The final distributor-oriented event at the National Association of Wholesaler-Distributors’ (NAW) 2012 Executive Summit on Feb. 2 in Washington, D.C. was a Capgemini expert and a panel of three distributors on the topic, “Distributors: Don’t Leave Money On The Table.”
George Swartz, distribution practice lead at Capgemini, took the audience through a laundry list of ways that distributors can and do overlook potential operational efficiencies. He then moderated a panel of three distributors, each of whom offered a mini-presentation on how their company was trying to do something along the lines of what Swartz was preaching.
Prime among the panelists was Tammy Miller, CEO and board chair at Border States Electric (BSE). Miller is also a former National Association of Electrical Distributors (NAED) chairman.
Miller captured the audience’s attention; all questions for the panel were addressed to her. Ten minutes after the panel session ended, Miller was still in the room, grouped with distributors discussing her ideas based on what she spoke about on the panel.
Understand costs first
Miller said by “capitalizing on customer’s problems” and offering customized solutions, BSE was able to achieve its goal to top $1 billion in sales by 2011, a double in five years.
The key to the ramp up from $485 million in 2006 sales to a projected $1.2 billion in 2012, Miller said, was spreading understanding throughout the employee-owned BSE workforce—an understanding of what the company’s true costs to service customers are.
Miller also said BSE doesn’t provide products to some customers. For one customer, the company provides software. For another, BSE provides third-party logistics services. “In some cases, we bill the customer at cost [for the products] and add services [to the invoice],” Miller said.
“We sit down with the customer and have a fact-based discussion on the services they want,” Miller said. “We discuss which of us [BSE and/or the customer] can provide the services most cost-effectively.”
It’s not necessarily easy
“We didn’t just wake up” one day, Miller said, and come up with a perfect model for pricing services. In fact, she briefly described an earlier BSE effort that involved activity-based costing—an effort she said was a failure.
Instead, the “understanding our costs” effort was developed over time, with special input coming from the accounting and financial employees. Additionally, the company gained from the hiring of “some brilliant young people who understand both technology and services,” Miller said.
In answer to an audience question, she noted that there are still challenges in implementing the BSE approach. “What is difficult is getting the ‘scope of service’ in focus,” Miller said.
“We have two problems [internally]: Folks who give services away, and folks who don’t understand all of our services.”
Another problem delineated by Miller: The BSE approach works best when the customer understands its own cost structure. If the customer doesn’t have that clear, it’s hard for BSE’s proposal—valued-added services that lead to customer bottom-line savings—to make sense.
A final note, Miller added that it’s not necessarily a six-inch putt for BSE employees to focus on costs, services, and customer savings. She made reference to a situation in Phoenix where BSE was delivering to a given customer twice a day. A competitor came in, took a fresh look, and proposed a solution involving delivering once or twice a week. “We were providing more service than we needed to,” Miller said.
Miller’s NAW presentation is now available for download
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