Avoiding the same old questions proved no problem for this year’s Distributor Roundtable. Given a half dozen topics, a quartet of successful pros from around the industry took the time to share their opinions and experiences.
See how this group reflects on 2020 and, more importantly, how they are approaching the mix of classic and novel concerns facing today’s distributors.
The landscape regarding employer COVID-19 vaccine policies is developing. Options range from requiring it to ignoring it to making it optional but offering a bonus to those who get vaccinated. How is your company approaching this?
Liu: We are not requiring our employees to get the COVID-19 vaccine, nor are we incentivizing them to do so. However, we do plan on offering COVID vaccines through an employer-sponsored on-site clinic, similar to the flu shot clinic we provide each year, as soon as they are available to our provider.
Schleisner: Our business model prides itself on local autonomy. We empower our local companies determine the course they will take regarding the COVID vaccine. We will always encourage the local companies to follow local and state guidelines as well as CDC recommendations on what is the best route to take regarding this issue.
Roberts: We haven’t finalized any sort of policy on the COVID-19 vaccine at our company at this point, but for the few people who have been eligible for it to this point, it has remained optional and not required.
Benischek: Our approach to the vaccination will be continued education and equipping our people with available resources. We are considering options such as tracking those who have received a vaccination, and wellness initiatives to ensure we have a strong pulse on our people and their views of COVID-19 and the vaccination.
Inventory challenges created a lot of headaches for distributors and contractors last year, reshuffling more than a few business relationships along the way. Tell us about one lesson or adjustment from that experience that you expect to serve your company well in 2021 and beyond.
Roberts: For the most part, we were fortunate and fared well during 2020’s supply chain and logistics issues, due to strong inventory planning on the part of our team.
As we have in past years, we were reminded of the importance of adding some additional temporary warehouse space to allow us to flex up in inventory for the busy season without a long-term lease commitment.
Benischek: One thing that was proven out in the pandemic was the “old school” idea that relationships drive success during both the good times and the bad. The communication channels we have developed with our suppliers and our customers over the years provided innovative solutions and very tangible results during the severe supply chain disruption our industry faced in 2020. We are only as good as the information gathered from all areas of the industry, and this helped us tremendously this last year and will continue to guide us in 2021 and beyond.
We also reached out to other wholesaler distributors to devise best practice health and safety processes, which enabled us to continue providing our essential services of food preservation and home/business comfort throughout the pandemic in all 22 states we serve.
Liu: Be proactive! Do not expect your vendors to come to you bearing bad news. When we started to feel disruption in our supply chain, it was usually the result of us noticing our lead times getting longer and orders getting filled improperly. As a result, we would contact our vendors and find out they were experiencing some sort of issue causing the disruption.
Often, we would say, “Why didn’t they say anything in advance?” Rather than waiting for something to happen, we started taking the initiative to reach out to our key vendors on a consistent basis and to ask them to share with us their struggles and what they were forecasting and predicting.
Lastly, given the delays in lead times, we also made the decision to increase our inventory by 25%.
With multiple manufacturer price increases taking effect in the first part of the year, how do you handle providing any heads-up to dealers who need to make their own adjustments?
Schleisner: When we can, face-to-face meetings have proven to be the most effective, along with emails and ecommerce updates. In some instances, we can provide updates electronically to our customers’ price books so they have the most current pricing information they need.
Liu: This year has been especially difficult with the amount of price increases our business has taken. Our practice is to notify our dealers at least 30 days in advance of any price changes once we are notified by our vendors. Equipment dealers need hard costs to develop their price books for their customers.
We ask our vendors to give us 60 days advance notice so we can inform our dealers well ahead of 30 days and allow us ample time to make the necessary changes in our system.
Roberts: When we have a price increase from any of our major suppliers, we give at least 30 days written notice to our customers to allow them time to adjust their pricing. In some cases, we assist our customers in updating their sales tools and software for them to be sure the changes are implemented in time for the price increase.
If you could snap your fingers and achieve one significant improvement in your warehouse operation, what would it be?
Benischek: If we could snap our fingers, we’d change the perception of ‘warehouse operation’ to the broader concept of ‘distribution operation.’
While the warehouse is a critical function of that core process, we are looking to get more interns and recent graduates involved in the distribution side of the business, and the ‘warehouse’ label pushes away those who have a shortsighted bias towards ‘front office’ jobs. Their knowledge and help would be very beneficial in both the heat of the summer and in improving processes during slower months, and it’s a great springboard to more responsibility and company exposure.
Schleisner: I would have to say that I wish our warehouses were bigger at our locations to hold the amount of inventory we have. Due to supply chain issues, what we would normally order during a normal delivery time, we’ve had to double or triple because of the extended lead times in getting product. This, in turn, causes some size constraints in our warehouses.
We’re fortunate that our five Winsupply regional distribution centers are also ordering more for the same reasons and serve us well with the extra inventory we need.
Liu: The process for handling vendor discrepancies. Currently, the process for handling vendor discrepancies (pricing issues, freight discrepancies, etc.) is very time-consuming for our employees. The amount of paperwork and communication is labor intensive, redundant, and not the best use of our time. Numerous lines of communication often continue back and forth several times between employees until the discrepancies are resolved. Improvements to this operation would allow employees to re-allocate a large amount of time on more important value-added warehouse services such as customer service and inventory accuracy.
The role of Big Data continues to evolve in HVAC distribution. What has changed since last year in how you evaluate performance, metrics you use, information your team uses?
Roberts: We look at a number of metrics regularly to understand how we are doing, but I’d say in the past a data point we focused too much on is optimizing turns, and 2020 changed that perspective. Sometimes you need to balance that with having some extra inventory on hand that may move slower to allow you to weather the supply chain issues to enable you meet the needs of customers.
Liu: Big Data continues to evolve within Standard Supply in the way we structure and process data so that it is useful to us in our day to day, month by month, and annual strategic decision making. In the past, I saw companies struggle with gathering and assimilating data. Now, like most companies, the struggle is processing and structuring the overabundance of data.
Generating reports and publishing KPIs is not useful unless there is a business decision being made based on the reports and KPIs. We have structured our data so that we can analyze our sales, operations, and financial performance and adjust as needed.
One of the areas we have improved over the last few years is leveraging data to improve the way we plan for each year. Rather than comparing ourselves to last year’s performance, we are more disciplined and accurate at forecasting sales and setting quotas. Furthermore, we have improved our accuracy in setting financial budgets and resource planning to ensure our operating expense growth does not outpace our gross profit growth, which helps us improve our bottom line.
Lastly, we focus on a few key areas to improve each year and consistently “shine the light” on those areas. Utilizing relative data and sharing the results within the company provides transparency and reveals where we have problems. It is not intended to shame employees; rather, it brings to light areas that need improving so that we all know what is expected and where we are exceeding expectations and falling short.
Once we know where help is needed, we can allocate the appropriate resources and assistance to address the situation. On the flip side, transparency affirms good behavior and motivates employees to continue performing at a high level.
Schleisner: More than ever, we are looking at our forecasting and purchasing data to make decisions on how to purchase more effectively to help offset the extended lead times we are currently experiencing.
Is there something from your company’s early 2020 to-do list that simply got shoved off the radar and that you look forward to getting back to this year?
Benischek: Looking ahead, our company has aggressive growth targets over the next three years. Our focus is on enhancing our customer’s experience through expanded delivery options, employee learning, and continuing our sales and support realignment that started in 2020.
Roberts: Several projects got moved from early 2020’s to-do list, but one of the things I’m most excited about that we are getting underway now is our new internal Learning Management System.
We have been using external learning management systems from several industry groups, which have been great, but our new tools allows us to create our own training videos and easily load them in to the system, along with giving us access to a massive library of already-created courses of all different topics. This will help us have a more consistent and easily accessible training program across all locations and departments of our company.
Schleisner: With the pandemic putting an indefinite hold on all travel and face-to-face meetings, our HVAC peer-to-peer meetings could not be held for the most part of 2020. Virtual meetings have been effective for the most part, but there’s no substitute for getting together as a group and discussing industry issues. I’m looking forward to restarting these meetings again soon.
Liu: One area that hit home this week is our disaster recovery plan. Last year, we intended to implement a new DR plan. However, due to COVID and integrating a new company we acquired last year, upgrading our DR plan took a back seat.
Having a more robust disaster recovery plan came a little too late, considering the most recent blizzard that swept through Texas. It knocked out power across the state for multiple days, caused us to lose power at our headquarters, and prevented us from being productive longer than we expected. We ended up managing through the ordeal.
However, being down for those few days made the cost of not being able to operate for single day very clear to me. That was a big wake-up call and exposed some areas we needed to address. All in all, it was a good learning lesson for us that will make us better prepared going forward.