Master distributors continue to gain industry influence.

The economy has played a big role in wholesalers turning more and more to master distributors to fill orders. Photo courtesy of Your “other” Warehouse

Dennis Holdenwas in a major jam.

Holden, the owner of Las Vegas-based Ideal Supply, had a customer with an urgent need for valves and fittings used in conjunction with pumping chocolate syrup at a granola bar factory in New Mexico. Holden did not have the valves and fittings in stock. This was Friday afternoon and the items had to be on-site the next morning.

“They lose $50,000 an hour if they aren’t pumping,” Holden states.

Holden quickly turned to Los Angeles-based master distributor Industrial Valco. The valves and fittings left Industrial Valco’s warehouse Friday night and arrived at the factory Saturday morning at 7:30. Crisis averted. Smiles abounded.

This type of success story has become a familiar refrain with PHCP wholesalers. As the economy continues its arduous climb out of a deep financial sinkhole, master distributors - by definition distributors who only or mainly sell to other wholesalers - are gaining influence by not only stocking those hard-to-find items, but by presenting a customer service package that ensures both the wholesaler and end user walk away satisfied.

Master distributors thrive by stocking hard-to-find items. The Distribution Point Customized Service Rep Kelli Wales displays Saniflo’s Sanishower water pump. Photo courtesy of The Distribution Point

Filling in the blanks

It’s no secret why the importance of master distributors is more profound in current times. Look no further than the recent economic downturn, which has resulted in widespread inventory reductions.

“Due to the recent recession, pressure was put on the entire PVF industry to decrease inventory levels,” statesBob Cooper, president of Commerce, Calif.-based industrial PVF master distributor Smith-Cooper International. “The same applies to master distribution, but it added another level of expectations by our customers. With low inventories at the wholesale level, master distributors were expected to have inventory available at all times.”

Chip Devine, vice president of multi-channel business services at The Stock Market, sees lower wholesale inventories as one key factor, but also is noticing a trend where wholesalers are exploring new frontiers and thus relying more heavily upon master distributors to help with the transition.

“Many distributors are now diversifying and entering new businesses they were not involved in the past,” he states. “The access to other products through master distribution has made these transitions easier.”

In other instances, wholesalers may encounter vendors who require certain minimums on items. “What if the distributor doesn’t need all that merchandise or has cut back on quantities?” asksDale Landy, owner of Great Neck, N.Y.-based Kolson, a master distributor of decorative hardware and bath fittings. “A vendor could be out of stock and it gets back ordered. Ordering from a master distributor is a good idea. Foremost, you want to satisfy the customer. You want happy customers and you want repeat customers.”

David Spence, an inside salesman at Roanoke, Va.-based CMC Supply, ran into the vendor back order dilemma recently with a customer in dire need of a faucet. “I couldn’t find it anywhere and the manufacturer was out of it. There was a long lead time of four to six weeks,” he says. Spence turned to Moody, Ala.-based master distributor The Distribution Point.

“They had the faucet in stock, shipped it out that day and the customer had it in two days,” he adds. “Master distributors make us look great.”

In an extremely competitive environment, master distributors are constantly looking for ways to increase order-fulfillment efficiencies. Photo courtesy of The Stock Market/Ferguson

New-age customer service

Just like retailers, many master distributors are developing e-commerce programs designed to provide another way to connect with their customers and provide an added outlet to place orders.

“As long as master distributors are participating in e-commerce distribution and fulfillment, they are going to enjoy growth,” statesMike Hogenmiller, general manager of Baton Rouge, La.-based master distributor Your “other” Warehouse. “It’s all about how the Internet is going to grow and everybody is betting it is going to continue to grow.”

Foxborough, Mass.-based Metropac Industries, like a growing number of master distributors, has a special web portal for customers where an ID and password are required to access line quantities and place orders.

“It’s accounting for more than 50% of our sales,” Metropac Vice PresidentBryan Cosentinostates. “Our Web order-entry system gives our customers another option to utilize in order to conduct business with us. It allows them to access our real-time inventories, pricing and images, cross-reference information and place orders. When our customers use the Web order-entry system, we pass along extra discounts. It’s a win-win situation for everyone.”

Mollie Donohue, The Distribution Point’s director of marketing, says while e-commerce sites are helping tremendously, traditional ordering methods cannot be ignored.

“There is still the strong need for people to call and have that one-to-one contact,” she notes. “We’re customizing those different services and needs. Our job is to get info to the customers and help them the best way possible.”

Landy, whose Long Island facility features two 5,000-sq.-ft.-showrooms, falls into that traditional customer contact category. Not a fan of e-commerce sites, she feels there is no substitute for human interaction with well-trained staff in a brick-and-mortar showroom environment.

“The human contact aspect is still very important. They can walk in here and comfortably select their merchandise,” she says. “If a problem ensues afterward, we are here to help. People will remember how well you solve their problems.”

Solving customers’ problems includes having a wide variety of lines available through master distribution channels. “Master distributors are expected to have it in stock for immediate shipment. Our customers are supply houses. They usually have the A and B items, not many C’s and no D’s,” saysErnie Coutermarsh, senior vice president at Amherst, N.H.-based CD Sales.

“As a master distributor, it is our business to stock A through D. We actually get more calls for D items. If you tout yourself as a master distributor and someone calls and asks for C’s and D’s and you don’t have them, they will say, ‘You are no better than me. We both don’t have it.’”

Master distributors are investing in their work forces. “You can’t have a great company without investing in your people,” The Stock Market’s Chip Devine states. Photo courtesy of The Stock Market /Ferguson

Need it yesterday

Part of conquering the customer-service Rubik’s Cube for master distributors is getting orders to customers in as short a time frame as possible, which entails providing competitive and efficient shipping programs.

“We had a plumber come in with specs for an American Standard flush-valve toilet,” statesJudy Newman, owner of Covenant Plumbing Supply in Fayetteville, Ga. “They needed to get an inspection done and needed that toilet ASAP. We’re not an American Standard dealer. We ordered it from The Distribution Point. These are the times for us that are most important. You don’t want to send them somewhere else. If we are their supplier, they expect us to supply. Hopefully, our customers remember we went the extra mile.”

Spence adds: “When there is a customer sitting in front of you asking when can I have it here, it’s nice to know you can tell them you should have it for them tomorrow. It’s a great benefit for that guy on the commercial job that has his back against the wall and needs something really fast.”

Masters of the future

Most in the industry see more small glimmers of light at the end of the recessionary tunnel. As the economy continues its recovery, wholesale inventories figure to remain lean, leading to a continued reliance on master distribution.

“We work with big and small companies with different needs that are still dealing with this economy,” Donohue says. “We’re looking to develop stronger relationships with them and find their needs and provide them what they need as quickly and as effortlessly as possible so they can win a sale for themselves.”

In a day and age where solutions are expected yesterday, master distributors also are staying ahead of the curve by heavily investing in their work forces.

“Our employees are our main priority,” statesCharlie Roche, vice president of sales at Worcester, Mass.-based industrial PVF master distributor NAPAC. “We have a small group, but we have a very good group. We have the same core of people that have been here the last 10 years. There’s familiarity. Customers know the person they are talking with. They know that same person is going to go out to the warehouse and follow up on their order.”

Devine feels employee investment should never have a qualifier attached to it. “It’s not just important to invest in your employees in these times,” he says. “It’s important to always invest in your employees all of the time. You can’t have a great company without investing in your people.”

Newman recalls a recent customer who came in with a broken plumbing fixture purchased at her supply house. Through her master distributor relationship, the problem was solved quickly and satisfactorily.

“You can’t let a customer stand there with something broken,” she says. “They paid for something and it broke three months later. Our job is to see they are satisfied and taken care of. That is where your master distributors are priceless. I wonder how we get by without them?”

Metal, oil and natural gas prices are helping drive business to industrial PVF master distributors. Photo courtesy of Smith-Cooper International

Demand increases for PVF master distributors

Merit Brass Executive Vice PresidentAlan Lippsays look no further than metal prices to understand why industrial PVF master distributors are essential players in the industry.

“Intense price volatility, particularly in the stainless-steel side of our business, is the primary reason why many distributors continue to reduce their physical inventories,” he states. “This general aversion to risk has been a catalyst for increased dependence on master distributors.”

That means having a comprehensive menu of inventory available to wholesale customers. “The just-in-time inventories necessitate lower investment dollars, but it highly commoditizes inventory,” notesRob Raban, president of Los Angeles-based Industrial Valco.

“When inventory is commoditized, it creates shortages on C and D items that are not able to be stocked to meet demand swings. Those demand swings, which happen every day, create the opportunity for master distributors to exist.”

In addition to keeping an eye on metal prices, industrial PVF master distributors keep constant tabs on the swings in natural gas and oil prices.

“We would all like to see oil stabilize, but it’s my belief that the oil industry is going to be a very volatile industry for many years to come,” statesBob Cooper, president of Commerce, Calif.-based Smith-Cooper International. “While energy prices will continue to be a driving force in the industrial PVF market, we hope that metal prices stabilize. If recent years are any indication, I would anticipate increases in the future.”

Lipp adds: “High oil prices continue to drive the industrial PVF sector’s demand growth. Epic political dysfunction notwithstanding, the election year 2012 should prove to at least maintain healthy demand levels of the last couple of years. If $100-plus oil prices persist, it would not surprise me to see nickel prices defy most prognosticators’ forecasts and beat last year’s average price ($10.38/lb.).”

With demand fluid, industrial PVF master distributors are making sure they are seizing the opportunity with superior customer service.

“With the enhanced importance of master distributors have also come increased service expectations throughout the PVF distributor community,” Lipp states.

Raban adds: “It’s our job to be prepared to do business the way our customers want to do business.”