Gearing up for change - and the rapid pace at which it’s happening - occupies the minds of PHCP wholesalers still struggling with a tough economy. Technology, training and vendor relations rank high in their thoughts as well.
For the second consecutive year, Supply House Times and American Supply Association brought together a panel of leading distributors at ASA’s annual convention to speak out on industry issues. The group that gathered Sept. 15 in Las Vegas consisted of:
David Finkel, Davis & Warshow, New York;
Reggie Hickman, Brock-McVey, Lexington, Ky.;
Patrick Hughes, Jabo Supply, Huntington, W. Va.;
Joe Poehling, First Supply, Madison, Wis.;
Rick Schwartz, WinWholesale, Dayton, Ohio; and
John Strong, Economy Plumbing Supply, Indianapolis.
The topics discussed ranged from company operations to the economy to health-care reform. As we did a year ago, we’ll run this article as a two-part series, this month and in the February issue of Supply House Times.
Topic: How has your business changed over the last five years?With one notable exception, the wholesalers on the panel have had to refocus and right-size their companies due to reduced revenues. The tough times, however, also have brought them closer to their customers and increased their reliance on technology.
“When the housing bubble burst and the recession began, everyone had to focus on commercial construction and repair and remodeling, which we did,” Schwartz said. “But most importantly along those lines, we’re taking a look at how we’re servicing the customer and realizing that they’re in the same boat we are.
“We want the customer to survive so we have to sit down with the customer and figure what we can do to help their businesses and their efficiencies. We’re trying to empathize with their situations. It’s not all about us and our woes in these difficult times, it’s also about them.”
Faced with increasing competition on a smaller number of jobs, contractors look to First Supply for a unique selling proposition they can take to the marketplace, Poehling said. One example is a quick-ship program for a large mechanical contractor. Offering a customized solution for an individual contractor is different than the one-size-fits-all programs the wholesaler used to offer.
Davis & Warshow has had to make some tough decisions about the customers it does business with, Finkel said.
“When your business was booming you weren’t worried about the one customer who was using you as a bidding service or taking up so much of your resources in order to service them and still demanding the lowest price,” he said. “When your resources are limited, you learn you really have to focus on the customers who want to be a partner and that will help the profitability of your company.”
Davis & Warshow is making better use of technology, which also helps the bottom line. “The benefits of EDI and VMI in taking the cost out of the process are huge,” Finkel said. “We need to take advantage of that wherever we can.”
Economy Plumbing Supply has taken time during the downturn to re-engineer its technology and train its staff, Strong said. With new home construction and remodeling both down dramatically, the wholesaler looks closely at the product mix and displays in the showroom.
“The $1,000 faucet has become a $250 faucet,” he said. “We have invested more in affordable luxury.”
The last five years have seen positive growth in the industrial PVF market in West Virginia, Hughes said. “The industrial and chemical side has been down a little but the energy sector has been very good in oil, natural gas and coal,” he added. “And it’s going to be a good year this year.”
Topic: How are you dealing with the roller-coaster economy?Answers to this question usually came back to having the right people in place and measuring everything associated with the company. What Hughes shares in common with the other panelists is Jabo Supply’s emphasis on its employees.
“With business being as good as it has been, we’ve taken time to do more training and we’re more selective in our hiring,” he said. “With the training, we take advantage of what ASA as well as the manufacturers have to offer. We don’t find there are any more good people to hire now than in good times. There’s a reason many of them are unemployed.”
Brock-McVey trains its employees on doing the fundamentals of good customer service such as returning phone calls, Hickman said.
“We’ve told our people to just control what you can and don’t get too far off the beaten path,” he said “It’s basic stuff when you are in contact with customers. Build an order, build a ticket. Just a dollar a ticket adds up. You don’t have to get too exotic when you focus on customer service.”
Training materials from ASA have helped Brock-McVey educate its employees and its customers, Hickman said. The wholesaler has conducted business classes for HVAC contractors on knowing what their overhead costs are. Also helping Brock-McVey deal with the economy are the ideas company executives get in networking through ASA and its other professional affiliations such as the WIT buying group, Hickman said.
Measuring everything - including the number of feet that walk through the showroom door - has helped First Supply navigate the economy’s ups and downs, Poehling said.
“That’s pretty untypical for us, but now it’s measure, measure, measure,” he said. “We say, ‘Show me the data,’ but that’s what you have to do.”
Topic: Has the economic downturn affected the way you plan to supply your customers in the future?The downturn has opened the eyes of many distributors who now see the benefits of customer relationship management software and other technology that will help them supply their customers more efficiently.
“We’re sharpening the tools we have to service the customer, and that’s good,” Schwartz said. “We’re a slow-to-adopt industry. This slowdown gives us time to reflect on the knowledge that’s available.”
He believes e-commerce will become more popular with WinWholesale’s contractor customers, many of whom are operating with fewer people than in the past.
“The person who used to place orders is probably not there anymore,” Schwartz said. “So, the contractor is going home at night and going on an e-commerce site to price jobs to get them out the next day or even that evening. That’s just the way it is these days.”
While Davis & Warshow doesn’t have an e-commerce site in a traditional sense, the wholesaler has opened its inventory and pricing to their partner customers - not all customers - and they’re using it, Finkel said.
“The amount of effort it reduces on our side is enormous,” he noted. “It was like, all of a sudden one day there was a fax machine and you weren’t taking orders over the phone. Now they’re actually entering orders into our system. The time savings is huge.”
Topic: What issues are you dealing with today that previous leaders at your company did not?Wholesalers of all generations have had to deal with downturns in the economy and employee issues, Finkel said. They’ve faced changes in technology too, but this time there’s a difference.
“It’s just been a very rapid change in the power the customers have to get information and pricing both inside and outside the market,” he said. “You have to embrace it. You have to work with it. But you also have to be mindful that someone who comes into the showroom can find that product on the Internet for less.
“So you have to be prepared with that value proposition and partner with manufacturers who do a good job of policing the Internet so the lowest-price guys aren’t able to come up with their product.”
The rapid pace at which technology is changing is the biggest difference for today’s leaders at Brock-McVey, Hickman said. Access is another issue they face. As an example, Hickman said he had eaten breakfast that morning with someone who was unable to answer the 161 emails he had received the previous day due to being involved in ASA convention activities. The man was dreading the possibility of another 160 emails that day.
“He could be facing almost 400 emails in 48 hours,” Hickman said. “How do you manage that?”
Compliance with government regulations is required at levels not seen by previous company leaders, Schwartz said. With states being starved for revenue, wholesalers are seeing an increase in both sales taxes and audits.
“You’re continually being audited for sales tax compliance,” he said. “It’s a full-time effort for us. It takes time away from your focus on the business and your customer.”
Strong agreed: “It’s a tremendous distraction. It sucks your resources. Even if you’re not being audited, you’re preparing to be audited.”
In West Virginia, Jabo Supply has had to deal with the U.S. EPA and DOE as well as powerful state agencies, Hughes said. “They definitely could change our market, especially as far as what EPA is doing,” he said.
This generation of wholesalers is more active politically, and they have to make sure political leaders are educated about the PHCP distribution industry, Poehling said. In Wisconsin, First Supply is trying to prevent the state government from moving much of its purchasing to the e-commerce site of an out-of-state distributor.
“We have to explain to the state that in making that move it will mean losing 10 jobs in Wisconsin because we just can’t afford those 10 people if they take that chunk of business and move it to a company in California,” he said. “If that’s what the state of Wisconsin wants, that’s what they’re going to get. But they have to understand their actions will have an impact on jobs.”
Topic: Are your relations with manufacturers better or worse?The wholesalers on the panel agreed their relations with vendors have grown stronger through the downturn. They’re working more closely together as partners with a rediscovered sense of appreciation for each other.
“We’ve got to work to keep them healthy, and we all have to work to improve the efficiency of the channel,” Schwartz said. “We’ve had several meetings with manufacturers over the last 18 months that weren’t structured at all on programs and pricing. They were all structured on how to improve efficiencies in working together and how we grow together.”
When a wholesaler has a vendor who is a true partner, it changes the whole dynamic and it makes everyone more profitable, Finkel said.
“There was a time when a wholesaler would be very uncomfortable showing a manufacturer what he has in inventory on a daily basis and being so open about what he was selling everyday,” he noted. “Now the wholesaler is saying, ‘Here’s all my data and how we’re selling your product. You fill in the holes in my inventory.’
“It’s a terrific relationship when you get it up and running but the openness is something new that technology helps foster.”
First Supply has discovered it has fewer relationships with manufacturers today, but they are deeper and more focused, Poehling said.
“Technology allows you to really focus on the relationship and other issues such as education instead of the details of what’s in the inventory,” he said. “You get rid of some of the mundane details and move forward into more of the relationship-type partnering that needs to be done so we can figure out how we go out to educate our joint consumer whoever that may be, a contractor or someone else.”
For Jabo Supply, being associated with the Delta buying group and attending ASA and regional meetings has resulted in sitting down with manufacturers four or five times a year, Hughes said.
“That definitely helps in building that relationship,” he said.
Part 2 of this panel discussion will appear in the February issue of Supply House Times.