Canadian Electrical Wholesaler

vmi benefitsBy Tom Hoar

To analyze the business benefits of VMI, Datalliance looked at the key business metrics of sales, inventory turns, and out of stocks before and after VMI for locations that have been using VMI for two years. Our sample set contained 65 location relationships spread across 12 distributors representing over 20,000 stock keeping units.
All three of the business metrics realized an initial improvement in year one and continued to improve in year two, posting substantial cumulative improvement across all of the metrics for the full two year period.

In year one, VMI’s greatest impact was in inventory management. By having the right products available at the right time, inventory turns increased and out of stocks decreased. Predictably, in year two, sales increased as VMI helped suppliers and distributors with a more effective product mix, better fill rates, more items to sell, efficient product introductions, and improved pricing and promotion strategies. 

VMI has proven to be an effective tool to improve sales, increase inventory turns, and enhance customer service. The analysis concludes that sales, inventory turns and out of stocks all improve in the first year of using VMI. More significantly, the analysis shows that these improvements are not a one-time benefit. Rather, the business results continue to improve in all three of these critical business metrics in the second year of VMI.

Business results of VMI
1. Increased sales. The data show a 13% increase in sales at the average location in year one and an additional 30% increase in year two. The cumulative improvement in sales over the full two-year period of using VMI was 47%. The results were widespread with 72% of the locations improving sales by greater than the industry norm of 5%.
Why the increase in sales? Distributors are rewarding suppliers that use VMI with more business. VMI makes trading partnerships easier, less expensive and therefore more profitable. Additionally, distributors realize that VMI helps them carry less inventory and provide better customer service. This increased profitability and efficiency is a result of several additional factors that go beyond the numbers:
•    the VMI process increases the amount of items available to sell and improves inventory fill rates
•    suppliers are able to improve their product mix and optimize new product introductions
•    distributors enhance their promotion and pricing strategies

2. Improved inventory turns. After one year of using VMI, our sample set had increased inventory turns by 22%. Following the second year of VMI, these same locations realized an additional improvement of 13% in inventory turns for a cumulative improvement over the two-year period of 38%.
In our sample set, the average location was turning their inventory 4.9 times per year before VMI. This rate is already faster than industry averages. At the conclusion of the study period, these same locations were turning their inventory 6.8 times per year.
Inventory carrying costs is the second largest expenditure for a distributor after employee compensation. The VMI process reduces this financial burden and therefore facilitates growth in profit. After the second year of VMI, distributors experienced a 38% reduction in inventory carrying costs. This dramatic decrease in inventory investment is another reason for such expanded profits. 

Enhanced customer service
Before VMI, the typical location in our sample set was out of stock on 5% of the items they intended to have on the shelf. For the industries in our sample, these out of stock levels are viewed as acceptable. Out of stock improvements occurred with items that sell both frequently and infrequently, although most of the items analyzed were inventory items that sell uncommonly. Our customers report that although these are the most difficult items to manage, they present the greatest opportunity to enhance customer service. More specifically, the results show a 41% reduction in out of stocks after using VMI for one year. In year two, the same locations realized an additional 6% reduction in stock-outs for a cumulative reduction of 45% over the two-year period.

To see if these data were an anomaly, we looked across all locations and saw that 72% of the locations improved out of stocks in year one and 60% realized additional improvement in year two. Keep in mind that some of the locations had NO out of stocks in the period of time before we started VMI. Additionally, 3% more items were being stocked after VMI was implemented.
Together, the increase in items on the shelf and the decrease of out of stocks resulted in a 6% increase in the number of items available. This is a significant increase in service levels to the end user, as well as in potential sales for both the distributors and suppliers.

Conclusion
Sales, inventory turns, and out of stocks all improved with VMI after one year and continued to improve in year two. On a cumulative basis,
•    sales increased 47%
•    inventory turns improved 38%
•    out of stocks improved 45%
In year one, 65% of the locations improved in two out of the three business metrics, and in year two, 69% of the locations continued to improve in two out of three of business metrics measured. VMI can help deliver immediate business benefits and sustain ongoing improvement creating competitive advantage for suppliers and their distributor customers.

How the VMI process works
With VMI, suppliers generate orders based on mutually agreed upon objectives for inventory levels, fill rates and transaction costs, and demand information sent by their distributor customers. In this process, the buying function moves from the distributor back to the supplier, who takes over responsibility for placing orders.
The distributor sends sales and inventory data to the supplier on a pre-arranged schedule — typically, daily — and the VMI system determines what should be ordered based on criteria established by the supplier and distributor. The supplier monitors the inventory status information to make sure that the distributor always has the appropriate amount of stock on hand when needed. The distributor can override the system when necessary; for example, if they anticipate an increased demand in the market.

Tom Hoar is Director of Sales Electrical, Datalliance. Datalliance is the world’s largest independent VMI service provider, and in Canada currently works with 3 electrical suppliers and 13 distributors encompassing around 150 locations; Tel: 513-794-4485513-794-4485; This email address is being protected from spambots. You need JavaScript enabled to view it., www.datalliance.com

CEW market research 400By John Kerr

The past nine weeks have been to say the least a challenge across the electrical industry. From agents to suppliers, from end users to the electrical channel, all have been affected, all have been forced to think differently and all have begun the journey to retooling the way we operate.

This is the third report in our series quantifying and exploring how electrical wholesalers have had to adapt and how they are looking to find a way forward. For this we have taken a different approach from our previous reports in that we have incorporated the results from our recent survey alongside personal interviews and discussions with electrical distributor teams across Canada

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arkest Before the Dawn, Part 2

CEW 9 JK Figure 1 700By John Kerr

I spoke in my previous article about my father’s quote darkest before the dawn. Well, he had another saying clearly brought forward by his growing up in the depression. He would say, “Money is not everything. It just helps,” and at a time like this when there are so many storylines of effort above and beyond the call, and so many initiatives underway by electrical distributors, there will be a rallying right across the country. The electrical distributors are moving, reacting, and more adaptable than ever before. 

The current situation we find ourselves in is to say the least fluid, dynamic and somewhat disconcerting for many, but underlying it is a focused, disciplined approach to addressing the new norm and new reality. Some branches remain closed, some open with minimal staff, and others rotating staff and working differently than ever before.

Recent public reports by Wesco and Rexel have indicated drops approaching 23% through mid April and clearly ones that demonstrated a slowdown from mid March. Our discussions with both distributors and end users/contractors alike confirm their buying and purchasing activity were curtailed more aggressively in early April.

Over 106 electrical distributors responded to our recent survey with 73% from corporate and branch management. 

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Gurvinder ChopraBy Gurvinder Chopra

This June, Canadians will commemorate Electrical Safety Month; June also marks the fourth month of the COVID-19 pandemic national lockdown. For many Canadians, working from home has become the new normal. As confinement continues, the demand for constant power feed to connect to the world we now live, work, and play in at home has grown substantially. Homes are being equipped with new technologies that offer plenty of benefits, but they also place high demand on electrical systems at home, potentially causing serious safety risks. 

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David GordonBy David Gordon

In talking with distributors and manufacturers it is clear that many are actively in the planning and pivoting mode, moving from survivability to thriveability. They’ve stabilized their business financially, emotionally (from a staff viewpoint) and operationally. Now they are looking at “doing business,” and more financially secure ones are identifying ways to take share.

This doesn’t mean that others are not planning and pivoting. Some didn’t miss a beat; others typically don’t do much planning and live in the moment. 

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Building Permits - MarchThe total value of building permits issued by Canadian municipalities decreased 13.2% to $7.4 billion in March, with declines reported in seven provinces and two territories. The $1.1 billion national decrease was the largest since August 2014. This reflected notable drops in Ontario (-12.9%), Quebec (-18.1%) and British Columbia (-19.4%), which coincided with efforts to slow the spread of COVID-19.

 Value of residential permits down

The total value of residential permits decreased 13.1% to $4.6 billion in March.

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Changing Scene

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EIN evolve 400As we continue to respond to the changing status with the COVID-19 outbreak, EFC is taking preventative measures to protect conference delegates from any further risks associated with this virus. After much consideration and consultation, the EFC Board has decided to cancel EFC’s Industry Conference in Banff which was rescheduled from late May to September 1 - 3, 2020. This decision was difficult but necessary for the safety of our members, employees, and the community.

One of EFC's key mandates, is to deliver a premier national thought-leadership conference for industry members, partners, and affiliates. 

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Sonepar's Gaurav SharmaA new video featuring Sonepar’s Vice President of eCommerce and Digitalization, Gaurav Sharma, answers COVID-19 related questions regarding Sonepar Canada’s digital solutions, his team, and the future of eCommerce in the electrical wholesale industry.

Among new solutions introduced by Sonepar: customers can now create an online account through a simple text message. Traffic on Sonepar’s website has tripled since the pandemic began, and the number of new accounts has doubled. Many Sonepar locations also feature curbside pick-up.

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Schneider ElectricThe Continental Automated Buildings Association (CABA) is pleased to announce the appointment of Hugo Lafontaine, Vice-President Digital Energy at Schneider Electric Canada. CABA is an international nonprofit industry association that provides information, education and networking to help promote advanced technologies for the automation of homes and buildings.

“We are delighted to welcome Hugo Lafontaine to CABA's Board,” said Ron Zimmer, CABA President & CEO “He brings a stellar background in building systems integration and the building automation market, and a wealth of insight into the digital platforms and solutions that will define smart-building innovations now and into the future.”

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Harold HayesHarold Hayes, a stalwart of the electrical industry, passed away peacefully in Scarborough, Ontario at the age of 90 on May 9, 2020.

Harold joined the industry as an apprentice at age 18, working first for his father’s business, Power Cable Installations, and then for Comstock. Among his later accomplishments, he formed Federal Pioneer Electric’s electric heating division, served as president of the Ontario Electric League in 1985, and while in his 80s consulted for Intellimeter Canada Inc.

 

 

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Sarah SilversteinBlake Marchand

Sarah Silverstein is a principal with Liteline along side her two brothers Mark and Daniel. Together, they lead the company founded by their father, Steve Silverstein, who retired in 2018.

Although she initially pursued a career in outdoor education, Sarah was instrumental in the company’s expansion into architectural lighting and the U.S. market. She joined Liteline as a project manager in between stints working in outdoor education. Now she leads Liteline’s U.S. distribution arm and marketing department.

 

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