By Supply House Times Staff

A key element of Supply House Times’ celebration of its 50th anniversary has been to examine “Best Practices” in an effort to provide our readers with insightful information that will help them grow their businesses. The staff has gathered 50 Best Practices from PHCP wholesaler distributors, master distributors, manufacturers and manufacturers reps, and trade associations. We hope the sharing of these ideas will lead to greater success for all.

Photos of employees and customers are everywhere at Porter Pipe & Supply’s Addison, IL, headquarters. These are displayed in a men’s restroom.

1. Provide a contractor prefab facility. That’s what Ferguson (Newport News, VA) did with an old branch facility in Denver that was being used for storage and which employees had nicknamed “The Dungeon.” Hydronics Manager Dennis Bellanti noticed that many of his contractor customers prefabbed many jobs by mounting piping, components and controls on a big plywood board that would end up on a mechanical room wall. Most of those customers operated out of tiny shops where they struggled for space to do this. So Bellanti came up with the idea of turning The Dungeon into a prefab workshop for customers, called “You-Build-It-Here Ferguson Customer Fab Shop.”

2. Prove that you’re good. “When you say it about yourself, it’s bragging. When somebody else says it about you, it’s PROOF.” So goes a quote from author Jeffrey Gitomer that’s the first thing visitors see upon opening the Web site of Western Water Works Supply of Chino Hills, CA, at www.wwwsco.com. The quote introduces a bunch of video clips of customers saying nice things about the company. Powerful stuff.

3. 24/7 service. Not many distributors will attract enough business to stay open 24/7, but Chicago’s Porter Pipe & Supply has figured out an affordable way to provide that kind of service using on-call employees to open up and charging customers a fee that goes to the on-callers for their trouble. A typical weekend will find six to eight customers in need of the service, and you can bet Porter will be the first company they think of during normal business hours as well.

4. Family atmosphere. We’ve seen some pretty snazzy and no doubt expensive artwork in plush offices around the industry. But none struck us as more apropos than the employee photos plastered everywhere around the facilities of Porter Pipe & Supply in Chicago. The family atmosphere there is the densest we’ve seen anywhere in the industry.

5. Reward employees for providing excellent customer service on return goods. Porter Pipe & Supply, Chicago, awarded plaques of recognition to warehouse workers for processing more than a million dollars worth of returns. Returns are no less a pain to Porter than to any other distributor, but they made it their goal to offer the best customer service possible and said they felt this would pay off in the long run in customer loyalty.

6. One step from a decision. Size has its advantages, but it’s even better to be nimble. Best of all is when you can combine both qualities. Southern California’s Kelly Pipe Co. is a $300 million company that nonetheless publicizes the fact that inside and outside sales reps are no more than one phone call away from a management decision. “Our customers do not have to wait while information passes up and down a lengthy chain of command,” CEO Earle Cohen told us. “We have published prices in the computer and the people working our desks are very experienced. Most have been with us 15 to 20 years.”

7. Make lemonade from lemons. Another best practice from Kelly Pipe in California has to do with handling defective product. It is a drain on productivity and assets to deal with defects. When the company receives pipe that is not up to its quality standards for traditional uses involving temperature and pressure standards, sometimes they will return it to the vendor, but at times they find it more profitable to sell it on the secondary market for non-critical structural uses such as pilings, fencing, etc.

Now: At Standard Plumbing Supply, Salt Lake City, items placed on the conveyor pass by an electronic eye, which determines routing.

8. Make safety happen. Every distributor shares an interest in reducing worker comp claims and insurance premiums. Workplace safety is best accomplished by putting someone in charge to make it happen. Santa Fe Springs, CA-based Kelly Pipe appoints a safety coordinator whose responsibilities include conducting accident investigations and filling out reports and disseminating findings throughout the organization. Safe work procedures are developed by a group staffed with representatives from employees, supervisors, equipment manufacturers and safety consultants. Relevant personnel undergo drug and alcohol testing. Many insurance companies will help organize an in-house safety program if you’re unsure how to go about it.

9. Function over form. We’ve noticed over the years that some of the top distributors in our industry operate out of relatively modest office facilities. A clean and orderly environment is a boon to morale and productivity, but plush corporate surroundings serve no useful purpose and are a drain on profits.

10. ID copper purchases. Theft of copper tube runs rampant at a time of skyrocketing copper prices. Last year’s Wholesaler of the Year, Standard Plumbing Supply, Salt Lake City, faced some incidents where employees terminated by large customers made large purchases of copper on their former company accounts before word got around of their dismissal. So Standard hung signs on the door to all branches saying, “We ID major copper purchases.” No further episodes occurred after the signs went up.

11. Disaster planning. Most distributors know enough to back up their computer records and store them at a different site in case of fire or some other disaster at headquarters. However, companies in areas prone to widespread natural disasters such as hurricanes, earthquakes and volcanoes need to make sure the storage site is far enough away to escape the same catastrophe that might destroy the home site. For instance, United Pipe & Supply of Portland, OR, has a view of the Mt. Hood volcano whose catastrophic eruption is inevitable somewhere in time, as is a major earthquake in the Pacific Northwest. So the company decided to invest a quarter-million dollars in redundant backup systems and off-site duplicate data 100 miles away in the city of Eugene. This “mirrored” data system automatically updates every transaction made by any branch in real time.

12. Open book management. Tradition in this industry dominated by closely held firms is that only the owners, mainly family members, get to peek at the financial data. Yet we have encountered several successful distributors who practice “open book management” by sharing detailed financial reports with employees — coupled with profit sharing. Every one that does it has expressed enthusiasm for the impact on employee productivity and morale. The biggest fear, that everyone will know how much key people earn, can be overcome by disguising administrative income into one large lump sum. The upside greatly outweighs the drawbacks.

13. Open office management. No distributor we’re aware of maintains an egalitarian environment quite like New York’s illustrious Davis & Warshow. President Frank Finkel’s “executive suite” consists of a small desk and computer terminal no different than those of the other dozen top managers who share the communal front office at Maspeth headquarters. In what resembles something of a gilded sweatshop, their work spaces are arranged wherever they fit just a few feet apart. Rank and status are invisible, job functions fluid, privacy impossible and vocal chords the main instrument of corporate communication, which is thick with banter. “It makes for a more productive day,” Finkel told us, “because the ebb and flow of conversation enables all of us to learn something new every day. Guys will talk about visiting a customer, and you learn things about that customer and maybe some competitors. Things that go on in this ‘fur ball’ of an office help us become better at what we do.”

14. Safeguarding warehouse scanners. Another innovation by Davis & Warshow has dramatically reduced broken and misplaced scanners that are crucial to its modern warehouse management system. They simply assigned scanners to individual employees and made them responsible for their upkeep and safeguarding. Each warehouse worker is assigned his or her own scanner, along with a lockable mailbox to store it at shift’s end. Employees have a sense of ownership, which always enhances TLC.

15. An alternative to holiday giving. One more Davis & Warshow innovation has the potential for solving a dilemma for many distributors. Holiday gift-giving is a tradition that can get out of hand financially and politically. How much should you spend on which customers? How do you handle those who get excluded? Years ago the Finkel family devised an ingenious solution. They set up the Davis & Warshow Scholarship Foundation as a tax-exempt charity. Each year they contribute thousands of dollars to the Foundation, about what they would spend on customer holiday gifts. The money gets dispensed as scholarships — $500 a year for four years — to recipients. At Christmas time, in lieu of gifts, they send out a card asking for nominations for the scholarship program. Everyone gets a crack at it, and even if recipients have nobody to nominate, they are likely to look kindly at D & W because of its effort.

Then: Packaged product rides the conveyor in a warehouse operated by Noland Co., Newport News, VA, circa 1960.

16. Variable overhead. WinWholesale (Dayton, OH) has a unique corporate structure in which branch managers have a sizable equity stake in their operations. This leads to an accounting practice that a lot of other distributors might do well to emulate to make life a little more fair to their branches. Corporate overhead is assigned on a variable basis tied to gross margin rather than as a fixed cost. This means those who may be blessed by favorable market conditions pay a little more, and that overhead expense decreases during market downturns.

17. How to avoid catalog clutter. Several years ago while visiting one of Castle Supply’s showrooms in Florida, we noticed a small two-tier bookshelf no bigger than one might find in a child’s room. It was explained that most showroom personnel want every catalog in the world. Company policy was that they could have any catalog they requested, as long as it fit on the bookshelf, and if a new one came in, the showroom staff had to determine which one must go to make room for it.

18. Make friends with the big-box stores. Home Depot and Lowe’s may seem like mortal enemies of our industry’s distributors, but that’s shortsighted. We’ve spoken with numerous distribution managers who love it when a big box opens nearby, because it inevitably leads to spillover business. Instead of getting depressed when one goes up in the neighborhood, a better tack is to introduce yourself to the manager and relevant department heads and bring along a stack of business cards.

19. Ice machines at the counter. In many markets there are spirited quests toward one-upmanship at wholesaler pickup counters in terms of food, drink and giveaways to entice plumbers to your supply house. One gimmick we’ve seen employed to good effect in hot climates is to have an ice machine. On scorching days many plumbers carry ice chests in their vehicles and fill them with bottled water or soft drinks.

20. Big delivery savings. In 2003, we ran a story detailing how Collins Pipe & Supply (East Windsor, CT), then a $15 million company, managed to cut $339,000 in expenses without impacting customer service. Almost a third of those savings came from delivery service innovations that enabled them to reduce the number of company delivery trucks from five to three. One technique was to make greater use of UPS and common carriers rather than pushing small orders on to company trucks headed in the same “general” direction. They calculated UPS could make such deliveries for $3-$4, while it cost the company more than $30 for each delivery stop. Also, a strange quirk of customer psychology is that they could easily tack on the UPS charge to an order without customers complaining, while every distributor knows the grief that comes with trying to tack on a delivery charge to items transported by their own trucks. The company also reduced the size of the flatbed it leased to the largest size not requiring a commercial driver’s license to operate. The CDL requirement meant delivery disruptions every time the sole CDL licensee took a day off. This enabled all company drivers to be used interchangeably. Collins also established targets of 250 miles a day and 10 stops per day for each driver. These numbers are metrics derived from the trucking industry based on similar company and delivery parameters.

Western Water Works (Chino Hills, CA) promises to pay any customer $1,000 if it makes a mistake in one of four key areas as part of its “Grand Guarantee.”

21. The Grand Guarantee. Western Water Works (Chino Hills, CA) has come out with a bold program they call their “Grand Guarantee™.” It stands for the $1,000 they promise to pay to any customer if they make a mistake in one of four areas identified by customers as most important to them:

• Accurate shipments;

• Invoicing that matches quote;

• Products that meet job specifications;

• Delivery when promised.

To be eligible for what the company calls its “Grand Guarantee Club,” customers must meet certain volume requirements and pay their bills on time. The program puts pressure on Western’s staff to avoid mistakes, and they claim a 99.5% accuracy rate. That’s not perfect, nor will they ever be, so they have ended up giving back some money in fulfillment of the promise, which they consider a marketing expense. Each of the company’s four operating branches posts a large sign in back of the pickup counter announcing how many days have passed since that branch was guilty of a “Grand Guarantee infraction,” as they refer to it. People get real embarrassed when the number turns to zero or one.

22. Invest in professional advice to improve operations.  WinWholesale, Dayton, OH, worked with systems integrator Ciber to complete a complex project that incorporated a facility redesign, a warehouse management system implementation and a facility move. The result was a 48% increase in picking efficiency at its Dayton distribution center. The company followed four key steps to leverage innovation: tap into existing innovations, use technology events, obtain stakeholder input and measure performance.

23. Try this procedure for handling customer problems. This best practice came out of a presentation at NAW’s Executive Summit last January by Dave Griffith, president and CEO of industrial distributor Modern Group Ltd., headquartered in Bristol, PA. We think it’s worth sharing because it represents a great opportunity for independent distributors to differentiate themselves from the big chains whose top executives don’t have the time and wherewithal to make themselves available to every customer with a problem. Modern’s top leaders do so, and have established the following procedure:

• Invite customers to call, e-mail or simply walk in to discuss the problem.

• Call back if unavailable, gather data and, above all, LISTEN.

• Assign the appropriate party and resources to investigate.

• Track what went wrong.

• Identify the root cause, which may involve working with vendors or other third parties.

• Fix the root cause and tell the customer all the details. Here, the CEO will personally close out the case.

• Share the information learned throughout the organization, establish measurement metrics to prevent subsequent occurrence and hold people accountable.

• Close out the case.

• Thank the customer for bringing it to your attention, and follow-up later to assure no reoccurrence.

24. The Paperless Warehouse. We reported in 1999 that Torrington Supply (Waterbury, CT) redesigned its warehouse in March 1996 to create a streamlined, paperless facility. Not one scrap of paper is written on or printed in the receiving or picking process. Every step is electronic — from receiving manufacturers’ deliveries and putting away inventory to taking orders and scheduling deliveries. The intent was to decrease walking and picking time for its employees by narrowing the zones where material is stored, as well as placing bar-code label printers and computer terminals in strategic areas of the warehouse. The warehouse management system also improved the system at the counter, where previously employees would have to enter an order, print it, grab the pick ticket and pick the order. A study the company did of the old system found that it typically took about four minutes per line item to pick a counter order, not including entry time. In the current system, the counter people enter the order and the warehouse picks it. The average time to pick an order is about 1-1/2 minutes per line item, and there is little, if any, waiting time to enter the order.

25. Find and retain the right employees for your business. There’s no magic to this business — it all boils down to people, said former SWA President Joe Lawrence, who headed Miami-based Lawrence Plumbing Supply Co. (now owned by Ferguson). “If you have good managers, salespeople, counter people and warehouse people, and treat them right, then you’ve got a good business. The key is providing an atmosphere for them to grow and earn money.” He said that he mostly relied on referrals from people on his staff who would have to work with and manage the new people. “They have to want to work with the people we hire.”

26. Customer Satisfaction Surveys. Conduct annual surveys to learn what your customers most value in your products and in their relationship with the company. Twice a year, Torrington Supply surveys its customers to see how well it is meeting their expectations. Then they make an action plan to address customer concerns and improve those relationships. This practice works with employees as well, the company reported.

Distributors who belong to trade associations such as ASA and (pictured here) HARDI tend to run better businesses.

27. Training The Sales Force. In order to increase a wholesaler’s sales volume, inside sales personnel must have comprehensive sales training. They need to learn how to make the most out of inbound calls from existing or prospective customers. Lebanon, PA-based APR Supply Co., a plumbing and HVAC distributor, addressed these training needs through scheduling monthly branch meetings and quarterly ccompany-wide meetings that all of the company’s employees were required to attend. These meetings included some type of seminar conducted by professional motivators. The company uses all of the methods available to train its sales personnel, including continuing education programs through the American Supply Association and the Northamerican Heating, Refrigeration and Airconditioning Wholesalers Association, and computer-based training programs at its branches. Extend this practice to showroom salespeople, counter sales staff and warehouse employees, to increase their knowledge of the products they handle.

28. Passing counter time productively. One more best practice springs from Western Water Works Supply Co. At their pickup counters videos play constantly with content pertaining to product or installation training, customer testimonials or business management and motivation topics.

29. Make it simple for customers to re-order. At Wolff Bros. Supply Co. (Medina, OH), a particular customer tended to order the same items over and over again, but on occasion needed something more specialized. After recognizing the repetitive nature of most of the orders, Wolff Bros. created an old-fashioned order pad that listed the items and provided boxes where the customer could indicate the quantity for each. The customer checked off what he needed, tore the form off the pad and faxed it to Wolff Bros. When he needed something not listed, he knew to call the Wolff Bros. salesperson, eliminating the guesswork for both the customer and the sales staff.

30. Be willing to diversify to adjust to market conditions. Industrial PVF wholesaler Raritan Supply Co., Edison, NY, which is celebrating 65 years in business in April 2008, has diversified to adapt to the changing environment in which it operates. The company has developed business in underground utility products and now offers a valve automation center.

31. Recruit on the Internet. The National Association of Electrical Distributors (NAED) has launched a special Web site and marketing campaign to attract young adults to careers in electrical distribution. Carrying the theme “Power Up Your Career,” the campaign highlights advantages of electrical distribution employment, including competitive salary and benefits, growth opportunities and positive working conditions. The Web site, which targets people ages 17-34, introduces viewers to the industry and describes careers in sales, warehouse operations and the business office. Links are provided to participating NAED distributor companies’ Web sites for information and job openings. NAED builds awareness of the site through Internet marketing as well as outreach to high schools, technical schools and community colleges. Elements of the campaign target parents and school counselors.

32. Offer your showroom or facility as a meeting place. Invite professional organizations, charities and/or community groups to have their meetings or events at one of your locations. Winston-Salem, NC-based Murray Supply opens its Fuller House showrooms to local home builders and interior designers for their meetings. Members of the wholesaler’s staff have joined these groups and attend their meetings for networking opportunities and to generate business from these markets.

33. Tailor your promotions to fit your customers. Bruce-Rogers, Fort Smith, AR, a distributor of plumbing, heating and air conditioning products, achieved higher sales and profits with a promotion that rewarded customers who increased their purchases from the company with camouflage gear and apparel. Customers had to match and surpass their purchases from the same time frame of the previous year. Bruce-Rogers was able to calculate to the penny how much of its sales increases were due to the promotion. The promotion was designed to fit the distributor’s target customer at the best possible time.

Now: George Morlan Plumbing, Portland, OR, hosted a concert in its showroom in June 2007.

34. Have people on staff who can speak multiple languages. Ferguson President John Stegeman pointed out that increased diversity in its customer base makes it essential to have employees who can speak other languages. In addition, the wholesaler faces continued competition for future talent in its workforce. “As an employer, we must diversify to speak multiple languages and provide more flexible working conditions,” Stegeman said.

35. Be able to respond to the increased velocity of the contractors’ business with speedy delivery of the products they need. Some contractors are awarded jobs on a design/build basis and sometimes they begin jobs before the design is finalized. Initially they might have only square footage and a rough vision of the final project, but when it finally takes shape and they know exactly what materials they need, they have to get everything immediately. The wholesaler who can provide the fastest execution, whether by pulling goods from a warehouse shelf or getting them quickly from someplace else, will get the business.

36. Accept and manage legitimate cross-purposes between suppliers and distributors. Learn how to tell the difference between critical and “minor but aggravating” issues, according to the book, Working At Cross-Purposes: How Distributors and Manufacturers Can Manage Conflict Successfully. The concept of “win-win” is dead, but mutual success can still be a goal. Conflicts are inherent in the supplier-distributor relationship. The first opportunity for resolution of many of those conflicts is with the factory representative. For more information on this book, visit www.naw.org/cross.

37. Promote from within when possible. Modern Supply, Knoxville, TN, has achieved success with a nurturing, supportive environment that provides advancement opportunities for its employees. Dottie Ramsey, president/COO, said she shares her story when interviewing potential hires. She joined Modern Supply as a teenager, advanced from pricing clerk to computer operator to office manager to manager of the builder department and moved on up from there over the years. She told Supply House Times of other employees at the company who have been promoted from within and remarked on the employee longevity the company enjoys. “My proudest achievement is recognizing talent, nurturing and saying, ‘you can do this,’” Ramsey said. “It’s just recognizing talent within the organization, giving people a chance. The more you learn, the better you are for the company.”

38. Partner with your best customers. In an interview when he took office as ASA president, Mark Theis, then vice president of Wisconsin wholesaler H.W. Theis Co., suggested this as a solution to increased competition. “Be loyal to the customer that is loyal to you. And keep your promises,” he said. “We are a people industry and people make mistakes. But your customer doesn’t care about that. They just want the problem solved and in the end that’s what you’ve got to do.” (H.W. Theis was acquired by First Supply LLC in 2007.)

39. Use the Internet to expand inventory. Kelly Supply in Grand Island, NE, said it purchases from 700 different manufacturers and about 35% of its business comes from non-stock items. “We have to be all things to our customers,” said President and CEO Jeff Kelly in a Supply House Times interview. Each of its locations carries a different mix of product depending on its local markets. “We have to go the extra step to research and find whatever a customer needs,” he said.

40. Support a charitable cause and gain exposure. Memphis-based Equipment Supply & Distribution partnered with a vendor to be a sponsor of a golf tournament to benefit St. Jude Children’s Research. Flint & Walling, a privately owned division of Zoeller Corp., made donations to three charitable organizations that were nominated by its dealers who are members of its professional dealer rewards program. Supply New England, Attleboro, MA, was honored last year for donating excess heating and plumbing products to the Storehouse of World Vision. Grohe Americas, Kohler Co., Moen, Jason International, Elkay Manufacturing and Delta Faucet have also been recognized for their support of this organization.

41. Clearly spell out your company’s rules and expectations in an employee manual. Even if you’re careful in your hiring practices, a problem employee may slip in under your radar sooner or later. To protect yourself, have an employee manual that spells out clear-cut do’s and don’ts. Include a statement of a “zero tolerance” policy regarding physical violence, threats or intimidation toward anyone and be sure to enforce your policies evenhandedly.

42. Use the Web to access online seminars, training videos and tutorials. It can save time and travel expenses. Many vendors and trade associations offer online educational opportunities.

Then: Members of ASA’s Industrial Piping Division enjoyed an entertaining meeting in an office setting, circa 1982.

43. Form strategic alliances with non-distributors. In the 1999 report,  “Facing the Forces of Change: Four Trends Reshaping Wholesale Distribution,” issued by the National Association of Wholesaler-Distributor’s Distribution Research and Education Foundation and Arthur Andersen, the concept of strategic alliances was identified as one of the four trends that would affect the distribution industry well into the future. The report cited the alliance between W.W. Grainger and Perot Systems, in which the two companies worked together to develop an online order-entry system for Grainger’s Web site. Through the alliance, Grainger was able to gain access to technology without having to make a significant investment in software, and Perot Systems gained valuable experience in working with a broad industrial/MRO customer base and product lines.

44. Join industry associations, buying groups and cooperatives related to your business. In addition to cost-savings from shared programs, members benefit from networking opportunities. One vendor noted that distributors who belong to trade associations tend to run better businesses than those who don’t.

45. Identify your most profitable and unprofitable customers. Some years ago, Bedford, MA-based F.W. Webb worked with a consulting firm to come up with an activity-based costing (ABC) model that eventually morphed into activity-based management. F.W. Webb’s IT department evaluated customers, ranking them by their net profit dollars. The best performing branches tended to have almost all customers on the profitable side of the ledger. Other branches had more accounts showing negative profitability — it cost more to service those customers than they contributed in net profit dollars. F.W. Webb did not want to “fire” those unprofitable customers but instead focused on figuring out how to make them profitable customers. This meant improving the business practices of those customers.

46. Discover your company’s strengths so you can focus on core competencies. Core competencies are value-added features that are unique and set your company apart from the competition. A core competency must be valued by the customer, hard to copy quickly and transferable to other products or markets. It should entail a group of skills rather than a single skill. To identify these competencies, a company must systematically look at itself, the needs of its customers, and the strengths and weaknesses of its competitors so it can determine where it excels. This was discussed in a 2001 article by contributing editor Jim Truesdell.

47. Be vigilant in quality control. Steve Anderson, president of Central States Industrial Supply, told Supply House Times in a 2002 interview that his company’s maintenance of its ISO 9002 quality system was one of the ways it maintained profitability in an increasingly competitive environment. At that time, Central States was one of the few distributors in our industry to be registered ISO 9002. Also back then Anderson said his company had embarked on a Six Sigma program to continue to drive costs out of the system while improving service to the customer.

48. If a customer needs it, we will get it, anywhere in the world. So said Phil Cannady, owner and president of Mechanical Pipe & Supply in Nashville, TN. He noted that the company has reaped rewards from that philosophy. In a 2002 interview, Cannady said his company did business in 27 states and Mexico from its single branch in Nashville. “Why would we need other branches?” Cannady said. “Our territory served extends from London to Singapore. We can go anywhere we can fly, drive or walk.”

49. Practice Customer Experience Architecture to learn how best to add value for your specific customers. Evaluate all of the points of contact between the customer and your company — from the way employees answer the phone, to the striping on the parking lot, to the toilet paper in the restrooms. Key indicators show performance gaps and provide information for necessary improvements. The focus is on how your business appears in the eyes of your customer, according to consultant Mike Dandridge in a 2006 article.

50. Drive costs out of the supply chain. Supply House Times reported on a joint project between the American Supply Association’s Industrial Piping Division and Associate Member Division that identified 23 criteria to help distributors judge supplier excellence. Key criteria revealed in the 2001 study fell under the subheads of order management, electronic commerce, inventory management, logistics management and sales/support productivity.