This article first appeared in the September/October print issue of Industrial Distribution. To view the full digital edition, click here.
With competition coming at the distribution industry from all angles right now, having a solid customer base comprised of a good mix of company sizes, industries, and verticals, is one of the best ways to ensure a steady sales pipeline. To get the most out of those pipelines, independent distributors should look to integrate both regional and national sales accounts into their business models. The former focuses on working with other distributors to service a specific customer on a regional level, while the latter widens the scope and finds a group of companies working to fulfill the needs of larger, multi-location (and even global) customers. By pooling their efforts and fulfilling one or more aspects of a customer’s needs, independent distributors can effectively leverage their strengths while providing service and support levels that the big box retailers can’t touch.
The Power of One
Having special contracts with large customers isn’t a new concept for independent industrial distributors, many of which have been successfully working together to fulfill the needs of large clients for decades. Both national and regional accounts come into play when a large customer has needs that outsize the capabilities of a single, independent distributor. By leveraging the “power of one,” and by centralizing purchasing, payment, and support operations under a single umbrella, the distributor effectively creates a win-win proposition for itself and for its customer. Instead of having to write multiple purchase orders, field multiple invoices, and write multiple checks to dozens of different vendors, for example, the customer uses the centralized, national or regional account setup to work with a single entity (which, in turn, is supported by multiple distributors).
In addition to centralizing its purchasing, invoicing, and payment operations, the customer wins on another, rather significant front: the ability to tap a technical and sales knowledge base that only a group of reputable, independent industrial distributors can provide. So where in theory it may sound simple enough to order a batch of parts or a pallet of supplies from an unknown, online seller, the reality is that today’s customers need support, service, and expertise. By pooling their expertise, gaining economies of scale, and offering competitive pricing as a single entity, distributors that get involved with national and regional accounts can repeatedly prove their worth.
The Choice is Yours
IBC is seeing continued interest in national accounts on the part of large customers that want to purchase multiple product and/or lines of products from a single source. This trend creates both opportunities and challenges for independent distributors. On one hand, the enterprising distributor that steps up to the plate, bids on, and then ultimately lands the national or regional account comes out a winner – but they must have a plan and the infrastructure in place to service the account. On the other, the existing distributor that opts out of the process can quickly find itself written out of the relationship. It’s the phone call that no company wants to get; you’ve had the account for many years and serviced it on a 24/7 basis, only to have your customer consolidate its purchasing operations to a far-off corporate office. What do you do? Mourn the loss of your long-term customer, or find a viable way to keep it onboard by joining forces with other independents that can cover the new geographically dispersed account? The choice is yours.
Opening the Doors
National accounts aren’t just for distributors that are trying to save existing relationships by broadening their scope. In fact, they can be a particularly great tool for landing that account that you’ve been calling on unsuccessfully for years. You know that the opportunity is there, and that the potential customer isn’t happy with its current supplier, but you just can’t seem to break through the barrier. Enter the national or regional account system – a setup that allows you to gather a strong team and strategize on how to win that elusive customer. Let’s say the targeted end user is unhappy with its current supplier’s performance. Now, you don’t actually know what’s going on behind closed doors, but you do know that the dissatisfaction exists. This is the perfect set up for a strong team of independent distributors to make their entrance and show the customer how they can do it better, provide more, cover a wider scope, and otherwise beat the competition.
Independent distributors can either start making these moves now, expand on their current efforts in this area, or wither away as they hold out hope that the “old ways” of buying and selling industrial goods come back. We all know that the last strategy won’t work in an era where the next supplier is literally one keyboard or mouse click away. By using a national account platform, distributors can overcome this and other challenges while shoring up their own positions in the industrial distribution stratosphere. As a side benefit, smaller firms can gain a larger presence in the marketplace and earn credibility that in many cases lead to even more market opportunities.
Top 5 Best Practices
For the distributor that’s never been involved with a national or regional account initiative, the undertaking may be daunting. After all, “independents” are independent for a reason, right? Used to working in their own orbits, these distributors often have to shift cultural mindsets, adjust sales strategies, and adopt new mindsets in order to start thinking more as team players. That’s not to say that it can’t be done, but it may take some work for the firm that’s not naturally accustomed to joining forces with other distributors for the greater good.
- One of the first considerations that distributors should be thinking about involves the financial resources needed to acquire, implement, and support a national agreement. Understand that it may take time for the new arrangement to become profitable, particularly if consignment inventory or a buy back is required.
- Next, ensure that you have a capable staff onboard that’s standing by, ready to win, implement, execute, and manage a national agreement. Without this strong support structure, the national or regional account system will not function properly.
- Once the financial and human resource aspects of your national account initiative are in place, it’s time to look at the products and services that you offer and how well these resources align with the customer’s needs. Put simply, you have to be able to fulfill those end user requirements – a mandate that could in some cases mean realigning your own internal inventory structure, adding new product lines, and/or creating a new menu of service offerings. And while no one expects you to overhaul your business model overnight in order to leverage one new opportunity, flexibility and adaptability are key traits in today’s business environment. Keep this in mind as you pursue regional and national account opportunities.
- To support your new regional and national account activities, you’ll want to make sure you have the data and reporting capabilities in place to properly manage the initiative(s). By tracking key performance indicators (KPIs), documenting cost savings, and offering customized invoicing, for example, you’ll be able to maximize the relationship without having to allocate an inordinate amount of manpower, time, and financial resources to the cause.
- As a final point, national account initiatives operate most effectively when distributors can provide a physical presence at each user site. This physical presence may be at the customer’s brick-and-mortar plant or at your own firm’s physical location (depending on proximity to the end user). Regardless of where the actual location is, the key is to be physically present for the customer on a regular, predictable basis. Without this final piece of the puzzle in place, the national account setup simply won’t function at optimal levels.
Taking the Leap
When it comes time to pursue and secure national accounts, independent distributors can either go it alone or align with an organization like IBC to get the job done in a very strategic and methodic fashion. By wrapping a “technology bow” around our distributor members, preferred suppliers, and end users, we’re able to create win-win-win scenarios that lend themselves to an extremely cohesive national account program. This level of cohesiveness is important not only from the end user’s perspective, but also for the suppliers that are involved in the process.
Aligning your distributorship with a larger, global organization that handles much of the “process” behind the national or regional account also helps remove some of risk that distributors tend to shoulder when setting up such arrangements. After all, simply setting up the meetings and completing the bid process can take time and effort that smaller firms don’t always have to spare. On the other hand, here at IBC, our goal is to win agreements that are strategically and financially advantageous for our distributors which, in turn, aren’t front-loaded like the solo companies embarking on the same process would be.
Now is the time to start considering regional and national accounts for your sales funnel, knowing that the competition for business is only going to increase in coming years. Rather than lose that valued customer to a larger entity, or risk missing out on key market opportunities, sometimes you have to take a big leap forward and try something new. Isn’t it time your company took that leap?
Bob Linderman is Director of Strategic Account Management for IBC (www.industrialbuyers.com), one of North America’s leading alliances of industrial, bearing & power transmission, electrical, and subassembly distributors. You can reach him at [email protected].