5 Services for Distribution Value-Added Success

While many distributors in recent years have been responding to the changing demands with new products, programs, and value–added services to match the competition, they've done less to truly differentiate their operations, making it increasingly difficult to stand out from the crowd, attract new business, retain long-time loyal customers, and expand profit margins. In this paper, we will examine five key services that can add greatly to distributor differentiation, customer satisfaction, and the bottom line.

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5 Services for Distribution Value-Added Success How to gain customer loyalty and grow revenue. Brought to you by: PAGE 2 | EPICOR When it comes to growing the bottom line, distributors have mastered many ways to cut operating costs, build effi ciencies, revise sales techniques, add extra services, develop new business strategies, and stay competitive on market pricing. Such game plans have reaped fi nancial benefi ts for large, medium, and small players in the sector for many years. But those methods, while still relevant, no longer offer a guaranteed path to success. In today’s Amazon era, customer expectations have expanded. Buyers now demand instant access to information and product data, a highly personalized buying experience, immediate price quotations, extra add-on services, and an overly satisfying customer experience. While many distributors in recent years have been responding to the changing demands with new products, programs, and value–added services to match the competition, they’ve done less to truly differentiate their operations, making it increasingly diffi cult to stand out from the crowd, attract new business, retain long-time loyal customers, and expand profi t margins. “At day’s end, a balancing act is needed between products, services attached to those products, and optional services you provide to add value beyond what competitors are doing,” says Michael Lovelace, senior director of sales & business development, Americas, in the distribution group at Epicor Software Corp. “Determining this balance is key to successful differentiation.” It involves going beyond the norm by incorporating the proper technologies required to implement a host of new value-added services that not only increase customer satisfaction and retain loyalty, but also surpass the convenience and low-cost alternatives offered by Amazon. In this paper, we will examine fi ve key services that can add greatly to distributor differentiation, customer satisfaction, and the bottom line for both: • Service & Repair • Vendor Managed Inventory (VMI) • Rentals • Manufacturing • Job Management SERVICE & REPAIR: DIFFERENTIATE, DON’T ALIENATE Service agreements have become increasingly popular in distribution circles and have proven to increase customer renewal rates and build recurring income streams, but only if administered and driven using the latest integrated and fl exible advanced software systems. If not handled correctly, such agreements can cause even long-time loyal customers to abandon ship. While many customers appreciate the convenience and fi nd it well worth the added expense, if management of the service is disorganized resulting in unreliable maintenance and repairs, it becomes a value-subtracted option that refl ects poorly on the distributorship and can lead to the costly loss of business. Fortunately, superior service and maintenance software now exists to simplify and automate the entire service process. ____________________________________________________ New technologies can help distributors keep track of inspection and preventative maintenance schedules, along with the data and analytics needed to drive a superior customer experience. ____________________________________________________ Today’s advanced software allows distributors to easily enter and process service quotes, order and replenish parts directly from existing inventory, set up labor and technician schedules, track full sales and service history for all serial numbers, and minimize data entry through an automated process without the need for a separate inventory system. Advanced systems have enabled many large distributors to differentiate themselves from competitors by successfully implementing customer-centric value-added options that grow income and boost margins. One such distributor, Winona, MN-based Fastenal, a supplier of fasteners and tools, provides customers with a range of added services, including calibration and repair; cut-to-length metal, chain, and cable; hose fabrication; tool repair and certifi cation; and even a gas detection rental program whereby customers can go online to request short-term or long-term, portable gas detection PAGE 3 | EPICOR instrumentation products customized for their unique needs on a daily, weekly, or monthly basis. The company, which fi nished in the top fi ve on Industrial Distribution’s 2018 Big 50 List, further enhances offerings by providing point-of-access vending and other onsite inventory and service options that generated 13 percent sales growth in each quarter of 2018, with full-year gross profi t up 11 percent. Fastenal reported that the vending portion of its business registered approximately 20 percent growth in sales for the year. MINDING THE STOCK In the Amazon age, customers have become increasingly demanding, expecting distributors to be agile, fl exible, quick, and connected as close ‘partners’ in business. Nowhere is that more evident than in inventory management, product availability, monitoring, and timely delivery to avoid backorders and costly delays. To do that, many distributors today offer VMI as a value- added service, a system that essentially lets the distributor take control of customer product supply, assuring the customer that it won’t run out of products and locking in ongoing sales for the distributor. It’s a win-win for both distributor and customer on many levels, but what it isn’t is a true differentiator since so many distributors offer the service. In order to stand out from the pack, it is critical for distributors to leverage the latest VMI technology to make the whole process easy, mobile, web-based, and fl exible. Implementing the proper software can help distributors minimize the risk of costly and disruptive emergency orders and further establish a close and ongoing partnership with customers. Field Fastener Supply Company, based in Machesney Park, IL, is one company that has made VMI an art form, enabled by Epicor’s Prophet 21 system. ____________________________________________________ ‘Quality is everything about the experience with the customer… and all that really happens through the ERP system,’ says Jim Derry, Field Fastener president. ‘The bottom line is that we work with our customers to help them save money and cut costs.’ ____________________________________________________ Field Fastener does that in two ways: managing customer inventory, including VMI services, and lowering the costs to assemble, join, and fasten products together. Without proper inventory management software, overhead can slowly climb out of control. With a high-end inventory system driven by data, Field Fastener’s goal is to ensure that the customer always has material where they need it, when they need it, and in the most effi cient manner. “We see Prophet 21 as a competitive advantage to help us provide the best level of customer service and drive costs out of the business and to improve the accuracy and quality of our services to meet our customers’ expectations,” Derry adds. “Clearly, we make better business decisions today than we did before Prophet 21.” RENTALS ON THE RISE Equipment rentals have long been a lucrative business for retailers and big box stores like Home Depot. Since the Great Recession that began in 2008, many contractors and service-oriented companies began leaning toward rentals to contain operating costs and keep up to date with technology needed for specifi c or limited jobs. In more recent times and with rapidly advancing technology, industrial distributors are starting to get into the act as well. It’s becoming yet another potentially huge differentiator and one that likely will continue to generate new revenue streams for many years to come. ____________________________________________________ The American Rental Association (ARA) has projected that U.S. Equipment Rental Industry revenue will grow consistently to nearly $60 billion by 2021 with a compound annual growth rate (CAGR) of 4.7 percent from 2017 to 2021. ____________________________________________________ Investment in rental equipment is expected to increase by 8.8 percent in 2019, 3.2 percent in 2020, and 0.4 percent in 2021, surpassing $15 billion that year, according to ARA estimates. PAGE 4 | EPICOR But, rental management is highly complex and requires sophisticated software because inventory, maintenance, tracking, and business functions can vary widely depending upon the nature of the rental business, the types of products involved, customer relations, and the handling of fi nancial data in dynamic transactions. The proper rental management software helps simplify the entire process, including online orders, on-premises fulfi llment, and electronic invoicing. One distributor taking advantage of rental services in a big way is a unit of Radnor, PA-based Airgas, ranked No. 2 in the 2018 Industrial Distribution Big 50 List. The company’s Red-D-Arc Welderentals™ operation rents and leases welders, welding positioners, welding- related equipment, and electric power generators to global customers through a network of 70 service centers. The Airgas unit’s program allows users to keep pace with new technology, take advantage of replacement equipment when necessary at no charge, and turn in the equipment along the way with optional mid-term equipment upgrades. Since industrial rentals can be leagues apart from consumer-oriented services like car, cell phone, or appliance rentals, choosing the right software vendor is critical when entering this complex, but highly lucrative business channel. To that end, a rental platform built by a software company with deep knowledge of the distribution sector, the management of distributor-specifi c inventory procedures, along with the fl exible and transparent upfront, internal, and backend technology required, is highly recommended. Employing a software vendor with a deep distribution knowledge base can quickly and easily guide any industrial distributor focused on growing an existing rental program, entering this new and lucrative value- added business, or building the framework to allow for future entry into true distributor differentiation. LIGHT MANUFACTURING SHINES Many distributors have been providing kitting, assembly, and a range of light manufacturing services for several years, either for additional revenue generation or as an extra benefi t folded into sales agreements. Such added services can be a major differentiator for distributors, especially if the offering signifi cantly raises the level of customer satisfaction, helps extend an ongoing distributor-customer relationship, and serves to attract new customers. ___________________________________________________ ‘It’s important to make sure customer requirements are well understood, establish a clear distinction between product-attached and optional services, and make sure both types are priced correctly,’ according to industry consultant Dr. William R. McCleave, Jr. P.E. ___________________________________________________ McCleave, president of W. R. McCleave & Associates, emphasizes that value-added services must be supported by the proper processes and technologies required to make them profi table and deliverable. With that in mind, today’s software technology designed for manufacturing processes can easily be integrated into an industrial distributor’s ERP system. An example of success in the integration of software designed for distributors that are focused on a range of value-added and companion services like manufacturing and assembly can be seen in developments at DeeTag Ltd. of London, Ontario, Canada. To improve the effi ciency of its warehouse operations, DeeTag, a distributor of hydraulic and pneumatic equipment, parts, and supplies, turned to advanced ERP and warehouse management software from Epicor that can forecast product demands and allow the distributor to stay on top of specifi c hoses that need to be assembled. “We have also added the light manufacturing module for our hose assembly facilities, and are seeing improved effi ciencies within the production queue,” Dean Gordon, DeeTag president reported. While Gordon cites better inventory control as the biggest benefi t of implementing the software, he also pointed to features that are continually being added to make it even more useful for fl uid power distributors. “The kitting and hose decoder features are very powerful,” he said. “We’ve also adopted new signature PAGE 5 | EPICOR capture technologies, both at our sales counter and via PDAs for deliveries. Having customers in the U.S. and Canada and vendors all over the world makes the multi-currency and container receipts functionalities very convenient for our business.” JOB MANAGEMENT LIFTS PRODUCTIVITY Taking advantage of the latest software technology and increased automation at distributorships also helps eliminate redundancies in manual processes and allows workers to spend more time on critical tasks, guided by job management software designed to improve operational effi ciency and productivity to the highest levels. Sophisticated job management technology available today not only allows manufacturers and distributors to keep a close eye on individual worker productivity levels, but also allows them to track the time it takes workers to handle specifi c jobs and orders. __________________________________________________ Top-class ERP solutions can boost development of lean manufacturing techniques, enable top manufacturing execution systems, build quality assurance standards, and keep the focus on advanced quality management techniques. ___________________________________________________ Such tools are vital components for any successful operation—especially those that produce or sell complex products alongside repetitive ones—and require exceptionally fl exible and versatile software in order to accommodate combinations of make-to-order, confi gure-to-order, engineer-to-order, and make-to- stock products. With the proper production management software, labor tracking tools, and service-oriented architecture in place, companies can establish continuous performance initiatives, mobilize workers, offer real-time connectivity, promote social collaboration, gather intuitive business intelligence, and provide greater business agility in pursuit of service perfection. It’s a scalable, fl exible, confi gurable, and effective route toward achieving value-added distribution excellence and delivering the highest level of customer satisfaction for long-term success. About This Report The information in this iReport was researched and produced by Industrial Distribution (Advantage Business Marketing) in conjunction with Epicor. About Epicor Epicor Software Corporation (epicor.com) provides industry-specifi c business software designed around the needs of manufacturing, distribution, retail, and services organizations. Epicor’s more than 40 years of experience with its customers’ unique business processes and operational requirements is built into every solution—in the cloud, hosted, or on premises. Contact us for more information on Epicor Products and Services: +1.800.776.7438 distributionexperts@epicor.com epicor.com