By Jim Williams
In this edition of Contractor’s Corner we approached Brandon Berumen, President of LEI Companies in Denver, Colorado to ask him a few questions about saving money on labor costs. The conversation quickly turned to value added services that distributors can offer to contractors.
tED: What are you looking for from Distributors when it comes to saving on labor costs?
Brandon: There are really two ways to look at it, the first – and the easiest, which I think all of the manufacturers are really trying to do, is product selection. If I choose Product A over Product B will Product A create some sort of product efficiency for me?
I think those are probably a little more difficult to connect the dots between the new innovative products that are out there, and the field installers who are actually using them. In a lot of cases, the procurement people – whoever is responsible for purchasing – might order the products they are used to purchasing, or might purchase the products that are cheapest, most cost effective, or available. So, I think one of the most beneficial things is for distributors to get those reps of the different products if it truly is something innovative. You don’t want to go to the well too many times, but if they really do have a product that’s quite innovative, we like getting the manufacturer along with the distributor into our foreman meeting with samples so they can kind of go hands on, see how it works. Touch it. Feel it. Picking things off of a brochure, or an online website, is decent, but nothing compared to when they can actually get their hands on it and try it and play with it and see how durable it is. And then, usually what we’ll see is, those foreman requesting that specific product by name, or by part number. That to me is the most effective way of getting the products out there into the right hands of the people using them.
Another area that has really gotten a lot of attention over the last few years are value added services. And those mostly for us come into play with material handling or installations that are difficult to mobilize or de-mobilize. We have a couple of distributors here in Denver that I think are doing a really nice job of, you know, if you purchase the feeder cable from them, they will deliver it on jacks, on a reel, on a trailer that the cable can easily be spooled off of. The distributor may even let you use a tugger if it’s available.
Then, you can arrange for delivery, pull in your wire and later that day or the next day, the distributor will come pick up the trailer and the tugger and get it out of there. To me, those kind of concepts and ideas of what we call value added are not necessarily going to result in cheaper products, but definitely going to save the contractor money with his labor trying to get things set up, make sure you have all of the parts and pieces. For example, if a contractor gets a tugger and then all of a sudden they realize they don’t have the control, or the cord, or whatever the case might be. So, to me, that value added sector, has gotten a lot of attention recently and I think it is going to continue to get more.
The value added services is a pretty tangible equation for purchasing/decision makers to latch onto. They can see if you buy the wire from me and it comes out racked on a trailer with a tugger and it’s going to cost you $500 more for that particular procurement, we can quickly do the math and say, well, that’s worth it, or it’s not worth it.
When it comes to products, the widget-type products – fastener XYZ over fastener ABC – that to me is a lot more difficult to measure the return on investment when you are getting down to fractions of a minute of labor time that it shaves off per installation. It just becomes a little harder math to do. That’s why I think getting people’s hands on it so they can see, boy, it’s a lot faster, or a lot more durable, or a lot easier to use.
But if it’s not relatively close to the competitor’s product that it’s trying to tick, you’re going to have a harder time. Even though it may be easier, it’s just a harder equation to balance out when you get into micro-managements of efficiency.
tED: How important is labor cost savings?
Brandon: They are very important. I don’t think any contractor will say it’s not important. I think you will have a captive audience with contractors every time you say this is a labor saving. But in terms of the widgets, the commodity things – connectors, couplings, straps, wire nuts – those types of miscellaneous product, I think the term labor savings has become almost cliché and it’s a much harder case to prove. Not to detract from the importance that it has to a contractor, I just think that value is a little more difficult to translate when it comes to those type of products versus value added services that the distributor can offer.
But that’s not entirely limiting. It’s just more difficult. You know, Southwire coming out with its simple wire and eliminating the need for pulling lubricants, it’s harder to pay a little more for wire – after all a thousand feet is a thousand feet – but, after the business case was made and we had a couple opportunities to try it and see how it works, now it’s pretty much a no-brainer – it’s just the wire we buy.
tED: How are distributors explaining the potential labor cost savings to contractors when talking about selling products?
Brandon: I think they have a tough road with that. Number one, because each companies’ procurement might be different. For example, a lot of our purchasing decisions are centralized to a purchasing agent, however, they may not be as closely connected to the impacts that some of these value added services can offer.
So, to me, the hardest part for the distributor is first, getting the right captive audience from the contractor. In the past, we’ve done lunch and learns – pretty much anybody that’s a sucker for a free lunch where the distributor can come and bring lunch and talk about a product or services they offer, and they have a room full of project managers, or purchasing agents or what have you.
Beyond that, it’s pretty much one-on-one. It would be nice to flag orders – if you know you have a distributor that offers a pole dancer, one of the beadings that will set light poles – so, when you order light poles, them circling back to the contractor saying, “Hey, do you know we offer this service as well? We can bring it out when we deliver the pole dancer and you can get those things installed right away.”
I think communication is a hard one. Contractors are not always a captive audience to sit and spend time shooting the breeze with distributors. That being said, each distributor has to find a way to get into the contractor, understand its purchasing team and how those decisions are made and just keep hammering the product information. Once is not enough! It may take two or three times before they are going to connect with somebody.
tED: Should it be done with every product that is sold?
Brandon: No, I think that will get overwhelming. It will lose effectiveness. I think if the distributor latched onto something once a quarter and said, “This is really a game changer. This is something outside the box that really has a big impact.” Trying to latch onto that and trying to push that out over the duration of a quarter would probably be the best strategy. Because if they came in and where swinging a new product every week, or every couple of days, you forget immediately the value of each one of those over time. So, I think doing it on a more reserved fashion for the real game changer type products.
A special thank you to Brandon Berumen for contributing to this edition of Contractor’s Corner. Brandon has co-owned and operated LEI Companies since its inception in September 2002. Brandon is responsible for managing the company’s Operations, Field and Finance departments. Much of LEI’s success can be attributed to Brandon’s proficiency in implementing controls and procedures that help the team achieve a final goal of quality project delivery.
To find out more about LEI Companies, please visit their website – http://www.leicompanies.com/.