Focusing on core competencies
As we tout the advantages of Market Center Distribution to manufacturers, contractors and end users we should consider what is the core value proposition we offer to those different constituencies. The core value proposition is what an organization tells its customers when it has a very brief time - say 30 seconds - to state its case.
What is it, then, that makes local distribution unique and special? A suggestion might be: "We help manufacturers bring their product to market in the most efficient way by providing local customer relationships, on-site warehousing, and prompt delivery to their target customers. Because we do this more efficiently than anyone else, we provide maximum value at the lowest cost to end users."
Consultant Michael Marks, a principal at Indian River Consulting Group, points out three criteria for something to be a core competency. These are:
1. It must be valued by the customer.
2. It must be hard to copy quickly.
3. It must be transferable to other products or markets.
A bundle or group of skills is necessary to make up a core competency rather than a single skill. Therefore, if delivery is a core competency for a wholesaler it does not mean it has the biggest trucks. It means that the wholesaler's bundle of skills and attributes results in putting the product where it needs to be when it needs to be there. This may involve a fleet of trucks, knowledgeable and courteous drivers, coordination between the order and shipping departments, relationships with skilled common carriers and a good shipment tracking system.
According to Marks, core competencies are normally defined by customer market segments. The process begins with a business mapping out its current segment shares and then building a list of core competencies for each segment. The cost of serving each segment should be evaluated and then the cost of growing each segment estimated. This means looking at existing competencies that appeal to that segment and which core competencies you desire for each one. A price tag should be applied to what it will take to grow or develop that competency and be juxtaposed against the potential growth of that market segment.
If Market Center Distribution is defined as "control of the channel of distribution through the blending of information technology with regionally established business centers, staffed and managed by persons familiar with local markets and customers," then competencies must be identified to accomplish control of the channel.
James Healey, education director of the Northamerican Heating, Refrigeration and Air Conditioning Wholesalers Association, recently identified lists of competencies based on four fundamental objectives of wholesaling: product availability, cost effectiveness, adminstrative certainty, and technological progress. These competencies are stated not as a prerequisite to being a successful Market Center Distributor, but as a means of provoking internal discussion as wholesalers ponder just what are their own unique competencies.
Product availability - Meeting this objective entails all the things Market Center Distribution wholesale employees do to ensure customers have access to appropriate products in timely fashion and properly located, including:
- Fair pricing,
- Good delivery,
- Desirable brand names,
- Express counter service,
- Technical help,
- Special handling,
- Convenient hours,
- Web ordering, and
- Specialized inventory control.
Cost effectiveness - Far deeper, more profound than "price," meeting this objective involves the Market Center Distribution wholesaler as a willing partner in the total activity of each customer as he uses products acquired from the MCD wholesaler. The wholesaler provides:
- Application advice,
- Special pricing on large orders,
- Quotation service,
- Related items,
- Warranty assistance,
- Return goods policy,
- Complete order fill,
- Merchandising assistance, and
- Joint sales call service.
Administrative certainty - Customers acknowledge the Market Center Distribution wholesaler is meeting this objective when they recognize the MCD wholesaler as "knowing what he's doing." The MCD wholesaler acknowledges the importance of the objective as the company strives to keep all customer dealings "hassle-free," accurate, pleasant and efficient. To accomplish this, wholesalers must:
- Conduct regular customer surveys,
- Have a Quality Improvement Program in place,
- Follow through on back orders,
- Provide timely price information,
- Appropriately enforce its credit policy,
- Use an outside/inside integrated sales team, and
- Have a user-friendly communications system.
Technological progress - Far broader than "product knowledge" or "new models," progress here connotes the Market Center Distribution wholesaler's efforts to keep customers in a "state-of-the-art" mode - not only in what they buy from the MCD wholesaler, but in best uses of those products and/or alternative products. MCD wholesalers will:
- Track new product introductions,
- Adapt design innovations to local needs,
- Conduct ongoing customer training sessions,
- Provide information on new applications,
- Keep customers informed on current regulations, and
- Keep the sales team skilled in substitute product offerings.
This list of potential competencies is by no means complete, even under the listed objectives. Different companies may highlight different aspects and many may define additional fundamental objectives.
Uncover strengthsIdentifying competencies requires a process of self-evaluation. Companies must systematically look at themselves, their customers' needs, and their competition's strengths and weaknesses to find where they are excellent.
Some 15 years ago this process was addressed by Healey and the late James Wilder, then executive vice president of NHRAW. They worked with consultant Stephen C. Zaremba to develop a self-evaluation procedure to improve wholesaler customer service. Healey recently discussed this process in light of our developing concept of Market Center Distribution. As one of the precepts of MCD is understanding what each customer wants, the exercise is intended to uncover company strengths and then use the information to:
- Distinguish ourselves from the competition,
- Inform key customers why they should buy from us and segment our customers more effectively,
- React more effectively to changes in the market,
- Improve supplier relations, and
- Uncover important training needs.
If we are satisfying 95% of our customers we are losing a lot of business. Poor service sends more customers away than price or quality.
A conventional view of wholesaling - and of wholesaling companies - focuses on "services" through which the wholesaler seeks to "add value" to the products being distributed. These are basics such as access to inventory, granting of credit, some form of delivery, accurate billing and product knowledge assistance. Delivery of these various services actually occurs through completion of a series of tasks within our organizations. This means that success in "adding value" depends totally upon the degree to which our people excel in performing tasks jointly and individually. Our customers today take it for granted, as a condition of our doing business, that we will perform these functions well. Doing them well will not in and of itself cause customers to come to us. They will merely cease to buy from us if we fail to deliver and go to competitors who will provide all the "givens."
Discovering our strengths then requires us to look beyond the givens to find out why customers come to the conclusion that our company merits their business. It leads us back to the four objectives of wholesaling defined above. Concentrating on the objectives, rather than on the more evident wholesaler functions, will make our evaluation more people-oriented rather than task-riented. Serving our customers excellently is a process rather than a single act. The process can break down whenever there is a lack of excellence (even temporary) anywhere in the company.
Evaluation requires that we assess our performance of the objectives.
Emphasizing excellenceReviewing this is a cross-functional, rather than departmental, activity. Therefore it will require meetings with people from across the company led and planned by someone in top management or with the clear support and blessing of top management. Care should be taken to keep the meeting from getting too large where discussion might be inhibited. To involve more people it is suggested that multiple meetings be planned, with care taken that no one department or person dominates any session.
Good leadership is important because there is likely to be some "start up" hesitancy. Thinking about the company and its activities in an unconventional way may be very difficult for some employees. To get things going, distribute an agenda. The leader should make it clear that the meeting is not designed to change things at this time or to rewrite policies, just to search for the excellent points in how the organization is currently operating. The purpose of these discussions is to assist all employees in understanding the process of serving customers and the importance of individual personal contributions to that process. It teaches us to constantly emphasize the excellence our company provides as a means of keeping customers coming back.
When discussing the "product availability" objective, for example, we look at the activities that comprise this and try to think of specific things that we do that really contribute to product availability as a value for our customers. To provoke discussions we might consider:
1. Are we measurably better than our competition in this area?
2. What tasks do each of us do especially well that relate directly to the objective?
3. Along with some tasks that we do well, we need to be conscious of how we fail to meet the objectives and think of specific ways in which we fail.
4. In what specific ways could we do our tasks better in order to improve our ability to meet the objective and make a customer want to buy from us?
Responses should be tabulated and retained as a blueprint for management to come up with a finite list of "how we are excellent." Many companies "claim" these virtues but really don't deliver. Let us strive to come up with a real list to communicate and define where we need to improve to truly be "excellent."
Marketing the strengths we define can take many forms, says Healey. Suggestions might be:
- Develop a company slogan,
- Write a mission statement,
- Prepare a short term strategic plan,
- Prepare a company brochure,
- Develop a sales promotion program to match company strengths,
- Publish a customer newsletter to keep customers reminded of company strengths,
- Partner with customers and suppliers that cater to company strengths, and
- Design trade advertising.
An understanding of our companies' strengths, developed through this exercise, will allow us to begin building on them as core competencies, a key component of Market Center Distribution.