This article was originally published in the March/April issue of Industrial Distribution. To view it, click here.
Distribution companies often look to wholesalers for volume pricing, unique procurement solutions, and their ability to defray carrying costs. But as the stakes change at every link of the supply chain, many are improving their value proposition in a host of other ways. We spoke with three major wholesalers in the industrial marketplace to find out what type of service and solutions models dominate the discussion.
Image courtesy of Brighton-Best Internation
When it comes to industrial B2B transactions, there are many important links on the supply chain. While these complex business relationships can carry their own burdens, they also offer big opportunities for distributors to leverage their procurement needs against their suppliers’ ability to source effectively and efficiently.
While many industrial distributors purchase goods from a combination of manufacturer-suppliers and wholesalers, both sources likely offer their own benefits and challenges in terms of transactional costs, ease of procurement, inventory issues, volume pricing, and customer service. Wholesalers have realized some great opportunities in recent years, specifically as global trade has opened a lot of doors, and e-Commerce solutions have streamlined transactions and cut a lot of time and cost out of the sales process. So where are these relationships headed, and how can a business “work smarter” in harnessing the real value of a wholesaler?
“There are a lot of things involved in purchasing that were never considered before."
Brighton-Best International has a rich history in the industrial realm, with humble roots as a fastener distributor. NY-based Best Socket & Screw set up shop in 1965, and in 1971, purchased the assets of Brighton Socket Screw Manufacturing, a quality manufacturer of Socket Screw products founded in 1925 in Cincinnati, OH. By joining the two companies together, company founders Stan Sevell and Perry Rosenstein created Brighton-Best Socket Mfg. Inc., a company that would ultimately become a major supplier of socket screw products in the United States. In 2008, Brighton-Best Socket Screw Mfg. was bought by a consortium of investors from Taiwan. The newly formed company, Brighton-Best International, Inc. (BBI), offers new products, more extensive inventory, world class service, and a new 24 hr. online web ordering web site.
As a 30-year employee of Brighton-Best, Chuck Halpin has seen it all. “There are a lot of things involved in purchasing that were never considered before,” Halpin says. He harkens back to the days where the traditional supply house would produce or obtain a large quantity of a product or a group of products, businesses bought it, and “you tried to judge by history what you should have,” says Halpin. Nowadays, like much of everything, the business requirements have become more complex. More and more of the requirements are based on business projections on specific OEM requirements. “We not only have to supply traditional products, but have specialty requirements — industrial coatings and products to print — and provide it all just in time. All distributors want to reduce their inventory, improve their cash flow, and maximize ROI. We look at providing resources; BBI provides the resources to allow them to make profit.”
Larry Davis, President of wholesale supplier ORS Nasco, echoes this point, citing what he sees as his company’s responsibility to serve a partnership role, helping to drive the ultimate success of its customers. “ORS Nasco is a service company whose vision is ‘to enable our partners to succeed.’ We do that through a value proposition focused on three key deliverables: Enabling our customers to grow their businesses, helping improve their profitability, and working with them to utilize their assets more effectively,” Davis explains. “Fundamentally, our strategic plan revolves around creating a successful outcome for our customers who are faced with increasing competitive and financial pressures.”
According to NC-based redistribution company Logistics Corporation, the company took shape in 2001 in an effort to bridge what it saw as an ever-widening gap between manufacturers and distributors. As the company saw it, while manufacturers struggled to provide equal service to all distributor customers, distributors struggled to meet manufacturers’ minimum requirements, creating some problem areas on both sides.
Donna Currie Bruno, President of Logistics, finds that her company’s service-oriented model can creatively solve procurement issues through offering no minimum orders, bundling opportunities, growth programs, and marketing services. These services are combined with an approach to delivery that must fit within an evolving market with an increasing need for immediacy.
“Five years ago, distributors might have been fine with receiving an order in three to five days but with many reducing inventory and their business structure, it’s now important to react immediately as they are often reliant on you filling the customer order for them as they may not have in stock,” says Bruno. “We have expanded our warehouse network to support this, as well as our inventory, and will continue with this expansion well into the future.”
Donna Currie Bruno, President of Logistics Corporation
Logistics Corporation prides itself on its ability to create a mutually beneficial link between manufacturers and distributors, since many manufacturers struggle to fulfill the service element that is becoming more and more critical to all size distributors. “We have also continued to improve our marketing and web services based on customer input to ensure customers are receiving exceptional services. Online services allow distributors to get information they need at their convenience.”
Much in the same way, Davis describes ORS Nasco and parent company United Stationers’ core strategy as one where they “win from the middle” by providing services that enable both its customers and suppliers. “We challenge our strategy on a regular basis to ensure we are aligned with the needs of our partners,” he explains. “Over the last several years, we have made significant investments in our service capacity. Given the considerable supply chain inefficiencies in the industrial marketplace, we have made investments in our supply chain and technology capabilities to enable our partners to lead the evolution in the industrial channel and deliver a more competitive value proposition.”
For NAW (National Association of Wholesaler-Distributors) research fellow Guy Blissett, an aggressive approach to service cannot be underscored enough. In the 2010 NAW trends report Facing the Forces of Change®: Decisive Actions for an Uncertain Economy, Blissett urges wholesaler-distributors to “get it right” going forward, highlighting three decisive actions he sees as critical for managing services-related challenges. Says Blissett:
“(One): Get much closer to customers to understand their processes and service needs, thereby becoming a truly collaborative business partner; (Two): Develop a services strategy that is adopted and understood company-wide; and (Three): Actively manage their product and services portfolio to ensure they are providing the right solutions at the right prices with the right profit margins.” (To order the report, visit www.naw.ftf10)
Larry Davis, President of ORS Nasco
For distributors and wholesalers alike, the customer face of the business is changing. With more than 80 percent of its order going through its e-Commerce site, Brighton-Best has grown its warehouse staff to keep up with the volume, but the sale force has grown very little. “It used to be that managers would travel all over to see the accounts because that’s how people knew you. But now with so many of the transactions going through the website — for a lot of people that is the face of the company.”
For specialty items, account managers are more hands-on. In addition, Brighton-Best offers a program where its own staff will go overseas and shop a specific item and then do a hold and release program. “You become much more than a supply house that may or may not have a product,” he explains. “Now you have to cover every avenue.”
Many wholesalers have put greater emphasis on their websites in order to capture additional sales. Working with a customer base who predominantly has their own e-Commerce platforms means the distributors are a bit more web-savvy and also have higher expectations in terms of ease of use and high tech capabilities. “Now, if you go on the Brighton-Best website, you can actually see product on the floor in China, and you build containers right off the website and ship it to yourself,” says Halpin. This effort ties technology into the company’s efforts to change the supply channel through a ready mill, meaning customers no longer have to order big commodity items at the lowest cost and then sit on stock for six or eight months at a time.
Adds Davis, “Clearly the competitive landscape has changed for our distributors and the new environment is globally digital, well informed, and demanding.”
Into The Electronic Age
“Clearly the competitive landscape has changed for our distributors and the new environment is globally digital, well informed, and demanding.”
Demands have certainly increased, and financial pressure drives the point. As cash has gotten tighter, giving a distributor the adequate tools to manage its risk has been a benefit that wholesalers can bring to the table. “The distributor puts in only a little bit of stock, and then wants someone like us to put in more stock as the backup, so he manages his cash and his risk,” explains Halpin. So instead of committing to 100 percent of stock, somebody like Brighton-Best, who’s a supplier, will commit to 40 percent, and have a little bit of backup on that. “The distributor, instead of having to buy all that stock up front, only puts in 20 percent, and we run a continuous cycle,” he adds. “Really what we’re trying to do is drive down the expenditure from the distribution side, while still proving the on-time delivery for that OEM. And it’s never perfect, but you do what you can do.”
For a company like Brighton-Best, the age of information has also allowed for better, more accurate forecasting, hedging the risk on its end as well. “If you tell me next year you’re going to use ten and I only have to stock five to keep you going, that’s perfect. I don’t have any wasted resources and neither do you,” says Halpin. “We’ve had computers for a long time now, but it really seems the whole supply channel has really opened up to it, so we can now get to a good prediction of what we can do for the year. And you really do manage it a lot better as a supply chain rather than one link.”
As wholesalers ready for the future, they look at the challenges they may face. In a tough business environment, rife with economic and regulatory issues, how do they plan to keep pace with the needs of their customers?
Zachary Haines, Executive Director of the DPA Buying Group, presents its 2011 Supplier of the Year Award to Chuck Matrazzo, Vice President of Logistics Corporation.
“There is no question that 2012 and beyond will continue to bring new opportunities and competitive challenges,” says Davis. “We are confident that our team will meet those challenges and continue our heritage of strong execution and performance. We will continue to challenge ourselves to ensure we know and understand how we add value for our customers.”
Adds Bruno, “Our business strategy can really be summed up by the motto; ‘We Care, We Listen, We Respond’. That’s what has allowed Logistics to grow its customer’s business and markets, even through tough times, in the 11 years we’ve been in business. We help distributors find opportunity in an economic environment that’s changing and evolving at an incredible pace.”
And in a world of change, the rapid pace of information may be the only constant. Says Halpin, “Information will flow faster and faster. Instant planning, instant reaction… I don’t see that changing.”