Best Practices in Wholesaling: The Indispensable Distributor
Yes, it's a tall order, but not an impossible one. Offering service built around customer needs is one of the most obvious but effective ways companies make themselves indispensable. Furthermore, improving customer service does not necessarily require capital; often, it only calls for taking the time to listen to customer needs and find ways to address them. In the distribution industry, the delivery process offers the richest opportunity for service improvement.
Thinking differentPlumbing, HVACR and industrial-PVF distributors can glean valuable insights for improving their levels of customer service by looking outside their own industries - and outside distribution in general. At Arthur Andersen, we believe that this "out of the box" thinking leads to breakthrough ideas for business improvement.
For instance, a hospital dramatically improved patient satisfaction after taking cues from a world-class hotel, and an electronics company was able to kick the quality of its delivery process up several notches by studying a legendary pizza chain.
Considering how companies in other industries successfully execute such best practices, distributors can find creative inspiration for process improvement within their own operations. Following are some examples of how specific actions enabled companies to attain broader goals:
- Understanding customer needs and wants. The idea sounds elementary, but distributors are often so focused on the everyday details of taking and fulfilling orders that they don't find time to analyze whether they're missing something in serving their customers.
To stay attuned to what customers want, Texas Nameplate Co., a Dallas-based manufacturer of identification labels that appear on consumer and industrial products, uses what it calls "listening and learning strategies." These strategies range from salespeople inquiring about customers' future plans and directions to on-site visits to learn exactly how a nameplate is used in the customer's manufacturing process. Both strategies offer TNC a chance to better understand current and future customer needs.
TNC also conducts annual surveys to learn what customers most value in TNC's products and in their relationship with the company. One survey revealed that several high-volume customers, each of whom uses the same nameplate all year, would rather not take delivery of a whole year's supply at one time.
In response, TNC changed its delivery process to provide small batches of plates every few weeks or months, but still allowed the customers to negotiate quantities, prices, delivery methods and schedules just once a year. By responding to their customers' needs, TNC strengthened loyalty among a key customer base that now contributes 30 percent of the company's revenues.
- Tailor the delivery process to customer needs. Allegiance Healthcare Corp., an Illinois supplier of health-care products to hospitals, has perfected this best practice. Allegiance noticed that their customer hospitals were warehousing large quantities of supplies. However, frequently used supplies were often out of stock, while seldom-used supplies took up valuable shelf space.
Allegiance saw this disparity as an opportunity to serve customers better. Rather than simply delivering the products and letting the hospitals worry about distribution and inventory maintenance, Allegiance created the ValueLink program.
ValueLink offers hospitals just-in-time supply and replenishment services. Each time a hospital employee uses an item, an EDI system linking Allegiance to its customers generates a replenishment order. At some hospitals, a vending machine-like dispenser performs this function. The EDI system interfaces with the patient billing system and general ledger, eliminating the paperwork that would otherwise be necessary.
Allegiance streamlines the actual delivery process, too, allowing ValueLink's hospital customers to receive supplies according to each hospital's and even each department's wishes. For some hospitals, Allegiance divides the supplies into department-sized batches, places them in tote bins, and delivers them to each department, ready to open and use on the patient.
Although customers do incur additional costs for the ValueLink program, they realize considerable savings from the program because they no longer have to employ someone to go to different units to check product inventories and develop product orders. Allegiance estimates that ValueLInk saves its customers an average of $500,000 or more each year, resulting from an improved replenishment process, more efficient use of storage space and supplies, and the elimination of multiple vendors.
- Think beyond current practices to develop innovative delivery solutions. GraniteRock Co. of Watsonville, Calif., happened onto a breakthrough idea while trying to address customer needs. Customer surveys indicated that at the top of the wish list for GRC's quarry customers was faster loadout of the company's ready-mix concrete and rock, sand and gravel aggregates into their trucks. Because customers own or lease the trucks, every loading minute counts. Not only did the loadout take too long, but GRC's system was imprecise, leaving many trucks underloaded.
GraniteRock employees had a series of problem-solving meetings to discuss improving the loading process. One quarry operator suggested that the loading machinery should function like an automatic teller machine.
This out-of-the-box idea led GRC to develop its own automated system, which has become the gravel-dispensing equivalent of an ATM. Though gravel is heavier than $20 bills, the principle is the same - delivery of a specific amount of product automatically. GraniteXpress started out with cards similar to those used in ATMs; truck drivers would hold them up to a card reader, which notifies the weighmaster that the truck is on the scale and expedites loading. After the system went into effect, loading time plummeted from 24 minutes to 61/2 minutes.
The second generation of GraniteXpress, which uses radio frequency transmitters on the trucks and RF receivers on the loading machinery, is now being tested on GRC's own trucks.
As these examples illustrate, by taking the time to really understand customer needs, your company can uncover new opportunities to serve customers in ways they never imagined.
So don't just carry on with business as usual. Go ahead. Come up with some new ideas to provide the highest level of service your customers have ever seen. Make yourself indispensable.