Pumping up plant profitability
Susan Avery -- Purchasing, 10/7/2004 2:00:00 AM
There are scores of ways industrial distributors can help purchasing operations pump up plant profitability. They help buyers consolidate the supplier base, streamline internal processes and manage inventory levels. But, perhaps the biggest impact distributor suppliers can have on their customers' bottom line, is through their in-depth knowledge of the products they provide and the manufacturers they represent. It is one of their strengths.
One distributor, Applied Industrial Technologies of Cleveland, Ohio, recently helped a customer, the purchasing operation at a rock quarry, with an overworked conveyor. Upon analyzing the equipment, the distributor invited six of its (noncompeting) manufacturer suppliers to the customer site. The team of manufacturers, led by an Applied regional manager, soon figured out that the conveyor had not been designed to withstand a number of modifications made to it over the years. One manufacturer on the team suggested new parts for the conveyor which increased its load capability. A minimal investment by the customer for the parts helped raise the value of the quarry's saleable product to $5 million in one year.
"Although the customer lived with the conveyor day in and day out, he didn't really understand the root problem, the fact that the conveyor was being overloaded," says Bill Purser, president and chief operating officer, Applied Industrial Technologies. "Their charge to us was, 'Hey, we have to find a way to be more profitable at this plant.'" Applied Industrial Technologies (www.appliedindustrial.com) distributes bearings, power transmission components, fluid power components and systems, rubber products, linear components and specialty items.
Other distributors offer up similar examples of ways their technical expertise helps keep plants up and running. Among the value-added services distributors provide, the suppliers regularly help purchasing operations with standardization efforts and have assisted customers by suggesting alternative products that may extend life cycle. Distributors recondition bearings and gear boxes. They put together kits or stage products at point of use for OEM customers. They do subassembly work.
Another distributor, Barnes Distribution of Cleveland, Ohio, recently helped a customer, a tire manufacturer, that was having a problem with a tire mold, resulting in plant downtime. Fasteners were breaking, causing scrap or variability in the manufacturing process. The distributor dispatched one of its engineers to the site who made recommendations on redesigning the fastener assembly that was used on the tire mold. The customer not only asked the distributor for help with making the changes to its other manufacturing locations, but also to work with the manufacturer of the tire mold. The customer now believes he has a competitive advantage, says Keith Drewett, president and chief operating officer, Barnes Distribution. "As a distributor, we are in a unique position because we see the broad spectrum of possibilities." Barnes (www.barnesdistribution.com) distributes maintenance, repair and operations (MRO) supplies, security products and springs.
The list goes on.
According to a survey of PURCHASING readers for the magazine's annual Distribution Report in May, 68% of buyers rate distributor performance as good or excellent. Survey results also reveal that some purchasers are concerned about an uneven level of service provided by many of the nation's distributors. They give high marks to distributors for their work introducing and pioneering the use of e-commerce tools in order fulfillment, in helping customers reduce inventory costs and in providing help in shortening order leadtimes.
Yet many buyers also display anxiety about distributor performance. Results of the survey show some purchasers are not satisfied with technical assistance they receive from their distributor suppliers. These buyers say they have to call the manufacturer direct for help with product application issues rather than contact their local distributor. Others complain that they now have to pay for services that until recently were free.
Ted Carl, vice president, North Atlantic area, and vice president, strategic accounts, Applied Industrial Technologies, likens a purchasing operation contacting manufacturers direct for tech support to a consumer taking his automobile to separate repair shops for each of its components. To get the job done, the consumer may end up going to dozens of repair shops. "Our job as distributors is to look at the whole range of manufacturers we represent and pick the right one with the right product for that customer's piece of equipment."
What they have to offer
From their years of experience, industrial distributors say they find many customers are not entirely sure of what they are looking for when they place a call to a supplier searching for technical assistance. The customer may be familiar with the application, they say, but what he needs is someone with technical experience to make a particular product recommendation.
Expertise like this requires in-depth knowledge of customer processes as well as manufacturer products represented by the distributor. To ensure that they have this expertise in-house, industrial distributors actively recruit professionals with technical work experience and educations. Many times, they look for personnel armed with engineering degrees. Sometimes they hire people who've worked for manufacturers. Industrial distributors spend significant resources training their employees.
Perhaps most important is distribution's ability to put together a team of the right people capable of putting a process in place to systematically analyze a customer problem until they arrive at a solution.
Industrial distributors offer customers several levels of technical support. As a matter of course, they offer advice right on the plant floor. Mark Knight, vice president of marketing, Barnes Distribution, says that on any given day his company has 10,000 to 15,000 contacts with customers. "Customers regularly approach us at their facilities and let us know when they have a problem with a particular piece of equipment. They are not afraid to ask us for ideas." Barnes has 1,500 field people and also provides formal training seminars at customer locations (a popular topic is fasteners) and application support from qualified subject matter/technical experts. These individuals have a broad knowledge as well as many years of work experience that, he says, a customer may not easily find among less tenured employees or from the manufacturer supplier.
"Our customers are looking for a knowledgeable staff of trained professionals both inside and outside who are expert in the latest technologies and can assist them in solving their application needs," says Willie Barnes, national market manager for commercial and industrial markets, Graybar Electric., St. Louis. Graybar has on staff 100 technical application specialists skilled in such areas as control, automation and networking. Technical application specialists recently helped a customer, an educational facility, develop a specification for its LAN (Local Area Network) infrastructure. Graybar (www.graybar.com) is a distributor of electrical, telecommunications and networking products as well as a provider of related supply chain management and logistics services.
For customers, the distributor holds technology showcases, which consist of seminars, hands-on training and product demonstrations on such topics as industrial networking, LAN infrastructure and process control. It expects to hold 30 this year. Depending on the complexity of the topic, Graybar sometimes presents these showcases with its manufacturer suppliers.
Right products
When communicating with a customer in a certain instance, personnel employed by Grainger ask, 'Why are you buying a high end tool when the application consists of using it twice and then throwing it away?' asks Donna Broome, vice president, commercial sales, W.W. Grainger, a broad line supplier of facilities maintenance products based in Lake Forest, Ill. (www.grainger.com). "Why not buy a different tool that does the job at half the price? We'll work with the customer so that he's not just buying another product at a lower price, but a product that's right for the application." The distributor provides its customers with various levels of technical support through its account managers, branch managers and network of suppliers. Suppliers provide technical support through safety seminars, lighting audits and the like. Grainger carries more than 100,000 SKUs (Stock Keeping Units) in inventory and has the capability to source additional products for customers. A technical assistance team provides customers with more in-depth information when choosing a product; they offer help in such areas as electrical or HVAC (heating, ventilation and air conditioning).
"Acquiring and training the best people in the industry so they understand how to apply our products in the customer's environment is our strength," says Bob Summerlin, group vice president, sales and marketing, Motion Industries, Birmingham, Ala. "It's where we excel. Customers approach us for assistance with product application, life- cycle management and process improvement. The customer has a particular mission to accomplish a set of goals. We usually start interfacing with the customer at this level." Motion Industries (www.motionindustries.com) distributes bearings, mechanical power transmission, electrical power transmission, fluid power transmission replacement parts and hose products.
Recruiting and training
Employees at Motion Industries take courses in core products and classes in sales and leadership at the distributor's Motion Institute. "Beyond this, we train our people so they have a broad understanding of the products we offer and how to use them in the customer's environment," says Summerlin. "You have to have the skill sets to provide the value to the customer to make him more competitive." In addition to a sales force that's 1,400 strong, Motion Industries employs 180 product specialists skilled in such technical areas as electrical, industrial automation and hydraulics and pneumatics.
"One of our understandings of the supply chain and our duty as a distributor is to focus the resources of the entire supply chain to the benefit of our customers," says Summerlin. "So, we engage our suppliers when customers need assistance with a unique application, prototyping or product liability issues."
As a way for its sales force to share best practices, Motion has developed an online toolbox that's essentially a repository of technical information, categorized by industry, customer and product application. The distributor also provides employees with an online dashboard of data relevant to their jobs.
Among the other value-added services Motion offers its customers are a number of Web-based applications. Motion Solutions includes asset repair tracking (ART) software which monitors warranty and repair as well as a cost management process (CMP). Use of this application helps customers track the bevy of cost savings tools provided by manufacturers. Motion also provides customers with training for their employees.
Like at Motion Industries, education and training are top priority at industrial distributors. Many say they did not cut funding for training during the recent economic downturn. Distributors regularly provide training to new hires and offer continuing education programs so skills of tenured employees remain sharp. Often times they extend some of these courses to employees of customers. Manufacturer suppliers provide training in specific product areas.
Three times a year Grainger gathers groups of employees from various regions of the country for training it calls Facilities in Focus. At these two-day sessions, manufacturer suppliers provide training not only in technical capabilities of their products, but also ways in which the products can help solve customer problems. The events also focus on such topics as ergonomics, safety, etc.
The distributor's "Account Manager Institutes" and "District Manager Institutes" provide intensive training to employees joining the company or promoted to a new position. Grainger designed curriculum for these sessions along the lines of a college education: Freshmen take a certain set of courses. Upon completion, sophomores take a another set of courses, etc. Topics covered run the gamut from product to process to inventory solutions to understanding a customer's business.
Finding solutions
"Our goal is to make the Graybar employee the most professional representative in the industry, while instilling a sense of teamwork, reliability and resourcefulness," says Barnes. "Rather than simply showing employees a manufacturer's product and explaining its features and benefits, we present them with all the elements required to complete a solution." At a recent training session on the topic of automation control, the distributor invited software providers and cabling manufacturers to explain how their applications integrate with other products.
Applied Industrial Technologies has about 100 engineers located throughout the U.S.; each has responsibility for four or five geographic regions surrounding the distributor's service centers. Manufacturers help educate the distributor's personnel who receive certification in such product areas as bearings, fluid power components, etc.
New employees in sales and customer service receive basic training, and begin their career at Applied with a six-week boot camp where they learn about the distribution business and acquire some basic product skills. The distributor also offers courses in specific product areas such as fluid power and electric motors. Each employee is required to attend at least 40 hours of training.
Applied now offers its customers fee-based training called MaintenancePro. The distributor created the curriculum containing both basic and advanced classes on such products as bearings and power transmission and fluid power components, and turned to a third-party educator to provide the training which is available in several different languages.
"Customers have employees of their own that need to be trained," says Applied's Purser, adding that the distributor surveyed its customers on its training needs. "Qualified maintenance personnel are becoming harder to find, and we're seeing customers dedicate more funds for training than they have in the past. Fueling this trend is the fact that they are trying to bring some young employees quickly up to speed."
Barnes has a full-time professional training staff of nine people, some of whom work at headquarters in Cleveland; others work at the distributor's sites throughout the country. New hires undergo a week of intensive classroom training, which provides a foundation of both product and application knowledge.
Bring in the manufacturers
When necessary, Barnes asks its manufacturer suppliers for "deep technical support," says Drewett, recalling a customer, a fleet provider, that needed help with repair of the sheet metal skin of its trailers. The customer had been using rivets and a sealant to keep the repair water resistant. Working with an adhesives supplier that had not been focusing on this particular market, the distributor helped develop a solution that eliminated the need for rivets in the repair, with "dramatic" cost savings.
Other distributors likewise see their manufacturer suppliers as an extension of their technical support offerings.
Graybar invites its manufacturer suppliers to demo rooms where customers can look at and test the latest technology. "Customers can go to a Graybar facility and actually see industrial networking in process and look at security cameras or lighting systems tied to the network," says Barnes. Graybar has 40 demo rooms at its facilities throughout the country.
"We cannot have world-class content in our catalog without partnering strongly and having strict standards with our manufacturers," says Broome of Grainger. An automated system allows the distributor to cross reference products (as customers search for substitutes) using content provided by manufacturers. Grainger also works closely with its suppliers in the field. For example, with customers, it regularly attends GE's Lighting Institute in Cleveland. There, customers learn how to use lighting effectively and safely while reducing energy costs.
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