customers such as programming PLCs and calibrating industrial instruments that measure the flow of oil. These services produce a steady flow of revenue for Valin. “If we can't make money from it, we don't want to do it,” he said.
The panel on “Differentiating with Analytics” offered an interesting contrast in distributors. Jon Giacomin, president of U.S.-Pharmaceutical Distribution, Cardinal Health, Dublin, Ohio, represented the big-company viewpoint, as Cardinal does $90 billion in annual revenues, is ranked No. 17 in the Fortune 500, and has approximately 30,000 employees in 10 countries. In providing pharmaceutical drugs, health and beauty products to retail drug stores and pharmacies in hospitals, physicians' surgery centers, as well as selling these products online, over the past few years Cardinal analyzed its pricing, forecasting, inventory, act-based costing and other business processes to streamline operations and improve service.
Julia Klein, owner, chairwoman and CEO, C.H. Briggs Co., Reading, Pa., manages a 170-employee distributor of building supplies that restructured its pricing matrix and segmented its customer base with the help of several distribution consultants to increase its gross margins in the face of horrific business conditions in the construction market.
In the session, “Leveraging Human Capital,” Manual Perez de la Mesa, director, CEO and president, Pool Corp., Covington, La., a $1.6 billion distributor of pool supplies with 295 locations, offered attendees some insight into his company's training program, where he annually hires 40 graduates of industrial distribution programs from hundreds of applicants. He has found “second-string” and “third-string” salespeople are always available from other distributorships, but they don't integrate into his company's culture as well as graduates of industrial distribution programs at Texas A&M, University of Alabama at Birmingham and University of Nebraska-Kearney. With so much new talent coming in each year, Perez de la Mesa has to constantly prune the ranks of his employees and weed out the poorest performers.
In another interesting presentation, Charles Bonomo, vice president and CIO, MSC Industrial Direct Co., Melville, N.Y., offered a behind-the-scenes look at what it takes to support his company's offer of online ordering and next-day shipping for its 500,000-SKU inventory of industrial supplies. In its “Get It Next Day” program, MSC Industrial ships any product ordered via www.mscdirect.com by 8 p.m. Eastern at no additional charge, as long as the shipping location is in the contiguous 48 states (all states except Alaska and Hawaii). According to the company's most recent annual report, sales through its websites were $511.1 million for fiscal 2010, and accounted for approximately 30 percent of consolidated net sales. Bonoma said one of the differences between operating in the catalog world with the company's “The Big Book,” which has been around for 70 years, and in today's online arena is that when customers have a catalog in hand they are glad to pick up a phone to ask a technical question, but when they are shopping online, “they would rather die” than call with a question. They expect all relevant product information to be available online.
Next year's NAW Executive Summit will be held Jan. 31-Feb. 2, 2012.