To someone outside the electrical industry, the story of Vanguard National Alliance (VNA) probably reads like a case study of how a centralized entity is attempting to solve the complex supply, profitability and logistics issues of the manufacturing arms of many of the largest Fortune 500 companies in North America.
But to anyone familiar with the electrical wholesaling industry and the mixed success of past attempts to service national accounts, the plot runs much deeper. That's because the tale of the Framingham, Mass.-based VNA highlights how 50-plus distributors for Rockwell Automation, Milwaukee, one of the most coveted franchises in the electrical business, rely on VNA's customer-centric approach to harness some of the latest e-business technology and use it to solve many age-old customer concerns.
The following numbers illustrate just how far VNA has come since its inception in 2002:
VNA now has national-account contracts on the books with an annual value exceeding $150 million.
VNA's distributor members have 532 branches and account for a whopping 99 percent of Rockwell Automation's sales volume through electrical distributors.
Combined, distributor member sales are exceed $7 billion.
Annually, the total number of VNA transactions tops 100,000.
Online training and conferencing technology has enabled VNA and its members to hold more than 40 customer training sessions and an estimated 1,200 ad-hoc meetings — and saved them an estimated $100,000-plus in travel costs.
The numbers are startling, when one considers the mayhem in the national-accounts arena just a few short years ago, after the failed attempts by several dot-coms to barge into the national-accounts arena. VNA has grown from two people and a business plan to an electronic hub serving members' national-account needs. VNA now employs 13 people and serves more than 20 end-user accounts with more than 1,000 locations throughout North America. (See “National Clout,” EW — April 2005, page 30.)
John Salvadore, VNA's vice president and general manager, says what sets VNA apart from other national-account solutions in the market is its ability to offer Rockwell/Allen-Bradley products and services and MRO electrical products from many blue-chip electrical manufacturers, its technology, and the value-added services that it brings in its total cost of ownership (TCO) program. “Those three things make it a very strong package,” he says.
VNA's TCO program is designed to improve the efficiency of a customer's facility, including their technical, financial and labor-related resources. It teaches customers how to reduce their costs in these areas, and educates them about the philosophy of total cost of product ownership. The challenge is to get customers to look at the whole picture, and not rely on the “piece-part-price” philosophy of purchasing, where price reigns supreme. With VNA's TCO strategy, distributors and manufacturers:
Help their customers plan their MRO more strategically.
Provide better service to customer plants with less expenditures.
Lower the customer's average cost of procurement across all of their locations.
Measure and manage customer costs and need for services in a manner that will eliminate future expenditures.
Lower customer costs by leveraging new technology for plant-wide applications.
Rick Dahlstrom, corporate vice president of sales and marketing, McNaughton-McKay Electric Co., Madison Heights, Mich., the largest Rockwell Automation distributor in North America, says the TCO program is the centerpiece of VNA's service approach. “We are trying to drive customers to that higher level of thinking,” he says. “Those customers that just want to talk about ‘piece-part-price’ might not be the best option for VNA. Many big customers still get caught up in ‘piece-part-price.’ They have reverse auctions, and things get pretty ugly. The margins deteriorate pretty quickly. But there is a continuing resurgence of customers that say price is important but it's not the only thing. They say, ‘If I can get something that has a greater service component and can really provide a greater value proposition, then I am willing to pay a little bit more for that.’”
Dahlstrom believes plenty of potential exists in Rockwell Automation's initiative to have its distributors offer additional value-added services to customers such as storeroom management, bin stocking, spare parts management, repair-parts tracking and repair services. “I believe there is going to be a great opportunity in asset management and storeroom management,” he says. “Customers are looking for them, and somehow we need to better incorporate them into the overall VNA story. We are getting there, but it's a great opportunity going forward.”
Although the TCO program takes a big-picture view of a customer's costs, VNA's distributors and manufacturers must constantly remind them to think past price. Barry Boyer, president, Van Meter Industrial Inc., Cedar Rapids, Iowa, says the TCO program drives total cost savings for the customer. But he says although the price of components is typically a small part of total cost, it's the easiest for customers to measure. He is looking forward to continued growth with those customers who understand that price is just one element of total cost.
Paul Lienesch, director of marketing for professional lighting, Philips Lighting, Somerset, N.J., says the TCO program makes VNA unique. “The TCO program brings the manufacturer and end user together in a positive and constructive way, providing a value-added service that the end user sees as beneficial to their business,” he says. “For example, Philips created a TCO capabilities sheet that describes our value-added products and services such as energy audits. This approach provides us with the opportunity for our sales rep to take the national account into a discussion beyond price.
“Another unique component is the ability to conduct training webcasts for both VNA distributors and VNA national-account end users. An additional benefit from a manufacturer's perspective is the matching of a TCO audit requested by a specific national-account location to a specific Vanguard distributor branch and our sales rep. The call progress is then tracked for actions and results.
“We are working with VNA to expand training and TCO programs in a way that communicates an application and problem-solving approach toward end users. VNA helps us facilitate the positioning of value through their programs, which will grow and provide new opportunities.”
The TCO program is a major element of VNA's message on the operations side for end users, and is a tool that VNA's distributors and manufacturers use to differentiate its package of services from other players in the national-account arena. Offering national-account contracts supported by a network of local distributors for Rockwell industrial automation products, as well as for complementary MRO products from more than 20 of the largest electrical manufacturers differentiates VNA on the product side. In addition to lamps and other MRO products commonly found in factories' tool cribs, Pratt says VNA's offering of products that support industrial Ethernet cabling applications has grown substantially.
Adds Salvadore, “VNA is just a spoke in the wheel in our distributors becoming more successful. They are market leaders on the local level on the Rockwell Automation side and the MRO side. But they have been locked out from the national-account arena because they haven't had a consistent national-account program to work with. We see our impact with the accounts when it's time to rebid a contract. Now VNA distributors have the opportunity to compete with the national chains for the national business.
“VNA's customers have always used our distributors for the Rockwell piece. Our VNA solution makes it easy for the customers to have one supplier do both the Rockwell and the electrical MRO. The electrical MRO is an easier piece of the package to support. When you put that all in one basket and wrap the VNA technology around it, it's a very strong piece of value for the customer: a single point of contact, with transactions streamlined.”
Online training and conferencing have also quickly become part of VNA's fabric because of the time-and cost savings it offers. Over the past few years, Microsoft Office Live Meeting software has saved VNA and its members more than $100,000 by eliminating unnecessary travel costs, says Pratt.
“We have been using it for four years. It's pure upside for all parties involved,” he says. “Live Meeting is geared toward cost savings, and not having people hopping on planes all the time. It's been a life-saver from the cost-savings aspect. I can't even tell you how many trips we don't make. We use it to roll out programs, hold board meetings, etc. It's our first line of communication for any kind of interactive multi-person meeting. We have been fortunate to have a group of distributors that accept that technology.”
Pratt says while there will always be a place for hands-on product training, this software works well for topics like safety, energy efficiency and circuit protection, or teaching customers about VNA's service offering.
“It's been exciting for our manufacturers to put on one of their top presenters where they can train 100 distributors in one session. It's high-powered stuff when you can train a large audience in one pop.”
Fast, efficient communications on the data side are also a big part of VNA's story. The bizLinx Commerce Connect/IBIS and Private Trading Exchange software from Infor Global Solutions, Alpharetta, Ga., help VNA manage its transaction data. VNA uses the Industry Data Warehouse (IDW) as its sole source of product and pricing data, and is, says Pratt, a “banner-waving supporter” of the Industry Data Exchange Association (IDEA), Rosslyn, Va. However, one of the challenges confronting VNA and IDEA is to get more manufacturers to supply “attributed data” for the IDW. Attributed data offers more robust content, including pricing, parts numbers, graphics — virtually anything available in a printed catalog. With this type of information, VNA distributors can build online catalogs loaded with accurate, up-to-date product data. It's a big draw for customers, says Dahlstrom of McNaughton-McKay.
“Customers are clamoring big-time for catalogs,” he says. “But your data has to be accurate and complete. A lot of manufacturers have not stepped up and said, ‘I am going to give you fully attributed data, and it's going to be accurate, and it's going to be maintained.’ Internally, McNaughton-McKay has been doing a lot to get there. We have broken through and have had some success with various manufacturers. IDW2 is one of the vehicles we are using to drive that.”
VNA can only move as fast on the e-business front as the amount of accurate, real-time and robust data that's available from manufacturers in the IDW. But that doesn't change its core philosophy of providing a -accounts solution for an elite group of Rockwell Automation distributors. Pratt says VNA's distributors are uniquely equipped and positioned to deliver the necessary technical and engineering support, not just in Rockwell industrial automation products but for MRO products, too.
“VNA wins because we can offer the IT connectivity, centralized financial and account services and retain the relationship at the plant level with our Rockwell best-in-class distributors,” he says. “Other national-account entities tend to be flat on the service side and won't be able to offer that local service. We provide national accounts with IT connectivity and centralized financial services, and allow the distributors to keep doing what they do locally. That's where the win-win comes in.”
VNA Services and Support
VNA prides itself on being a single-source solution for Fortune 500 companies seeking national contracts for the purchase of industrial automation and electrical MRO products. It provides these customers with a robust selection of services that include the following:
- 24/7/365 emergency services
- Stock delivery
- Buying options (may include customized catalogs with search engines, online order entry, price check and stock check, EDI and XML document transmissions)
- Summary billing and customized usage reporting
- Savings summary analysis (calculates the savings from buying through VNA)
- Vendor-managed inventory programs
- Storeroom management
- Data management programs
- Supply chain optimization
- Product and technology training
- Asset management
- Warranty management
- Personalized product data
- Predictive maintenance program
- Obsolescence management services
- Repairable asset services
- Installed base evaluation of existing equipment
- Inventory management