As a distributor, it's imperative for you to understand the customer's culture. When I was a branch manager for WESCO, I wanted to earn the business of a local Caterpillar plant. Our normal on-time delivery performance was competitive but unacceptable to Caterpillar because it required on-time delivery 100 percent of the time. As our local branch built multi-level relationships at Caterpillar, we learned more about its culture. Caterpillar expected the same level of service from its suppliers as it delivered; nothing more, nothing less.
Prior to introducing new executives from our company to Caterpillar, we would discuss the Caterpillar philosophy. If we had not understood Caterpillar's culture, we would have promoted our standard performance, but this would have been unacceptable — our effort to move up the organization would have been blocked.
Understanding your customer's culture is particularly important in the e-business world.
Some electrical distributors don't trust the basic premise of e-business because of the late 1990's dot-com flame-outs. Those distributors are betting all their customers want to continue doing business in traditional “brick-and-mortar” fashion, with the vast majority of products flowing from electrical manufacturers through their warehouses in local markets to end users.
But in the years to come, some larger customers (possibly huge industrials that want to buy enormous quantities of commodity items from one central source) may opt for the efficiencies of a proven collaborative e-business model. This can be dicey for electrical distributors because this model may or may not include distributors — the customer may opt to establish a direct relationship with manufacturers.
If you think this scenario could take place with any of your customers, read on.
Customer e-vision analysis
Your customer's upper management team will define their e-vision. That's why you must align your e-vision with the customer's. It takes a long time to get to these decision makers, and you cannot skip levels of management to shorten the process. To align your e-vision, you need answers to several questions prior to establishing an e-partnership: What is their e-vision? What do they expect from their suppliers? What is your customer's definition of partnership?
Relationships must be established and refined up to, and through, the “C-level” (CEO, CIO, CFO) of the customer's organization, if possible, because these senior managers will drive their company's collaborative e-business initiative. Companies without existing high-level relationships must take a long-term approach to develop them. Failure to carefully nurture these relationships will put your company's business at risk.
Driving such a plan from the top of a distributorship is difficult because it requires constant customer contact. The most likely candidates to direct the initiative on a day-to-day basis are the branch manager and the account salesperson — the company's “day-to-day directors.”
These day-to-day directors must advance and orchestrate a constantly evolving plan to penetrate the customer's organization, always at a level equal to, and hopefully above, the competitors. Working together and independently, the branch manager and salesperson will continue to introduce new members of their executive team and their supplier's team to the customer, constantly pushing the ceiling upward.
As we learned in last month's article, knowledge management is vital. One of the day-to-day directors should always be present when new levels of management at the customer are penetrated because their customer knowledge will keep the discussions focused and in line with customer expectations. This scenario should continue until the upper levels of the customer's organization are accessible.
The branch manager and account salesperson must define the customer's needs, culture and vision. The needs analysis will provide the blueprint for an action plan that consistently targets the customer's needs and expectations. Concurrently, the customer's culture and vision must be analyzed and articulated throughout the distributor's organization and to loyal suppliers. Multiple business and social contacts are required at all levels of the customer's organization — from the truck driver to upper management — to gain the customer's total confidence.
Every contact should be documented to help define the customer's culture and vision. This documentation will help the distributor organization retain as much of the customer knowledge as possible if an employee who had a key relationship with that customer leaves the company.
Most customer relationships are limited to two levels in each department. Typically, the salesperson and manager know a few key contacts, plus managers of engineering, purchasing and maintenance. The collaborative e-business plan requires the salesperson to expand relationships in both directions to include equivalent corporate-level positions and lower-level employees in other departments, such as the receiving department and the warehouse. On the other hand, the manager needs to broaden relationships and concentrate on middle-level and upper-level managers at the various divisions and headquarters.
The day-to-day directors must earn the right to visit with targeted managers at the customer. This process can take a long time in a large bureaucratic organization. When the distributor team senses customer resistance to penetration of the organization, new levels of distributor and supplier management need to be introduced to the customer before continuing to move up.
Sales associate efforts
The sales associate must establish ties with the customer's engineering department to gain access to that company's standards to note approved suppliers. Then the salesperson must methodically gain approval for other suppliers' products not included on the list.
The account salesperson and branch manager will determine which products to submit for approval and which suppliers to introduce to the customer. Product-specifying engineers, including those at corporate, need to sign off for approval. To expedite the approval process, plan plant-wide meetings and training seminars that bring engineers from different plants together. The sales associate completes the approval process by getting their suppliers' names added to the approved list, always keeping the purchasing departments informed so they won't be alienated.
This process is time-consuming for the sales associate. Management should compensate the sales rep based on effort. Although the sales potential is large, success is not immediate or guaranteed. If sales reps are not compensated based on effort, they will focus on other accounts that will generate immediate income.
As relationships are expanded, the sales associate must keep the manager informed and involved, and introduce members of the support team that also have customer contact — including inside salespeople, warehouse workers and truck drivers. For example, truck drivers can be goodwill ambassadors and a conduit for feedback. Finally, the salesperson must have the authority to make customer-service decisions and prevent problems from escalating.
The same power must be given to inside salespeople. They must be able to make decisions when disputes arise. In most cases, the decisions they make will cost less than the problems that can result from lack of responsiveness. This respect by the distributor for their customer's time — no matter what their position in the company — will create goodwill. Problem solving at the lowest level possible, without management involvement, is a key element for success.
Customers considering a collaborative e-business model will develop and execute plans from headquarters. They will select partners based on corporate knowledge, often with little or no plant input. That's why it's the branch manager's responsibility to identify the key decision makers at the customer's headquarters and develop a strategic plan to penetrate the corporate office. This will include working with the distributor's management team, supplier management teams and the sales associate. Distributors will be vulnerable if they do not have existing corporate relationships or fail to develop them.
Customers wanting to establish national-account relationships will select a distributor that can deliver consistent service to all locations. National-account customers don't want to work with multiple organizations. They want one point of contact to gain the efficiencies of an e-commerce model. Small and regional distributors that cannot provide such continuity will be left out of consideration. This is why some distributors have directed national-account efforts through the industry's buying/marketing groups and other distributor groups with a national-account focus, like the Vanguard National Alliance and Vantage Group.
The same process outlined previously must be duplicated with national accounts across all divisions and headquarters. This requires a national-account manager to develop upper-level customer relationships and identify and fill all customer-wide relationship gaps top-to-bottom.
National-account managers will work with the lead branch to assure that a parallel effort is made at each customer location. The national-accounts manager will be responsible for making sure the other branches evaluate the standards list and compare their offering to the lead sales associate's selection. Then, as much as possible, each branch will promote and gain approval of common lines at each location to maintain continuity. The national-accounts manager must also develop a method to evaluate pricing to the customer across the distributor organization.
If all customer locations are not involved and committed, the distributor will have problems when responding to a request for quote because the company will have holes in its bid and cannot bid a complete package. The distributor won't be able to deliver a complete quotation consistent with existing pricing. Also, pricing from suppliers will be higher than expected because the quoted package will be smaller than anticipated. The results will be compromised because the distributor effort wasn't coordinated.
Efforts that only target the customer's headquarters group or select plants have not been very successful in the past. The headquarters group cannot force remote facilities to honor these agreements and projected sales results will fall short. An e-business model can overcome this problem by forcing electronic purchase orders to go to the selected suppliers. However, unless all facilities buy into the new model, all blame for failure will be directed at headquarters. The supplier selection process, therefore, must have support throughout the customer's organization, and the distributor must present a coordinated effort.
Relationship building in the collaborative e-business model and in traditional sales situations requires a true team effort with all members working together to achieve a common goal. The distributor and its suppliers need to have numerous and ongoing contacts with their customer, from low levels all the way to the top to gain the customer's total confidence and to lay the foundation for a successful collaborative e-business partnership.
As you take steps to get to know your customer at all levels, you will be constantly demonstrating to them that your company has similar values, understands their needs and can and will meet their service requirements. With that foundation in place, they will want to work with you to build a common collaborative e-business vision and form a long-term business relationship.
After developing a strong relationship, a joint strategic plan can be formulated. A technical solution for implementing the partnership should be addressed last because even the best technology in a weak culture will fail. Once the strong foundation is in place, partners will work together to achieve their common goal and implement their new collaborative e-business model.
Tom Paulsen is president of Tom Paulsen and Associates, Rockford, Ill. He is a collaborative e-business consultant with more than 30 years of supplier-distributor experience. He can be reached at (815) 229-2555 or [email protected].