Building Trust Along The Supply Channel

October 20, 2005
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ORLANDO, Fla. –– A panel made up of manufacturers, suppliers, and contractors convened at the Plumbing-Heating-Cooling Contractors (PHCC) Network '05 Conference in Orlando in early September. The purpose of the meeting was to discuss ways to improve the supply channel by open and honest communication.

Kirk Alter, education director for the PHCC Educational Foundation management courses, moderated the panel which included Robert Vick of NIBCO, Jeff Clyne of Hughes Supply Inc., Donald Maloney of Coburn Supply Co., Milton Frank of Milton Frank Plumbing Co., Jay Schechter of Rep Sales, Gene Schlotman of Moen Inc., and Bill Jones of Raven Mechanical.

Alter began the discussion by saying, "Our efforts to increase profits sometimes lead us to unprofitable behavior."

The main focus of the discussion was to find ways that all partners along the supply chain could work more efficiently and cooperatively in order to increase trust –– and more importantly –– profits.

"Contractors often ask, ‘Why doesn't my supplier carry all of the parts I need and why can't I get the right price at bid time?'" said Alter. "Wholesalers ask, ‘Why do they [contractors] always wait until the last minute and yell when they can't get what they want?' Manufacturers ask, ‘Why can't we work together to create a better flow?'"

He encouraged attendees to "stop hanging out in the bar with your contractor buddies and hang out with your wholesaler buddies."

Contractors Speak Out

Jones, a contractor who works in the new construction market, said, "Every partnership is built on trust. Each one of us has to do what we say we will do. And we should exceed our customer's expectations."

He listed some ways to establish and maintain a good relationship with vendors:

  • Agree on terms and conditions up front –– not after delivery.

  • Determine partners up front.

  • Put a value on previous history.

  • Determine who has responsibility for back orders.

  • Pick up and deliver parts where a contractor can control deliveries.

  • Purchase many common parts online.

    Jones added, "We expect the manufacturers to stand behind the product. And our supplier needs to get me material on time and keep me consistently competitive. My goal is to become our partner's best customer. It all comes down to service, pricing, and followup."

    Frank, a contractor whose market is service and replacement, said his needs are different from a new construction contractor. "In the service business, we cannot plan ahead," he said.

    "Each service call is different and we depend on the wholesaler to have the parts. Customers will not wait for next-day delivery. They can't wait for a faucet for their sink."

    He added that contractors need to develop "partnering opportunities" with suppliers in order to have access to the supplier's complete inventory and to encourage them to minimize the product lines in order to broaden their own inventory.

    "We also need continual training for our techs," Frank said. "This will result in more partnering opportunities with manufacturers and brand loyalty."

    Distributors Voice Opinions

    Maloney agreed with Frank that distributors need to streamline the number of product lines in order to avoid redundancy.

    Clyne said his company had dramatically scaled down its number of vendors, adding, "We will benefit by consolidating as many lines as possible."

    But Clyne took the redundancy issue one step further. He said there is too much redundancy in the supply chain in areas such as warehousing, inventory, logistics, purchasing, marketing and sales, and advertising. "Each member of the chain should focus on what they do best," he said. "Contractors don't need to be in the warehousing, logistics, or inventory control business."

    Schechter also echoed that sentiment. "We need to focus on value, and trust our chain partners to do what they do best," he said.

    Maloney believes manufacturers need to be consistent in their pricing and production lead times. He would also like to see continued support through manufacturer training.

    "We want our people to be as trained and knowledgeable as possible," he said.

    But he also had words of advice for contractors, too. "Order clearly –– don't keep changing what you need and when you need it," Maloney said. "Don't put every job on the street, calling around for the lowest price. And please, we would like to get paid for our services."

    Distributors on the panel would like to see more use of the Internet, but there are contractors who still have not caught up with technology. "Customers will often not use the Internet to download spec sheets," said Schechter. "So we download the spec sheets and fax them to our customer."

    Clyne added, "We estimate that 25 percent of our customers don't even use a computer."

    Manufacturer's Viewpoint

    Schlotman focused on the need to share information along the supply chain.

    "Right now we have no information on why products are selling," he said. "We need to share more information and improve the communication process."

    Schlotman said his company plans to manage the top SKUs in its wholesalers' inventory in order to "understand the sell-through activity.

    "Everyone in this room has goals and objectives and the more we share information, the better our relationships will be."

    Vick said that everyone talks about partnering, but they don't talk as much about trust. "Back when business was simpler, trust was easier to define," he said.

    He said that as a manufacturer, he doesn't want to be in the distribution business. He'd rather not get recognition for parts distribution like his company recently achieved. "FedEx gave us an award for being one of their best customers - doing something we don't want to do."

    Vick would like to see contractors plan ahead and know what they need –– and when they need it. He also asks contractors to understand and appreciate value versus lower prices and to be brand loyal.

    "If I brought you to the party, please dance with me," he joked.

    Publication date: 10/24/2005

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