Editorial...High Velocity Distribution
Case in point: a panel discussion sponsored by the American Supply Association's Industrial Piping Division at September's ASA Convention/Network '05 event in Orlando, Fla. “The Voice of the Customer: The Key to Mutual Profitability” featured three prominent mechanical contractors talking about their expectations of distributors, and their frustrations. Moderated by Columbia Pipe & Supply's Tim Arenberg, the program gave insight into rapidly changing construction methodology.
According to Mike Anderson of J.F. Ahern Inc. (Fond du Lac, Wis.), more and more of their jobs are design/build, and some are awarded even without the design finalized. “The response time continues to shrink while the supply side is not keeping up,” he scolded. “Distributors must understand the velocity of our business. We might not have a bill of materials, just square footage to go by. I realize you can't have everything we need on the shelf, but you must find a way to execute faster.”
Malcolm Sweet, president of St. Louis-based Condaire, Inc. said, “The trend is toward more negotiated work on the fly. Everything we do seems to be last minute. The process is not driven by contractors, but by our customers. We contractors cannot control the actions of owners and consulting engineers.”
The third panelist, Joe Whitney of North Shore Mechanical Contractors, Topfield, Mass., described his specialty as servicing semiconductor and pharmaceutical clients. “The reality of our business is that everything revolves around avoiding shutdowns, and you have to help us do that. You have to be in the ballpark, but the high purity work we chase is not about price. Most important is, you have to be able to ship on a timely basis.”
Another major complaint of the panelists was recurring mistakes. “Not a day goes by when I don't have to spend time working on paperwork issues related to distributor invoices, back orders, material tracking reports and so on,” said Anderson.
Sweet took note of deliveries increasingly coming from more than one warehouse location, and said better documentation is needed on packing slips to account for this. He spoke of headaches arising with FDA-certified jobs where hard-copy signatures are required on material reports. Sweet added that foreign materials are widely accepted on jobs today, “but if the quality isn't there and we can't weld it, that's a big problem. You have to get it right.”
All three of the contractors expressed dissatisfaction with wholesalers' outside salespeople. “I don't need a salesman calling on me to take me to a ballgame,” said Whitney. “Usually, (I get better results from) someone on the inside who knows what we need and can support us technically.”
Anderson iterated the same theme. “We haven't found outside salespeople to be very helpful,” he said. “The inside sales staff and branch managers are key for us.” He noted that his company has reduced purchasing from 20 to only six distributors. “Technical support from their manufacturers was the key ingredient in those we chose.”
Sweet offered that with big mechanical contracting companies, the outside salespeople need to interface with more people than the owner, such as estimators, purchasing agents, foremen and superintendents. “Your salespeople need to be more involved in the industry, and bring us information more quickly.”
One thorny issue that came up for discussion concerned the practice of large companies putting jobs out for bid but not awarding them until many months later, yet expecting the prices to be the same. “Big corporations budget for capital expenditures one or two years out, and when a budget gets resurrected they won't change,” explained Sweet.
Wholesalers in the audience winced, and drew attention to 2004's skyrocketing PVF prices. Whitney responded, “I understand that you distributors can't eat that, but then what we need is help in value engineering to use less material on the job.”
The contractors also voiced the usual irresolvable discontents about issues such as return goods policies and the lack of compensation for labor costs associated with material failures. However, for the most part they issued cries for help that sounded to these ears like terrific opportunities for distributors. At the end of the program, moderator Tim Arenberg asked them to assign letter grades to distributors overall. Their grades ranged from C to B-.(Whitney said he would give a grade of "C" for the industry-at-large, B+ for his distributors.)
In the Q & A portion of this program, various distributors spoke up to tell of obstacles they face, and there was much validity to many of their complaints. Yet, the thought kept occurring that “the customer is always right.” This was more than a gripe session. Take contractors at their word when they say the velocity of their business is increasing and mistakes are growing more costly. Then figure out a way to solve their problems.