Distributors of electrical supplies have as many ways of doing business as rock star Madonna has performance personas. Most distributors provide the same basic functions in the supply chain: breaking bulk shipments into saleable quantities; stocking local inventory; delivery; extending credit to customers; and handling product returns. But how distributors provide these functions and with whom they do business varies all over the map.
The distinctions are never clearer than when EW's editors immerse themselves in the magazine's annual Top 200 listing. Along with ranking companies by sales, the magazine's staff learns about how companies grew (or lost sales) in the previous year. As you will discover in “Top 200 Analysis” on page 34, some companies are investing in their businesses across multiple fronts and are adding branches, installing or updating their software, exploring new markets and hiring and training personnel.
The answers to the following questions can quickly define a distributor:
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Does the company grow by acquisition, start-up or by using both strategies?
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In an acquisition, does the company keep the management team or bring in their own people?
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Do local branches just stock the fastest-moving items and rely on a regional distribution center, or do they maintain a full stock?
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Do branch managers make the calls on brands and pricing or does headquarters handle these decisions?
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How much does the company invest in e-commerce tools such as the IDW, EDI and their website?
These nuances define and differentiate distributors. Distributors can get pretty darn passionate about these nuances. Take the age-old question of whether or not wire specialists should sell only to electrical distributors, or if they should sell to end users, too.
On the one side of the controversy you have wire specialists that sell directly to contractors, facility maintenance personnel and other end users, including Anixter Inc., Skokie, Ill., and some smaller wire specialists. On the other side are those that believe wire specialists should only sell through electrical distributors. Some companies do both.
It's a nuance that may seem like a tempest in a teapot to industry observers unfamiliar with the wire business, but it's a huge deal to people in this market segment. The controversy dates back to 1975, when Terry Hunt founded Houston Wire & Cable with a distributor-only-sales policy and began fighting his way city-by-city for acceptance within the electrical wholesaling industry.
Jeff Siegfried, president, Omni Cable Corp., West Chester, Pa., is also a passionate believer in the distributor-only sales policy. He doesn't agree with the rationale behind EW's decision to rank all wire specialists in the Top 200 ranking, regardless of their sales strategies.
In a letter to the editor he said, “After much thought and internal discussion, I respectfully request that you remove Omni Cable from your list of the Top 200 largest electrical distributors. We have always been happy to participate in your survey and we have been pleased to see our company show growth and expansion. However, we feel the recognition is unnecessary and misdirected.
“As you know, 100 percent of Omni Cable's sales are to listed electrical wholesalers for resale and therefore are already included and represented in their published numbers. We certainly understand your rationale for including master wire distributors is that most of those listed do a significant amount of volume directly with end users and their sales are more applicable to your listing. Omni Cable does not share that practice nor can we support or endorse the practice.
“We are fiercely proud of our growth earned, selling exclusively to electrical distribution and believe our growth is properly reflected in our electrical distribution partners' continued success.”
While Siegfried did eventually decide to submit his company's sales data for the most recent Top 200, his passion for his company's sales policy exemplifies just how much the nuances that define distributors matter in this industry.