Canadian Electrical Wholesaler

 Best PracticesBy Frank Hurtte


The distribution business has a beast looming in the back of the closet. It lurks in your inside sales group, thrives in your sales department, and sucks the life blood from your bottom line. What is this savage? It’s the practice of cost-plus pricing. Every industry has one. For the electrical wholesaler, it’s cost plus 20. For others, it’s cost plus 10, 20, 25 or 30%.
As an industry we have talked about cost-plus pricing for decades, yet it manages to survive. If your organization doesn’t have a clear-cut process for pricing, it’s still hiding in the deep recesses of your company. And, it needs to be killed before it kills you.


Here’s how it works. A customer calls in and asks one of your employees for price and availability on a product. Somehow, someway they believe the “system price” shown on the computer is too high, inaccurate, not supported, or non-stock. The employee quickly looks up your cost and then the monster appears. Instead of measuring the cost of ordering, freight, logistics and all the other value we provide as distributors, the employee just goes cost plus 20.


In our own research, many of these cost plus 20 orders actually turn into cost plus nothing. This is especially true when we think about non-stock items where freight or special handling is required. In our work, we see literally hundreds of occurrences of profit potential being given away. And, worse yet, often negative revenue is produced. We’ll cover this phenomenon some other time, but for now let’s just look at profit potential.


Candid conversations with our manufacturing partners indicate there’s a problem with giving distributors “really hot” into stock pricing. Why? Because some untrained inside sales guy can screw up a whole market by using their favourite cost-up number. The option for really meaningful margin gains flies out the door, because the distributor’s own people allow the monster to dominate their thinking. Still not convinced? What if I told you last week we spoke to a company president who “bribes” her IT person to add 15% to the cost of a line where she had negotiated a really great price level. It’s been nearly two years and not a single salesperson has complained — and her business is growing.


I know what many of you are thinking: it doesn’t happen here. Put your own organization to the test. Sort the last week’s customer invoices and look for common gross margin percentages. I would be willing to bet a shiny new “loonie” that you will discover a whole string of orders with margins of 10, 15 or 20%. In many instances it will be the same guy in the quotes department or inside sales group who has gotten in the habit of assigning 20% to far too many orders. The question you need to begin asking is, why?


We already said, sometimes this type of pricing is applied because the computer price isn’t accurate. Other times the product is a non-stock and your people are too busy to find the right price. Regardless of why, the real question is how much money are you willing to toss because it happens? We recommend a process. Measuring the process gives you an opportunity to review and re-educate your people. Ask, why 20% instead of 21.3, 23.25 or 24.75%. Customers don’t think about cost-plus for products. The market didn’t somehow form around this cost-plus monster. We created it. The only people with access to our costs work inside our own business.


Build a process


A process gives an opportunity to uncover some of the issues lying a below the surface. When employees know management cares, they go a little further to determine the right price. The right price equates to more bottom line profits.


Here are some steps to driving a wooden stake squarely into the monster that devours profits:


1)    Inspect your current situation. Look for instances of even digit cost-plus pricing. Sort them by customer, by salesperson, by customer service rep, by product line. Nothing beats data for understanding your real situation


2)    Reeducate your staff. Cost-plus pricing is a decades old practice. Talk about the importance of understanding value with your whole team. Coach individuals when you see even digit cost-plus margin percentages


3)    Fix computer issues. Has your computer pricing gone to purgatory? Identify lines with issues and fix them


4)    Tighten up pricing authority. If everyone has the ability to reset price levels, evaluate their skill sets. I believe one person per branch should be the “go-to” for all pricing authority


5)    Establish a procedure for price adjustment. The term czar seems to be in vogue. Why not jump on the bandwagon and name your own “pricing czar”? Establish a plan for everyone to bring their pricing issues to a single person


Tools for building pricing strategies have blossomed in the past few years. For instance, Strategic Pricing Associates of Cleveland, OH has developed tools for pulling data from your system and scientifically evaluating your pricing direction. Their product “bolts” onto your business system and provides real live direction to your process.
Is all of this worth the effort?


David Bauders, who leads the Strategic Pricing organization, has gone on record stating the process developed by his organization can add 2-4 margin points to your business in 90 days, and he has a number of distributors who back up his claims. Let’s calculate the payback. If you are a $100 million organization and you get just a 2-point improvement, this works out to a cool couple of million bucks.
If you have questions about how any of this works, get in touch. We have seen the monster. We can help.


Frank Hurtte, Founding Partner of River Heights Consulting, packs straight talk and 28 years of experience in the electrical wholesaling industry into his work. He speaks, writes and consults with distributors and their supply partners. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Westburne WOWLed by Divisional Lighting Manager Salma Siddiqui, the initiative will focus on making Westburne the workplace of choice in the electrical industry and beyond.

Results from research conducted by Westburne found that the electrical industry has a ratio of 6:1 of male vs. female employees. “Realizing these stats are the industry norm has made our eyes open and realize we need to make a change and showcase our women who work for us and at the same time make Westburne the place women would love to work for,” the company says.



Read More

 

 

 

Westburne and RockwellThe Authorized Service Provider designation enables Westburne to deliver Rockwell Automation services through their factory trained team of specialists. These services include installed base evaluation, network assessment, arc flash assessment, lockout/tag-out assessment, and start-up of variable frequency drives.

According to Steve Roy, Regional Sales Manager for Rockwell Automation Canada, “Customer expectations continue to evolve. Aging infrastructure, workforce gaps, global competition and an explosion of new technology provide endless opportunities for customers to improve their businesses.

Read More

 

IdeaIDEA plans to introduce an online learning management tool, the IDEA Learning Portal, to train customers on the new IDEA Connector, which will launch in late September. This portal will contain comprehensive training information and documentation on the IDEA Connector, a master data management (MDM) platform that enables distributors to securely access accurate and timely product and pricing data directly from manufacturers.

To complement the portal, there will be four training session devoted to manufacturers and distributors at eBiz. These training sessions will dive deeper into specific content to ensure a complete understanding of important functionality.

Read More

Changing Scene

  • Prev
Cree, Inc. has completed the sale of its Lighting Products business unit, Cree Lighting, to Ideal ...
Kelly Hanson has joined Ryan and Chris Maguire as agency Principal. Kelly has an extensive sales ...
AD, the contractor and industrial products wholesale buying/marketing group, reported a 7% increase ...
Profile your organization as a leader in the Canadian electrical industry by showcasing your ...
Legrand has promoted Scott Bausch to Vice President/General Manager for the Wiremold product ...
  The OmniCable Toronto branch recently completed its first customer order after opening ...
The Hannover Messe Trade Fair in Germany, held this year at the beginning of April, is the world’s ...
Global energy producer BP has selected Schneider Electric as one of its main electrical ...
The Stratford and District Chamber of Commerce has presented its 2019 Business Leader of the Year ...
The company’s wholesale locations will be branded Robinson Supply, and the lighting and bath ...

MundenOn March 29, Munden Enterprises moved into its new Atlantic Canada headquarters, located at 2 Bluewater Rd., Suite 105 in Bedford, Nova Scotia.

The new office offers more than double the square footage of its previous location, allowing for two boardrooms, a product showcase room, and a large demo amd sample warehouse space. This new space is home to seven of Munden Enterprises' employees.

 

 

 

Read More

 

 

EHRC WLNElectricity Human Resources Canada is delighted to have announced its new partnership with Women Leadership Nation™ (WLN) on International Women’s Day.

Electricity Human Resources Canada is delighted to have announced its new partnership with Women Leadership Nation™ (WLN) on International Women’s Day. This strategic alliance will offer EHRC members and Leadership Accord signatories with training, development and strategy support in their efforts to make progress in closing the Gender Gap.

Read More

 

ABB Showcases Its Vision of Leadership in Digital Industries at ABB Customer World 2019

Show ReportBy Line Goyette

Leaders and innovators from business, government and the education sector gathered for this ABB premier collaboration event. More than 11,000 delegates attended the bi-annual ABB Customer World Houston 2019 from March 4 to 7 in Houston, Texas. ABB’s latest pioneering technologies were displayed over 150,000 sq ft of a colourful, buzzy display of futuristic conveyor belts and robots, an ABB Formula E Generation 2 car, and much more groundbreaking technology.

Read More

 

 

Peers & Profiles

  • Prev
On a regular basis, our publications profile members of our industry through their responses to a ...
First and foremost, sitting down with Susan Uthayakumar feels more like sitting down and conversing ...
Sales of electrical supplies from full-line electrical distributors capture the geographic ...
Laura Dempsey has been working as an outside sales representative for E.B. Horsman & Son for ...
Michael Gentile, President and CEO of Philips Lighting Canada, has had a long and distinguished ...

 

National ManufacturingExcellence in Manufacturing Consortium EMC’s Advantage through Excellence: Future of Manufacturing Conference is a 2½ day event exploring the competitive advantages, opportunities and successes that can be achieved by manufacturers through a variety of learning forums — up to 40 workshops, panel sessions, keynote presentations and best practice plant tours — providing delegates with outstanding opportunities for benchmarking, peer networking, learning and sharing of hundreds of best practices. An estimated 500 to 900 manufacturing leaders and stakeholders from across Canada are expected to attend. 

Read More

 

 

 

Rick McCartenBy Rick McCarten

I think it was Bill Gates who said the Internet will not have an effect on society short term, but will have a profound effect on us long term. 

Long term versus short term fascinates me. Making the call for one over the other can determine the success (or failure) of companies today. 

Using Bill Gates’ long-term Internet effect example, means that business decisions about the Internet will not necessarily show short-term gain, but will show “profound” gain in the long term.

Read More

 

Looking Back

  • Prev
The best memory I keep from CEDA is the way that they accepted me when I came into the business. ...
In the 1930s to 1940s, CEDA’s Western Canada membership was very stable with old line independent ...
Prior to the late 1950s there was little if any involvement in CEDA by the so-called “national ...
  As 2017 marks the 150th anniversary of Confederation, we take a look back at an aspect of ...

Bnei AkivaBy Blake Marchand


Lior Levy, along with Josh Kantrowitz, led a team of 21 students earlier this year as they travelled to Hartsville, South Carolina for the annual Bnei Akiva Habit for Humanity trip, in partnership with Legrand. As a frequent supporter of Habitat for Humanity, Legrand donated the funds required to purchase the construction materials for the project.

Ms. Levy, a pre-med student from Toronto who recently received her BA in Biology while attending Yishiva University in New York.

Read More

 

 

Copper $US Dollar price per pound

Kerrwil Publications

538 Elizabeth Street, Midland,Ontario, Canada L4R2A3 +1 705 527 7666
©2019 All rights reserved

Use of this Site constitutes acceptance of our Privacy Policy (effective 1.1.2016)
The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Kerrwil