Remember all the hoo-hah several years ago about how dot.coms would rewrite the rules of the national account game? Internet startups had grand visions about how their Web-based business models would give Fortune 500 industrials fast-and-efficient ordering options for virtually any product on the factory floor or in the tool crib. Then came the Internet bust, the recession, and the move overseas by many industrial firms in search of lower production costs.
These factors created a much smaller industrial market for distributors. For many of the remaining industrials purchasing $22-plus billion in industrial electrical supplies, the goal of reducing their overall electrical spend still remained.
Rockwell Automation distributors, which represent almost 25 percent of the industrial electrical market, recognized the need to develop an efficient process for national account contracts — which accounted for a significant percent of the remaining industrial market — but still offer customers with local supply options. To create serve this customer niche, these distributors formed and funded Vanguard National Alliance.
Over the past three years, Vanguard National Alliance (VNA), worked under the radar to position its 50-plus electrical distributors as the channel of choice for national account contracts covering industrial automation equipment and industrial MRO supplies.
Since 2002, the organization has grown from two people and a business plan to an electronic hub serving members' national accounts needs. VNA now employs 13 people and serves over 20 accounts with more than 1,000 locations throughout North America. The annual value of existing contracts exceeds $150 million, and VNA is processing more than 100,000 transactions annually.
VNA's distributor network has a very important distinction that differentiates it from other national account options: all VNA distributors carry the Rockwell Automation line and its coveted Allen-Bradley brand. Together, with 532 branches, they account for 99 percent of that manufacturer's sales through electrical distributors.
John Salvadore, VNA's vice president and general manager, says the landscape is quite different than it was five years ago when dot.coms battled with electrical distributors for contracts and end-users had greater interest in integrated supply. Today, VNA primarily competes for contracts with established national chains. He says integrated supply didn't provide industrial customers with the savings that were promised, and customers found one supplier couldn't serve all their needs. “We have seen the whole quotation process over the past three to four years narrow down to a few of us who are going after the same accounts,” he says.
Dave Pratt, VNA president, says VNA fills the need that Rockwell Automation distributors had for a national accounts solution. Pratt says VNA is owned by its distributor members, and has a distributor and a customer-centric focus. Board members include: Art Cook, Buckles-Smith Electric; Rick Dahlstrom, McNaughton-McKay Electric Co.; Stuart M. Irby, Stuart C. Irby Co.; Jack Lawson, Electrical Equipment Co.; Clarence Martin, State Electric Supply Co.; Barry Boyer, Werner Electric and Van Meter Industrial; and Bob Zamarripa, OneSource Distributors.
Philosophically, Pratt, Salvadore and the entire VNA team see themselves as a support tool that members use to retain and attract business in their local markets. “We take this whole position as a hub very differently than you would have heard three or four years ago, where the hub was trying to become more important than the distribution channel and own the customer,” he says. “We take a back seat to that. We want to provide corporate customers what they need; cost-effective purchasing systems with high service levels, but distributors are still the focal point. They have the local account responsibility and maintain the local relationship in all situations.”
Jack Lawson, VNA board chairman and president and CEO of Electrical Equipment Co., Raleigh, N.C., says VNA is unique in that it's owned exclusively by the channel and acts as a nonprofit service organization. He says its use of automated systems to communicate transactions between customers and the distribution channel minimizes cost at all points in the supply chain. Because of the model on which it is built, he says VNA adds no cost to the channel while providing significant value to the customer community through traditional supply chain consolidation.
Having the ability to service national account contracts for industrial automation equipment with Rockwell Automation products anywhere in the United States is a key selling point for VNA, and is one of the ties that bind together VNA distributors. It helps VNA in several other ways. The fact that VNA members are authorized to carry the line means they must fulfill the high quality expectations of Rockwell Automation for its distributors, including significant investments in inventory, technical personnel and training. “They cannot maintain their Rockwell Automation distributorship if they are a weak player,” says Pratt, who adds that when distributors carry this product line, it also tends to attract other “tier-one suppliers.”
Pratt and Salvadore say the other MRO product lines VNA distributors offer are equally as important as Rockwell Automation to customers. While all of VNA's accounts were already Rockwell Automation customers, these customers sometimes thought of VNA distributors only as providers of Rockwell Automation's products. VNA and its distributors now work closely with 22 suppliers of industrial MRO products. Osram/Sylvania, Philips Lighting, Cooper Industries and Panduit have been several of VNA's strongest supporters.
By providing a full-service national account solution to their customers, VNA members have been able to unlock more MRO potential. VNA says customers place their MRO purchases through local VNA members under the national account contracts because the pricing is competitive, the service is solid and they receive key “total cost of ownership” benefits. This package of services is intended to help customers reduce their total acquisition costs by placing one order through one distributor and receiving one delivery and invoice.
“When VNA distributors start a contract, the Rockwell Automation content for our distributors is much higher than the MRO piece,” says Pratt. “But we see the MRO portion growing month by month, and we track those numbers right down to the SKU. ‘Growing the MRO’ is a major focus on each VNA agreement, as VNA wants to help its member ‘control the crib.’ Over the past three years, non-Rockwell purchases, as a percentage of overall VNA contracts have increased significantly.”
Another tie that binds together VNA distributors is the software packages that make the VNA engine hum. VNA uses the bizLinx Commerce Connect and Private Trading Exchange software from Infor Global Solutions, Alpharetta, Ga., to handle electronic transactions with customers and to link with distributors' business systems. It also uses the Industry Data Warehouse (IDW) as its sole source of product and pricing data.
Another online tool that helps link VNA distributors, supporting manufacturers and customers, is Microsoft Office Live Meeting software. VNA uses online meetings to conduct new contract implementation meetings with distributors and customers, and to provide product training for distributors and customers.
Pratt says these tools help VNA provide its members and supporting manufacturers with a cost-effective method for winning national account contracts that they could never service as individual companies. “The idea,” says Pratt, “is to keep creating good, profitable deals for our members and to drive continued cost savings and added value to our mutual customers.”