How can electrical contractors leverage their supply chain partnerships? This article details some distibutor support services and programs of which contractors may not be aware.
Contractors and distributors share a definite kinship in the electrical supply chain. While there are national and even global electrical distributor corporations, the majority of distributors are independents—family or privately owned operations. And, in most cases, the largest segment of the customer base still is the electrical contractor. So distributors tend to pay attention to their contractor customers because they have much in common, and there is a great deal at stake for both in maintaining a close and mutually profitable relationship.
Distributors have been working on these relationships for almost a century, and over time, they have gotten some pretty accurate ideas about what the contractor needs and, accordingly, have developed a number of programs and services to meet those needs. Do you know what the distributor has to offer above and beyond pipe, wire and free coffee at the counter?
Bidding, buying and billing
In the opinion of many distributors, contractors can use help in bidding a project, but too often fail to take advantage of the assistance the distributor can provide.
“We can help in the bid stage both from a technical and a pricing point of view,” said Norm Blumenthal, vice president of sales at Turtle & Hughes Inc., an independent distributor. “This way, the contractor can put together a quality bid and know there are no holes in it technically and that he has a competitively priced bid that will allow him to secure the project.
“The distributor adds value by looking at the entire package and offering options as opposed to parroting whatever price a rep or manufacturer may quote on individual materials. Any ‘me-too’ distributor can come up with a price. The significant part of the bid process is advising the contractor about everything around the price.”
After the job is secured, purchasing the materials required in a timely fashion is critical to ensure on-time delivery at the site. Turtle & Hughes approaches this from two angles: online purchasing and on-site availability.
“Some contractors are not strong computer or paperwork people,” Blumenthal said. “Our own MIS department developed the software we use, so we have the flexibility to interface with our customers virtually any way they wish. They can log on to our system to order, expedite or check our inventory. They also can access the system after hours to check on the delivery status of an order. And, if the contractor wants, our MIS people can go to his office and link his EDP [Electronic Data Processing] system to ours.”
The distributor has developed what it calls a “mobile distributorship,” which is one or more trailers, depending on the size of the job, that are parked on-site and stocked with whatever materials contractors have determined they will need.
“So instead of them having to have a purchasing agent calling in orders and us having to deliver every day, especially if it’s a multishift job or one that runs weekends, the contractor has accessibility of materials 24/7. The foreman just signs for it at the trailer where we have a computer.”
A side benefit of this procedure for contractors is that they are able to gauge the productivity of crews on a large job by checking on how much material different crews picked up for installation on a given day.
Efficiency, safety and productivity
“In this economy, contractors desperately need help in finding business,” said Dave Moeller, national market manager—construction at Graybar. “And when they do find it, there is more risk than ever. The job has to be done very, very well. It has to be profitable, and there is little or no room for errors.”
To help contractors meet these exacting standards, in late 2007, Graybar introduced a program called ESP (efficiency, safety and productivity).
“By efficiency, we mean reducing the amount of job site labor, which is the contractor’s biggest drain on profitability,” Moeller said. “The electrician’s safety on the job is also critical because a contractor with a sound safety record will be in a position to bid more jobs and can be bonded and insured less expensively. Finally, productivity has to do with helping the contractor take greater advantage of available electronic efficiencies, like EDI [electronic data interchange].”
With regard to labor efficiency, Graybar has been able to assist contractors with prejob planning and also prefab work, which is becoming more widely accepted today.
“Many contractors are buying components and pre-assembling them in their shops prior to going to the job site or are buying complete packages from a manufacturer,” Moeller noted. “These might be box assemblies or lighting fixtures with whips, cords, connectors and prelamped. We can help them whether they want to assemble the package themselves or buy complete from a supplier. In any case, this kind of prefab unit can then be quickly set in place on the site, saving considerable installation time.”
On the job site itself, Graybar has an e-mail proof-of-delivery system that tells the contractor when a shipment was delivered and to what part of the site, and it includes a picture of the packaging for ready identification.
On an extensive site, the distributor also provides as many job boxes, or clamshells, as are required that are filled with whatever materials the electrician needs so that he doesn’t have to go more than 20 feet from where he is working.
With regard to productivity assistance, the company can upload its stock pricing into the contractor’s estimating software so that he knows immediately that he can buy at these prices.
“A contractor’s project manager with a laptop on-site can communicate with us by e-mail, and we can help on an instant basis,” Moeller said. “We can collaborate online, look at submittal and project-management documents, and provide quick solutions. But it’s surprising how many contractors don’t use the powerful electronic communications tools that they have at their disposal.”
The omnipresent energy-efficiency issue is an-other area that many contractors haven’t looked at carefully enough, Moeller said.
“There are an estimated 90 billion lighting fixtures currently installed that could be potentially upgraded,” he said. “And contractors put them all in, know where they are, and have good relations with the customers they installed them for. Our company has the technical resources to help contractors develop a lighting-upgrade solution and formulate a proposal, and then we can help them finance that proposal and sell it. If the electrical contracting industry wants to reposition itself as an industry of energy contractors, this is an ideal way to do so.”
Marketing the ‘green opportunity’
Many contractors do not run the risk of losing business because they aren’t proficient and professional at what they do. They run that risk because they fail to promote themselves in the marketplace.
“In today’s economy, contractors have a real marketing opportunity to appeal to the end-user customer’s interest in energy-saving products,” said Dianne Becker, marketing manager at Becker Electric, an independent distributorship. “Distributors should make a point of advising contractors that they can increase their business when they add value by informing the customer about the benefits of energy-efficient products.”
Recently, Becker attended a dimmer manufacturer’s demo and training class conducted at a local contractor’s offices. The contractor explained that historically he had not done much residential work, but with commercial activity and new housing starts both down, he wanted to get into residential service work to keep busy.
One of the products featured in the manufacturer’s presentation was a dimmer that ties into the garage-door remote. The system can be programmed to turn on any lights at the house at the same time that the garage-door motor is activated—a rather sophisticated and relatively pricey upgrade.
“I asked the contractor how he planned to promote this product to the appropriate audience,” Becker said, “and he mentioned leaving flyers or using door-hanger ads, and maybe having his drivers make up lists of single-family dwellings. So I asked him if he’d consider having us help him set up a direct-mail program utilizing postcards showing a woman and child coming up to a darkened house and the lights coming on. I said we could reach the right prospects by targeting the ZIP codes of upscale neighborhoods.”
The distributor developed the marketing program for the contractor and provided him with a distinctly higher profile in the eyes of prospective customers.
“Many distributors have considerable experience in the marketing arena and would be glad to share this expertise to help their contractor customers,” Becker said. “It’s really just a question of getting away from the old ways of thinking about things and being a little imaginative.”
Products, prices and getting paid
In these risky times, it makes sense to think about money matters a little differently too, starting with the basic issue of price.
“Too often, contractors think about price simply in terms of product price,” said Joe Lipuma, director of sales, Rexel New England division. “But the contractor’s largest cost is in labor, so we make the point that what they should be thinking about is the lowest installed cost—that is, purchasing not the lowest-priced product but the best labor-saving product.”
The company also offers the contractor manpower assistance on the job site.
“We have a number of what we call project groups whose people are dedicated to tracking particular segments of the job for the contractor, whether it be lighting or switchgear or some other particular aspect,” Lipuma said. “These people are in constant contact with the contractor, updating order status and providing him with whatever information he needs at job meetings as work progresses. Two of the things they personally assure for the job are that the top 250 items will be in stock or they will give the customer a $25 dollar credit and also our ‘midnight express’ program that guarantees materials delivery by 6 the following morning. It’s as though the contractor has extra employees on his work force.”
One problem that seems to recur, Lipuma said, is that contractors are reluctant to share budgetary concerns at the beginning of a project. Then, after the pricing process has been completed, the contractor requests an alternative package, an exercise that wastes considerable time and can lead to unnecessary annoyance and frustration on both sides.
Getting paid on time these days has become more of an issue than ever, and this is a situation in which the distributor definitely has experience, since a significant part of the business has to do with extending credit.
“Since the distributor is not going to get paid unless the contractor does, it’s in our interest to help him in any we can,” Lipuma said. “There are a number of ways to help the electrical contractor if he has not been paid by the general contractor. A notice of lien might be suggested, or the distributor might have some leverage because of previous experience with the GC, or ... other subs who have worked for him. One approach is to set up a joint check arrangement so that both the electrical contractor and the distributor are assured of payment at the same time. As with other situations in the distributor-contractor relationship, discussing any problems up front is key to reaching an equitable solution.”
QUINN reports on a broad range of business and industry issues for journals in the United States and Europe. He can be reached at 203.323.9850 and firstname.lastname@example.org.