Getting the Most from Your Middleman

Dec 1, 2005 12:00 PM

Is your distributor meeting your needs? In a recent study commissioned by the National Association of Electrical Distributors (NAED) Education & Research Foundation, “Operational Model for Increasing Distributor Profitability,” researchers concluded that distributors are under increasing pressure to provide a higher level of service at lower prices. According to the report, long gone are the days of sales-based service; the future of the industry lies in service-based sales.

The report's new operational model for electrical distributors incorporates the elements of “lean production,” meaning the distributor should provide continuous needs assessment, time flow/error management, and communication to members of its own firm as well as its customers. According to the distributor business model, there are ways for distributors to provide you with more service for less money, including the following elements:

Needs assessment — The distributor participates in a continuous and systematic measurement of customer needs and is committed to meeting those needs. For John Duda, chairman and CEO of Butler Supply, a distribution company based out of Fenton, Mo., this means a monthly analysis of sales records. “Every month we look at what we have sold the month before and the prior 12 months,” he says. “We look for trends, and we re-supply our inventory based [on those trends].”

Structured focus — The distributor structures its activities to focus strategically on key customer needs, preferably following a process model to help indicate the direction the firm should take in modifying its service profile. Bill Elliot, president of Nacogdoches, Texas-based distributor Elliot Electric Supply, says it's all about education and cooperation. “We can let the electrical contractor know it's something that costs us money, and we can be more competitive with him if we can cooperate on reducing costs.”

Rapid response — The distributor provides an environment in which it can quickly and aggressively react to changes in market conditions and customer needs by communicating information inside and outside of the organization. A project audit should be held periodically on a company-wide basis. Duda points out that cell-phones and push-to-talk communication devices are useful tools in encouraging rapid response. “Customers can be in constant contact with their sales person, and the sales person can be in constant contact with the delivery truck,” Duda says. “Everybody knows what's going on instantaneously.”

Advanced technology — The distributor maximizes its ability to meet customer needs at reduced expense levels by applying technology, such as expanded use of online ordering or customer service. Elliot says technology such as GPS tracking, point-of-delivery signature capture technology, and online real-time inventory records help his distribution company save time and money, which he can then pass on to his customers.

But ultimately, Duda says, putting service first “sometimes means that our costs are going to be higher, our cost of getting him [the electrical contractor] the product, because we're doing more for him. Chances are somebody would be less expensive, but he's coming to us because we're dependable.”