Dumpster divers

It's dirty work for sure, but AIM Supply account managers know that trash surveys are one of the most effective ways to uncover a customer's wasteful spending habits and lost profit dollars.

by Rich Vurva

Chuck Losh learned a long time ago not to wear his best dress shoes when he visits customers. He never knows when he might climb inside a trash dumpster to find evidence of MRO and production supplies thrown out, even though they still had useful product life left in them.

What’s an executive from a major distribution company doing dumpster diving?

“Some of our best work begins by climbing in somebody’s dumpster and seeing where the waste is,” says Losh, president of AIM Supply in Largo, Fla.

Losh instructs the company’s 45 account managers to dig through the trash in search of MRO and production supplies that employees toss aside before they’re worn out, gloves or painter’s suits that appear to have been worn just once, or paint brushes and buffing pads and other supplies that still look new or are overkill for the process being performed.

After rummaging through the garbage, they present their findings to the customer to help them realize how much money they could save every year on discarded or misused production supplies.

“Sometimes it looks like a crime scene with all of the evidence in plastic bags,” says Mike Huling, president of Nestor Sales, AIM Supply’s parent company.

When customers see a display board filled with discarded gloves, drill bits, paint brushes or abrasive wheels — each carefully labeled to show their cost — the visual impact is powerful. Employees begin to realize that potential raises, bonuses and retirement contributions are ending up in the dumpster.

“Since we don’t deal in anything that outwardly enhances the value of the customer’s product, we bring value to the customer by making sure our processes are streamlined, and that their trash cans aren’t full of unused or underused products,” says Huling.

Talking trash with customers
Nestor Sales started in 1971 selling tools and equipment to local customers in Florida. As the company grew, it formed two separate divisions; AIM Supply provides MRO and production supplies to customers in the marine, industrial and automotive service/fleet industries, and Ace Tool is a wholesale distributor to the automotive aftermarket.

AIM Supply today has distribution centers in 10 locations nationwide. Losh says the company’s growth is a direct result of its dedication to understanding the business needs of customers. Today, their primary concern is containing costs and enhancing customer profitability.

“We’re passionate about cost containment and cost savings,” says Losh. “Customers are looking for value-added services. Our goal is to make our customers more successful, not only by supplying them with high-quality products at reasonable prices, but by developing reporting systems to show them the components of their spend, having our account managers on the floor identifying opportunities to improve their processes, eliminating waste in the plants and keeping our customers competitive.”

Through its cost saving initiative (CSI) program, the company guarantees at least 6 percent savings per year to customers who hire AIM as their key MRO production supplier. Account managers work closely with customers to identify the key areas of their total purchases of MRO supplies and then jointly develop a program to reduce overall costs.

Account managers sometimes utilize CSI T-shirts and reward programs to gain support for a cost savings initiative. Some customers share the savings with employees by rewarding them with a night of bowling or dinner, and one company used part of its cost savings to pave the employee parking lot.

During the manufacturing downturn, AIM gained market share by demonstrating to manufacturers its ability to focus on reducing costs. Now that business is starting to improve, Losh believes the opportunities to generate even greater savings will accelerate because, as production increases, the natural tendency is to lose focus on the importance of cost containment.

Part of each account manager’s total compensation is based on achieving customer-focused cost saving goals. When customers switch products, they must use the new item for 90 days before the account manager receives credit for the cost savings. The 90-day window eliminates the temptation to frequently switch between brands to achieve false dollar gains.

“We don’t want our people to be perceived as the fox in the henhouse,” says Losh. “By having our account managers’ compensation partly based on savings, it gets rid of the perception that they’re trying to sell them something. Our belief is that the less we sell of every item, the more likely our customers will entrust us with a larger portion of their spend.”

Making customers more competitive
Account managers typically look first at a customer’s largest expenditures to identify where they can make the biggest impact. In some cases, the results are dramatic. AIM recently started doing business with a manufacturer that previously had a full-time integrated supply solution and reduced the company’s MRO expenditures by 30 percent a month. They thought because they didn’t own the inventory until it hit the floor, they were saving money. Easy access to large inventories created overuse and waste.

“We’ve saved them $20,000 a month — nearly a quarter-of-a-million dollars a year — on equal or greater production. What we’ve really done is remove access and improve accountability. In some regards, we’ve become the watchdog for the company,” says Huling.

AIM has been a supplier to Regal Boats of Orlando, Fla., for nearly 30 years. Martin Clement, director of materials for the luxury boat manufacturer, calls AIM “our most strategically aligned supplier. They’re helping us drive out costs. By helping us drive out costs, it helps us add value to our marketplace,” he says.

Regal belongs to the American Boat Builders Association (ABA), which awarded AIM Supply a contract for providing production supplies to its 12 member companies that operate 15 facilities in nine states.

Helping customers reduce their MRO expenditures often results in more business. ABA member Cobalt Boats of Neodesha, Kansas, a manufacturer of runabouts and performance cruisers, already buys most of its MRO supplies from AIM, and plans to begin buying janitorial supplies.

“The more you do to make customers more competitive in the marketplace and reduce their spend, the more they’ll increase their spend with you. Because then they start asking you to get into things you had no intention of getting into,” says Huling.

Online reporting
AIM offers 47 different reports to help customers manage their expenditures by department, by general ledger code, unit volume, dollars spent, commodity groups and other categories. For key customers, the reports are available online, enabling managers to check project status or review purchase history 24 hours a day, seven days a week.

“We update the online reporting system every day at 6 p.m. so the data is available to key customers,” says Losh. “I want to make it as accessible to them as I possibly can to help them manage their spend.”

D. J. Cross, purchasing manager for Cobalt Boats, uses weekly e-mail reports from AIM to help him keep track of production supplies.

“They e-mail me a report every Monday that details exactly what we bought from them the previous week,” Cross says.

The information helps Cross keep tabs on the cost of materials, spot aberrations and make adjustments when needed. Over two years, by consolidating suppliers, locating lower-cost suppliers or substituting products with greater performance characteristics, AIM helped Cobalt save about $73,000 in just one product category.

“We’re always trying to decrease material costs for our boats without sacrificing quality. If you have to wait until next month or next quarter to get the information, it might be too late. Using these reports, we can go back and look at a given week, and if our production rate is the same and our model is the same but there’s something not right about the material costs, we can address it much more quickly,” he says.

AIM asks key customers to fill out monthly report cards grading its job performance in terms of delivery, fill rates, customer service levels and other criteria.

“When we receive a sub-standard grade, we either phone or visit the customer to discuss it with the person who provided the review. It creates a dialog that produces further improvement. Getting graded by customers makes us a better supplier,” says Losh.

This article originally appeared in the May/June 2004 issue of Progressive Distributor. Copyright 2004.

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