Progressive Distributor - Wholesale helpers

Wholesale helpers

Distributors turn to wholesalers to help them navigate rough financial waters

by Rich Vurva

Companies that sell products to distributors for resale to end-users believe they have a business model that benefits distributors during an economic downturn. In addition to lowering a distributor’s inventory carrying costs, wholesalers (some prefer to be called redistributors) are increasingly providing marketing support to help their customers grow their businesses.

“When you’re in a recessionary period, you’ve got to protect your cash,” says Larry Davis, vice president of marketing for master wholesaler ORS Nasco Inc. in Muskogee, Okla. “Instead of having inventory on your shelves consuming your cash, you can buy it, receive it overnight and take care of your customers, yet maintain a very strong cash position and a very strong balance sheet. We bring a working capital efficiency to them that makes financial sense.”

Because distributors can buy product in smaller quantities from redistributors than from manufacturers, it lowers their upfront inventory investment.

“We can do an analysis for a distributor to show them what their true costs are,” says Joe Sodini, vice president and general manager of R3 Safety, a safety redistributor based in Wilmington, Ohio. “We’ll show them what it actually costs them to buy standard packaging when they may only need a partial order. We can usually save them money and improve their service levels.”

“During slow times, making a manufacturer’s minimum order requirement is a problem,” adds Mark Friefeld of master wholesaler Field Tool Supply in Chicago. “Since we have no minimum order requirement, they can sidestep the vendor’s requirements and place an order across product lines and from various vendors in one order.”

The redistribution model also benefits manufacturers, adds Donna Bruno, president of Charlotte, N.C.-based Logistics. She says redistributors can help manufacturers support their distribution network more cost effectively while improving service levels.

“During a slowdown, distributors look at their inventory a little closer. They don’t want to take risks. Under those conditions, redistribution makes more sense to them. It’s the same with manufacturers. They start to look at what they’re doing with their resources and rely more on the redistribution model,” she says.

Marketing assistance
Other services that wholesalers provide – such as customized fliers and print- and Web-based catalogs – can help distributors expand into new markets when business slows among their existing end-user customer base.

To help them get started, R3 Safety offers a Top Sellers catalog, a 64-page periodical that focuses on the most popular personal protective products that meet the basic safety needs of a typical end-user. Similarly, ORS Nasco’s Most Popular Items (MPI) catalog is a valuable tool to help distributors quickly learn which suppliers have the best selling products in a market category that may be new to the distributor.

“We bring an opportunity in a down market if you want to expand your business into new product categories such as hand tools, power tools or abrasives,” says Davis. “You don’t have to invest in a line. You’ve got a partner that can take you into that business literally overnight.”

Distributors are finding that wholesalers also provide them with valuable marketing support and knowledge.

“It’s important for redistributors to help promote products and develop marketing materials for distributors,” says Sodini. He says distributors who use his company’s catalog as a key component of their marketing effort enjoy greater sales growth than other R3 Safety customers.

“We see volume increase every year among customers who utilize our catalog. In 2006, distributors that utilized these tools grew 28 percent more than our company average,” he says.

ORS Nasco recently revamped its electronic price book (EPB), which offers e-commerce capability and real-time visibility into product availability. Customers can download images to build their own customized marketing material in print or online, automatically update pricing, and build quotes and place orders with no paperwork or telephone calls required.

“When you look up a product now, you can see which warehouse it’s stocked in and what quantities are stocked in each warehouse in real time,” says Davis. “With the EPB, customers can take all the information they need and download it into their system if they need to. It facilitates a much more efficient process.”

Increased demand for electronic ordering has put additional pressure on wholesalers to provide real-time data, says Friefeld. “When people go to the Internet, there’s a greater expectation that what they see, they expect you to stock,” he says.

Bruno says Logistics offers additional marketing support to help distributors enter new markets, such as training materials, a lending library, and an end-user publication that focuses on timely issues such as product selection, application tips, or code requirements.

“As an example, we deal with a lot of safety distributors that want to go into fire-related products. If that’s a new avenue for them, we’re a risk-free way to not only have access to those products without having to buy a huge amount of inventory, but to get training and to understand how those products are sold,” Bruno says.

Logistics has developed informational material explaining legislation adopted by local communities requiring carbon monoxide detectors in all rental properties. In some cases, Logistics provided distributors with lists of property owners to prospect for new business, because this was a new sales avenue for them.

“To us, it’s more than just filling orders, it’s about growing their business. We’re working with distributors to help them understand opportunities that might be right in their area,” says Bruno.

Efficiencies of scale
Two reasons distributors have traditionally done business with wholesalers was to gain greater buying power and access to state-of-the-art logistics support. That’s especially true since R3 Safety and ORS Nasco were acquired by multi-billion dollar wholesale distribution companies.

R3 Safety, formerly UASI, is part of the wholesale network of R3 Reliable Redistribution Resource headquartered in Chicago. R3 is owned by Bunzl plc, a $7.1 billion international distribution and outsourcing group headquartered in London. Sodini says the primary benefits since the acquisition will be improved IT support and marketing tools available to R3 Safety and its customers.

“Having greater financial support behind us and IT support is a big benefit,” he says. “On the IT side, it’s allowing us to make sure we have the right inventory at the right place in the right time and is giving us better buying information. On the financial side, we’ve increased our staff to handle the growth in our business.”

Since being acquired in late December by United Stationers Supply Co., North America’s largest broad line wholesale distributor of business products that also owns jan./san. wholesaler Lagasse Inc., ORS Nasco is now part of a $5 billion company. Prior to the acquisition of ORS Nasco, United Stationers offered nearly 46,000 items to approximately 20,000 resellers from 63 distribution centers.

“United Stationers and Lagasse move product very efficiently,” says Davis. “We are learning and understanding more about their models to see how we can apply various features to our business.” For example, there are differences in how the companies redistribute products – Lagasse tends to ship in bulk containers while ORS Nasco repackages in smaller quantities and ships via UPS – but Davis says the combined companies are exchanging best practices that make them more efficient, which ultimately benefits customers.