Distributors Examine Future Practices

August 7, 2006
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Fred Thal
I can't tell you what the distribution business will look like in 2020, but I am beginning to get a clearer view of what it will look like in 2010. Now before I go any further, be warned: Many distributors I have worked with over time have been slow to come around. After trying what I am suggesting regarding the future of technology and customer service, they loved it and now continue to reap some outstanding market share gains while simultaneously boosting their profits.

Consider these two ideas: answering machines and fax machines. "Why? That's a no brainer," many have said. Remember the business prior to these technologies? It is hard to believe the impact these units ultimately had on the distribution business. It was a fierce battle in the 70's and early 80's getting distributor employees to put in mandatory after-hours work, to order lines and answer machines so contractors could call in their orders for early pick up.

THANKS FOR THE MEMORIES

Leaving the past behind, it is imperative to discuss the future. How can distributors prepare their business and their staff to once again raise the level of customer service and satisfaction? How are they going to separate themselves from the competition?

Look at the recent changes in how transactions are conducted. Most people want a worry free and easy method of transaction. Not too long ago, society's principal method of handling purchases was cash. Ever notice lately how many consumers use either a debit or credit card for their purchases? The world is definitely changing.

Examine the average industry transaction. The contractor goes to a consumer's home and diagnoses the problem with the HVAC system. At that point, there are two options. Option one is to pull the part, bring it to the distributor store, and wait while the distributor team locates the part, pulls it, and fills the order. If under time constraints, option two is to climb around the unit, get the model number, call the distributor, and ask the counter person if the part is available. If available, the contractor will typically drive in, pick up the part, and drive back to the customer's home to install it. Theses options are acceptable, but either way, the contractor is killing a lot of time.

Consider this. Instead of option one or two, the contractor pulls out a PDA (like a Treo or Smart phone), waves it past the unit, and automatically captures a model and serial number that tells the phone and the distributor everything necessary to be knowledgeable about the unit.

In fact, the contractor has complete tech specs at his fingertips. If the manufacturer hasn't built in a chip that analyzes the problem automatically, then the contractor will resolve the problem. The unit chip helps the contractor select the necessary parts, click the order button, and order parts from the distributor.

If a part happens to be out of stock, the contractor is given immediate notification of when it can be expected. If the order can be filled, the contractor receives a projected delivery time. The part is then picked up and given to a local delivery service or cab company for delivery to the jobsite. The contractor then makes the replacement and finishes the repair. This scenario yields approximately 30 percent of the contractors' time returned.

ANY OBJECTIONS?

Let's address the objections now. Distributors often argue that their contractor customers don't have PDAs; their internal system isn't capable of handling this venture; and the cost of third party delivery is too high.

In light of these issues, "What is it worth to own the relationship with the contractor?" Yes, equipping every tech with a PDA sounds expensive, but if you're the easiest person to order from and you can deliver in the clients' time frame, you are going to own the relationship. That is huge.

So how can distributors afford to equip 10 to 100 contractors with this technology? Consider this program. Approach the contractors and offer to purchase the technology for them as long as their purchases stay at or above a certain preset level for one full year. If they stop ordering or don't hit their quota, they get billed for the technology or the balance of what their company hasn't paid.

Delivery is another major issue. What does it cost for third party delivery? Let's look at the alternative. What is the hard cost for a contractor to drive to the distributor, stand in line, and wait to have an order filled? The cost is alarming. Eliminating time spent at the supply house helps increase the time spent on the jobsite, thus increasing contractors' profits.

LOOKING TOWARDS TOMORROW

The fact is that in order to survive in the future, everyone is going to have to look at business in a different way. Address the contractors' pain and find ways to add value to their purchases. Be the first to help make their business run faster, smoother, and more profitably, and you'll most likely reap the rewards of a long and rewarding relationship. Remember it's always harder to get accepted if you are peddling from a "me too" position.

This concept might just be another fax machine battle to fight with distributors or, who knows, maybe we will see it at the local distributor before 2010.

Publication date: 08/07/2006

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