HVAC Residential Market

Nuances of the Distribution Channel

August 13, 2012
Trans

To no one’s surprise, the way to successfully navigate the HVAC distribution channel is to have parts that are readily available for immediate shipment. It’s that simple. Or is it? Manufacturers spend a great deal of time on research and development to make their parts and equipment move quickly through the channel and get into the hands of contractors.

That certainly is the philosophy of the Rheem Sales Company. “From the manufacturer’s perspective, our ability to consistently ship parts on a reliable schedule is one of our best attributes — and it’s been honed in recent years,” said Rheem general manager Don Harter. “When our distributors place an order with us, they know exactly when it’ll ship out and when it’ll arrive. Our commitment to building a logistics model that’s second to none means our distributors can better plan their inventory cycle and better manage existing inventory.”

Inventory is the buzzword. Not enough means possible shortages and delays in service and replacement. Too much can tie up cash flow and create added tax burdens. That’s why manufacturers place such an importance on forecasting when necessary.

“Inventory level is a tough issue for all links in the supply chain,” said Rob Hawk, Partners Choice brand manager for Nordyne. “The slowdown in the economy put pressure on all companies and inventory levels have been reduced up and down the supply chain. Maintaining good inventory turns is more important than ever.

“The catch is that forecasting is more important than ever. If anyone brings in too much inventory the turns are reduced, but if not enough is brought in there are lost sales.”

Using The Web To Connect

The old tradition of stopping by the supply house to pick up a phone order or just for a last-minute part has long ago been replaced by online ordering via web portals. The ideal scenario is to check inventory levels online, place the order, and pick it up immediately — often done today via a smart phone or tablet.

Johnstone Supply recently launched an initiative to meet the increased use of smart devices. “We made a huge investment in totally revamping their technology foundation, in order to establish the company and its stores as an industry leader in the emerging areas of mobile contractor tools, smart devices, and online catalog ordering experiences for customers,” said Johnstone Supply’s David Dayton.

“The company believes having a state-of-the-art database system and pursuing the quickly evolving and emerging capabilities of smart phones, tablets, etc. is a major operational advantage and emerging opportunity in the distribution business.

“It is already positively impacting efficiency and speed in parts tracking and delivery, and providing the best and most user-friendly technology tools to better service their customers online and on the job (for example, Johnstone has developed an iPhone catalog app, with an Android version soon to launch). Johnstone’s brand-new database resource is having a very positive impact on customer support and service, and the need for top-line technology support in HVAC is a still-emerging business concern that will only grow in importance in the years ahead.”

“Real time” is no longer a buzzword, it is expected thanks to distribution technology. Having up-to-the-date information is the norm, and it is expected. “Manufacturers have invested significant resources in developing online websites and portals where distributors have complete visibility into product inventory and availability, which gives them an edge that they didn’t have previously,” said Harter.

“The Internet has really become an even greater resource for the HVAC industry over the past three to five years. Our customers are now seeing inventory in real time, which enables them to quickly know what parts are available and in stock so they can confidently place orders.”

Face-To-Face Alive And Well

While technology rules the day, it is still important to complete the distribution cycle via in-store pick-ups. This face time gives suppliers a chance to update contractors on what’s new and available, too.

“Our distributors benefit from mobile-based web access because when contractors visit their locations, they often have a better idea about what product they want right when they walk in the door,” said Harter. “To help facilitate this, our Rheem replacement parts website is entirely mobile compatible, and all products listed on it have mobile-friendly support documents, such as service bulletins and installation guides.

“Unique to Rheem, contractors can remain competitive by accessing our Prostock stores throughout North America. Prostock stores give contractors immediate storefront access to Rheem and Ruud parts and supplies — ensuring they can find supplies in a timely manner. The real benefit of the Prostock model is that it helps our distributors present a bright, well-organized storefront that can meet the needs of contractors.”

“Providing incentives (spiffs) to sales and counter people at the distributor, or to salespeople and technicians at the contractor level is another way to get the word out about parts availability,” said Hawk. “The incentives, when effective, will challenge those involved to learn more about a product so that they are comfortable presenting the concept to a consumer.”

Hawk said that meetings beyond the parts counter are beneficial, too. “With the decline of equipment sales, and the corresponding increase in consumers repairing older equipment, it has provided an opportunity for parts manufacturers to bring new products to market. This has made it more necessary to find ways to alert the contractors and distributors what products are available. Parts manufacturers are getting more time during distributor sales meetings to present their products. These meetings may or may not include contractors, but the idea is the same: inform anyone who is purchasing or selling parts what is available.”

Hawk added that having a marketing edge is advantageous to all parties, including manufacturers, suppliers, and contractors. “Marketing of parts is more important than ever, and manufacturers spend a lot of time talking about the features and benefits of their parts and how selling these parts will lead to higher profit margins for all parties. Many of the items being offered today are add-on products for existing systems. These types of products are meant to provide opportunities for increased sales during clean and checks, or during repair calls. Included are programmable thermostats, retrofit air cleaners, and other IAQ products.”

Having parts in hand doesn’t mean that the process is over. In fact, Johnstone Supply makes sure that contractors continue to get support via the Johnstone Supply website, where a Contractor Resources section contains conversion tools, calculators, slide charts and more, including a/c load, super heat and subcooling calculators, pressure temperature and orifice charts, a duct sizer, and metric conversion calculators.

In a recent press release, Andrew Verey, Johnstone Supply vice president of sales and marketing, noted that his company “identified an opportunity in the market where we saw there simply wasn’t a really top-class website experience in our industry, and we made it a strategic objective to provide that for our customers and stores. We wanted to be the industry trailblazer in helping contractors use the web and leverage new e-commerce technologies.”

Publication date: 8/13/2012
 

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