How Distributors Are Defining Value

One of the most prominent topics on ID recently has been the challenge of value vs. price. How do you balance prioritizing value at the local level while corporate is driving price?

This article first appeared in the September/October print issue of Industrial Distribution. To view the full digital edition, click here.

If you’re a regular reader of Industrial Distribution magazine, user of our website, viewer of our videos and attendee of our webinars, it’s likely you see lots of recurring themes in terms of what we cover.

In early August, we hosted an educational webinar discussing vendor managed inventory. As our speakers – Mike DeCata of Lawson Products and Lisa Anderson of LMA Consulting – gave their insights on this topic, we kept going back to the way vendor managed inventory was able to drive total value – a benefit above and beyond the cost of the individual products.

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The audience questions flooded in and, as moderator, I could only choose a few. But when the following question came in, I knew I had to give it some air time:

“The idea of value hits home at the local level, but corporate purchasing considers price the driving factor. Thoughts on overcoming?”

Such a simple, yet poignant question that we hear from distributors of all sizes, because it brings us back to such a critical issue in industrial distribution: the concept of price versus value.

Granted, price competition, as well as the challenge of relaying total value, seem to get more attention as more and more online competition emerges. But I bet if you took a survey of the Big 50 companies featured in this month’s issue, not a single one of them would say the key to their business success has been in serving as the lowest cost provider. In fact, most of them would likely point to their service offering – whether it be inventory management, kitting, finishing, or any other multitude of tasks – as one of the reasons for their continued growth. But getting the customer to see your value is a bit easier said than done – especially, as our webinar audience member points out, when corporate purchasing often places an extraordinarily high emphasis on physical cost.

As we talk about price, value, and everything these concepts support, I’d encourage you to check out our Distributor Profile on Fastenal. While Fastenal has grown to become a household name, they’ve done so while staying true to their roots in customer service. For Fastenal, the proximity of their branches to their customers means there is so much value in their ability to quickly fulfill orders for critical parts, and offer associates who are close enough to truly understand the customer’s business.

When you’re done reading about Fastenal, be sure to check out the guest column from Bob Linderman of the buying group, IBC. Here, Linderman explains ways independent distributors can get in the game when it comes to winning or retaining national accounts. Says Linderman: “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?”

Whether you’re a Big 50 company like Fastenal, or an independent, Linderman’s suggestion is that there are viable ways to obtain (or keep) these relationships based on value, but it’s got to be done the right way. And the great thing is, while the question about total value applies to all of us, it can be answered in so many different ways.

So what’s your answer? Email me at [email protected].

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