Chapter Corner

Optimize Your Supply Chain

Posted in: Features, April 2015

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There are some things that are best left to the experts. You choose the best surgeon in town to operate on a family member. You trust major car repairs to a certified mechanic. Similarly, you should allow specialists in distribution to optimize your supply chain.

Generally speaking, a supply chain is the network of individuals and organizations involved in the process of moving a product or service from the producer to the end user—and distributors are a vital link in the supply chain. Warehousing, inventory management, kitting, transportation, and estimating are all key functions of a modern distributor. Despite the expertise and technology used by distributors today, many contractors still believe their role in the supply chain is vastly greater than it has to be.

“When a contractor examines his or her business elements, they will most likely find work that someone else could handle more efficiently,” said Steven Horst, Graybar Vice President, Service and Administration. “By allowing your distributor to handle supply chain responsibilities, you can focus on your core competencies and become more profitable.”

Ask for Help

A contractor’s job is vast. It’s often difficult for a contractor to step back and examine their operation with a critical eye. It can be helpful to bring a third party to help recognize redundancies and suggest process efficiencies—that’s where your distributor comes in.

Reputable distributors not only provide competitive pricing on the items contractors need but can also minimize the effort it takes to order, manage, and move those items. Many distributors offer a variety of services that help you focus on productivity, not parts. The right distributor will work to determine what is causing your pain points and offer ways to fix them. Good distributors will also help identify and eliminate unseen issues that are costing time and money.

Graybar, for instance, offers a service for customers called an opportunity walk. Opportunity walks are designed to identify waste in a company’s processes and procedures, which could include how employees complete day-to-day tasks, warehouse receiving, inventory management, and shipping processes.

“Opportunity walks allow us to understand the contractor’s operations. We sometimes find problems that are relatively easy to fix. For example, we’ve discovered that contractors can save about 2.5 percent in operations costs by simply holding pre-job meetings,” explained Horst. “By putting all of the moving parts together at the beginning of a project, each individual should walk away with a clear understanding of his or her role and how to achieve that goal. This meeting eliminates redundancies and keeps all the key players on the right track.”

Eliminate Redundancies

Bringing in a distributor with an outside perspective certainly offers an opportunity to offer simple suggestions, but distributors can also offer more complex ways to eliminate wasted time and money.

“Suppliers make magnificent products. Distributors efficiently deliver the products. Contractors are experts at installing the materials and providing related services to the end user,” continued Horst. “There’s an old school paradigm that a contractor has to have trucks, inventory in their back room, and handle returns and order from multiple suppliers. Experts find most contractors have a 25 percent redundancy in their supply chain. Material movement, transportation, returns, packaging – those things are productivity killers for a contractor.”

Many distributors count services such as warehousing, inventory management, shipping, and receiving among their core competencies, so they are well suited to examine a contractor’s practices and offer advice. Distributors can also recognize ways that contractors are creating unnecessary work for themselves and offer value-added services to make the operation run smoother and more efficiently.

“Services should be customized to meet individual needs,” Horst continued. “Your distributor’s goal should always be to make your life easier. Good distributors will suggest services or a combination of services that will require little to no management on the part of the contractor.”

Some useful services can include:

Electronic estimating – This service uses software designed for contractors to takeoff, estimate, and manage their job materials and update pricing from the supplier to create and send purchase orders electronically to the distributor. Distributors should be able to load a contractor’s personalized pricing structure into the program to remove any guesswork and provide instant, accurate quotations. These services can streamline a process by providing accurate labor estimations and reducing clerical errors.

Kitting and preassembly – By packaging the components to provide a complete “kit” of materials required for assembly or installation, contractors can reduce administrative and internal labor costs while improving customer service and reducing returns. Kitting and preassembly services run the gamut. For example, materials can be grouped by specific jobsite need (i.e., by room and floor), which eliminates trips from the job trailer to the point of installation. Kitting can include more advanced tasks like IP camera assembly, IP burn-in, and labeling. Allowing the distributor to handle kitting and preassembly will allow workers to do more productive tasks.

Material management e-solutions –Because up to 40 percent of time on a jobsite may be spent on material handling rather than installation and service work, some distributors offer inventory management solutions that can reduce the cost of purchasing and handling inventories by automating the process with simple technology. By using an app on an iPhone, iPad, or Android device, orders are sent directly to the distributor and material can be delivered when needed. Furthermore, it can help eliminate the need for returns. Returns, on average, equate to one percent of a contractor’s annual sales, whereas the administration and labor costs associated with returns equate to five percent of their sales.

Accounting management – Some distributors have the ability to consolidate individual invoices into a single invoice, summarizing billing activity to help make paying invoices easy and efficient.

Maximizing the Supply Chain

Many contractors say a top challenge is finding skilled workers. By taking a holistic view of the supply chain, contractors can make sure their employees are performing the jobs they were trained and hired to do.

“It is imperative to make sure your skilled laborers are focused on the jobs they are trained to do,” Horst says. “If you’re paying your electricians to receive and handle material, you are not receiving the value of your employees. If you’re using electricians and technicians to do material management, you’re increasing your labor cost.”

One of the most amazing things about utilizing the supply chain properly is that quick wins add up. Money is saved when redundancies are eliminated. Jobs are completed on time. And when costs are down, bids can become more competitive, resulting in more projects won.

“When you use your supply chain, your time and effort can be better used for more productive work,” concludes Horst. “Ask your distributor to work to your advantage. You may be amazed at the results.”

Todd Reed is National Market Manager for Graybar, an IEC National Platinum Industry Partner. With five years of experience within a family-owned distribution business and 10 years as a Graybar employee, he knows the importance of efficiency, safety, and productivity for electrical contractors. As National Market Manager at Graybar, Reed’s goal is to find the best products and solutions to help contractors work more efficiently, stay safe on the job, and win more productive and profitable business.