Overcoming supply chain distributions

ASA distributor and vendor members discuss product availability, customer interactions and 2023 predictions.

By Mike Miazga, Vice President Sales-Operations, mmiazga@asa.net

Now that the worst of the supply chain struggle is behind the PHCP-PVF industry, ASA member distributors and vendors are focusing on the future and applying what they learned over the past year or so.

A group of distributors and vendors sat down during ASA’s NETWORK2022 in Chicago for a panel discussion on how distributors are navigating supply chain disruption with their customers and agreed that while ugly terms such as allocation are now less commonplace, a hint of caution still exists as the calendar has turned to 2023.

Moderator Scott Robertson, president of Robertson Heating Supply and a former ASA president, asked the panel what potential supply chain issues are lurking in 2023.

“Trucking companies are the biggest concern,” Viega’s Dalyn Cantrell said. “Getting them to show up when they say they are going to show up and getting them to do what they say they are going to do.”

“The freight industry is top of mind,” Charlotte Pipe’s Billy Zimmerman agreed.

Zimmerman cited statistics where 30% of all freight is transported by rail and the average rail slowdown at the time of the conference was 3.5 miles per hour.

“Manufacturers concerns become our concerns,” Gateway Supply Chairman Sam Williams Jr. said. “Their concerns are real.”

Lessons learned

The majority of the panel discussion in Chicago talked about lessons learned from the supply chain crisis and how those can be implemented in the future.

A hard reality on the distributor front was having to say “no” to customers. “One thing we all learned is customers were going everywhere for product,” Coburn Supply President and ASA President-Elect Patrick Maloney explained. “We were getting orders from customers we had never dealt with before. We weren’t used to telling people no. It was definitely a struggle, but we looked at order history and tried to be as fair as possible.”

Williams noted Gateway dealt the challenge of new customers placing online orders and taxing already limited inventories.

“In some cases we had friends that we had never had before who were searching for product,” he said. “Ultimately they understood, but they didn’t like it. We told customers this is what you bought from us and this is what you can get. Use it all now or over a period of time.”

Irr Supply Centers President Pat Duffy said business analytics software helped the New York-based distributor’s branch managers with product allocations as did a letter from him to customers explaining the situation.

“We had to support those who supported us,” he said. “It worked out in the best interests of everybody. After getting the letter and reading it, our customers felt they had a stronger relationship with us and supported us.”

“We were all in the same reality. You try to communicate with them the best you can,” Maloney said.

Viega’s Cantrell and Charlotte Pipe’s Zimmerman said they’ll be prepared if/when conditions go off the rails again.

“We will have to go through it again in the future,” Zimmerman said, “and we’ll communicate even further with our customers.”

“We have a process in place and will be prepared when it happens,” Cantrell added. “It can easily happen again, and it can happen quickly.”

5 things customers want (And how to deliver them)

By Randy MacLean, President, WayPoint Analytics

If you ask your sales reps what customers want, you’ll get a lengthy inventory of needs, whims and wishes, as expressed by customers over the years.

More than a decade working in LIPA (line-item profit analytics) with hundreds of the world’s best distributors has answered this question much more directly.

In reality, there’s only five fundamental items that truly influence customer purchasing decisions. Distributors with mastery of these items always lead the market. Moreover, you’ll need either parity or superiority in all five to seize and hold a leadership position.

If you fail in any of them, competitors that outperform your deficiencies will pass you by.

There are no exceptions — you either have them, or you lose.

The 5 things customers want

Customers are affected and influenced almost exclusively by:

 Availability

 On-time delivery

 No product failures

 Smooth (and short) interactions

 Acceptable price

Availability

The top element that matters is the availability of the product or service needed by the customer.

Efficiency metrics surrounding fill rates on critical products is foundational to customer experience and company productivity. Fill rates exceeding 99% are certainly possible for your most profitable products and most profitable customers — when you can identify your most profitable products, and know who your most profitable customers are.

You need a dedicated cost and profit system to identify profitable products, customers or anything else. Margin will not help you find those that contribute most to your bottom line because profitability is all about cost-to-serve and has almost nothing at all to do with margin. (Heresy, I know, but this is the most important finding from a decade in the numbers of the market leaders.)

Once identified, you can increase stock levels on the mostprofitable products and prioritize your most-profitable customers. This will reduce stock-outs and raise fill rates where it matters most.

On-time delivery

Customers want what they want, when they want it. The “when” part is best achieved by formally offering a range of delivery time options. (“You can have it tomorrow, in two days or sometime next week.”)

Each will have its own associated delivery charge ($25, $10, FREE), giving the customer complete control over the balance of time vs. cost. It also facilitates the vital addition of delivery revenue to your OpCash (operating cash) and cash-flow.

More importantly, formalizing options puts the balance of speed vs. cost for every order into the hands of the customer, while eliminating the costs and inefficiencies of exception processing driven by provision of informal options.

No product failures

Product failures (and delivery failures) are an irritant to your customer relationships. As they accumulate, your company will be tagged as unreliable and customer loyalty will plummet. It’s also important to stay on top of quality issues, be they productrelated or service failures in your logistics chain.

Failures happen — what counts is how quickly and conveniently (for the customer) you correct them. Have a concierge customer service group for your Platinum accounts and be proactive with the vendors as they’re upstream from product issues and may not have any notice of widespread problems until they hear from you.

Smooth (and short) interactions

Your customers are properly focused on what they’re doing for their own customers. Your sales reps are an unwelcome distraction in their world. Make customers’ interactions with you as effective and as minimal as possible — that’s how they like it.

Customer loyalty doesn’t come from the relationship with the sales rep, it’s from the company’s execution on the things that matter. Using analytics to manage operational efficiency improves performance and reduces errors. Both drive customer loyalty and also reduce costs.

If the customer connection actually does hinge on the rep’s relationship, then the customer isn’t yours, it belongs to the sales rep. If the rep’s relationship is holding the customer relationship together, then your company performance isn’t. You need to have a hard look at the customer experience because your company may have an inability to deliver on the things that matter. You’re vulnerable and competitors will take your accounts.

Acceptable price

Customers don’t want to feel like they’re being exploited. That is, feel like they’re paying an unfair price. Outside this caveat, they’ll pay a price premium if they evaluate the experience with you to be efficient and trouble-free.

If you’re executing competently, price is seldom the ultimate determinant, but where price does have sway, having a low-expense rate on the customer relationship gives you options. (This is a critical feature of LIPA – knowing the actual expenses for a customer.)

For instance, you could help a profitable account where the margin is 18.3% (already below your company average) win a specific bid with an order you’d price at 15%, knowing the customer’s expense rate is 10.4%. You’d take a reduced profit (but still a profit) because you’d add profitable incremental cash-flow (OpCash) to your sales, and would be seen by a key customer as a great partner, increasing loyalty.

What’s the takeaway?

Total customer experience determines customer loyalty and market share. You get advantage in your market by executing above your peers on these five items. Superiority on one or more will increase share and profits — as long as you’re not underperforming on others.

If you’re feeling “margin pressures,” “evaporating customer loyalty” or an inability to maintain historic profit levels, you’re certainly behind your peers on one or more of these elements.

Companies get down all kinds of rabbit holes, trying to be everything to everyone. The reality is that customers only want five things, and relentless focus on this limited list separates the best from the rest. Use this list to cull unproductive initiatives while taking a new look at the items you’re almost certainly missing. A reviewed focus will magnify the gains you’ll get from your limited time and resources.

Gather your team and get to work on these five items and you’ll begin your advance to new records in cash-flow, profits and market share.

Randy MacLean is the founder of WayPoint Analytics, the inventor of LIPA, and best-selling author of a series of profit practices books.For more than a decade he’s been analyzing company results, thinking about, writing about and advising on profit issues in distribution and manufacturing. WayPoint software is used by hundreds of companies to control their profits, and their destinies.Visit www.waypointanalytics.net

About the book

This article is adapted from a section in Profit-Driven Analysis & Practices: The CEO’s Guide to Record Profits by Randy MacLean. The book explains the field of LIPA (line-item profit analytics), and how you can use its unique metrics and strategies to outperform everyone else in cash-flow, profits and market share. Get it on Amazon at https://amzn.to/3tjr2VM.