STAFDA State of Manufacturing: Wells: Relationships Can Beat Big Boxes

Jason Sandefur

�The tighter the connection between customer and distributor and distributor and manufacturer, the more opportunities we will have to grow, succeed and profit,� manufacturer Cliff Wells told the Specialty Tools & Fasteners Distributors Association.\
Working closely with customers can offset a down economy and product changes.
Like most industries in recent years, the pipe tool business has more than a sluggish economy to deal with, noted Wells, national sales manager of Ridge Tool Co. in North Ridgeville, OH.
Wells told the 26th annual STAFDA convention that advances in technology have led to a growth in alternative piping systems, such as copper, while steel pipe sales remain flat.
At one time specialty tool companies relied on residential housing starts to indicate market conditions. Advances in piping now allow general contractors to install their own systems with little more than a hacksaw and some glue.
Wells said the same holds true for other manufacturers and distributors, with advances in battery tools, conduit equipment, and even hand tools.
At a time when customers have unprecedented access to information on products and services, job performance options and distribution channels, it�s common to feel overwhelmei�by competition. But looking over your shoulder isn�t the best way to do business, Wells explained.
Several years ago, Wells recounted, Ridge Tool undertook an extensive program to explore customer needs with the intention of improving communication and understanding distributor selection and expectations. That effort revealed four types of professional tool buyers.
Ridge Tool discovered that one group purchased 80% of his tools through distributors, accounting for $5.6 billion of business in 2001. This buyer has an average job experience of 20 years, and uses the products about 35 hours a week. Wells argued that this group doesn�t mind paying for a dependable tool and is motivated to conduct business with STAFDA distributors for four reasons:

�Time is valuable, so the more service you can provide, the more money he can make through increased productivity.
�Demands tools that are designed specifically for what type of work he does.
�Wants to have a personal relationship with the manufacturer and distributors.
�Wants to be associated with proven brands, instead of testing things on his own.

Wells explained that Ridge Tool used that information to pursue the buying group and has achieved double-digit gains in new product sales year after year.
It is important for suppliers to partner with distributors who stock diverse products and back them with service to keep prime buyers working, Wells recommended.
Wells remarked that distributors are looking for ways to unbundle their services in an effort to get paid for them. Since World War II most manufacturers, including Ridge, rewarded volume buying. However, Wells noted that volume-based discounting by suppliers doesn�t help them align their goals with distributors.
Wells recommended using a functional method of discounting that benefits both parties. Such a system compensates distributors for carrying a broader product line. It also recognizes those distributors who introduce new products to end users and provides training for the sales force.
Increasing Profit
Wells explained that for years distributors focused on buying right and having the best price. This approach leaves little room to listen to customer needs and realize the greater profit potential that exists when buyers are willing to pay for quality services and products.
�We must work together to define the values and services that each of us provides,� he stated.
When manufacturers and distributors operate alone, Wells maintained no one wins. Manufacturers can�t deliver product without effective distributors. Distributors can�t satisfy customers without good products and support from suppliers. �Functional discounting models� help define a good relationship that serves the end user, he remarked.
STAFDA members have always embraced innovation � tool rental, on-site service, 24-hour access, repair facilities and Internet storefronts.
�The reasons that drive distributors such as you to try these new things go beyond making a buck � it goes to the heart of what you value most. Serving your customers and taking care of their needs.�
That separates distributors from deep discounters and home hardware chains.
Wells noted that STAFDA �stands on the threshold of a new era� that will see tremendous growth, not all of it necessarily positive. The traditional focus on price will give way to better service. The bottom line is leveling the playing field to provide equal opportunity service.
�The customer is truly king,� Wells emphasized. �When your service and product offering is tuned to the customers� needs, there is a tremendous opportunity to be paid for the value you are presenting.�
National retailers trying to muscle in on STAFDA distributors� markets don�t understand the importance of these relationships, Wells explained. They aren�t structured to provide this service.
This knowledge leaves Wells feeling confident about the industry�s future. �We stand at the doorstep of what promises to be a rich, rewarding and exciting time in distribution,� Wells declared. �2002 FastenerNews.com