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WESCO Distribution Inc.
By:
Deepak ChavanY.Sreenivasa ReddyPraveen Katiyar
Start up Founded in 1922, as the distribution arm of Westinghouse After disappointing performance in the early 1990s, sold to the
investment company of Clayton, Dubilier & Rice (CD&R), in 1994
Roy Haler taken over as CEO and rebounded the revenue to $2.2 bn, became third largest distributor in EES (Electrical eqpt. and supplies) in USA by 1996 globally
Suppliers : - have strong ties with over 150 suppliers - majors–Cutler-Hammer, Thomas & Betts, Philips and Leviton - Suppliers make only part of customers total EES
requirements, cannot deal with small volumes and unable to add value at all stages of the sales process
Products: Primarily electrical products, MRO (maintenance,
repair and operating) Supplies, and supplies for industrial Original Equipment Manufacturers (OEM’s):
Electrical Supplies – fuses, terminals, connectors Industrial Supplies – cutting and other tools, safety
equipment, etc. Distribution – circuit breakers, transformers, etc. Lighting Wire and Conduit Control, Automation & Motors Data Communications – premise wiring, patch panels,
etc.
Cont…
Customers: Segmented
1. Electrical Contractors $17.9bn total business of which WESCO gained $465mn in
1996. Referred to as ‘bid-to-quote’. Transactional in nature Installs lightning and electrical systems for construction
projects. Preference will be given to timely delivery of supplies
2. Industrial Customers $1bn in 1996 & expected to grow Maintenance, Repair and Operations (MRO) is main Serving segments include utility, manufactured structures,
pulp and paper, lumber, petrochemical, mining and metals and Transportation
Collaborative in nature and look for long-term contracts
3. Commercial, Industrial and Govt. (CIG) $148 mn sales – include hotels, motels, hospitals,
universities and institutional customers
Competitors:
1. National Chains – 5 Competitors - placed third in sales2. Regional Chains – 8 competitors3. Full line Distributors – Sales ranging from $20-$200
million – 250 Local Distributors4. Full line Distributors – Sales ranging from $0-$20 million5. Specialty Distributors 6. Others - Retail generalists
Major Competitors
Customer does not recognize need or opportunity
Recognizes Customer need or opportunity
Customer recognizes value & decide to act
Ensures that customer identifies WESCO as
potential solution
Customer Commitment towards WESCO
Value is created, demonstrated and
documented mutually
Customer works with WESCO on next value creation
WESCO Selling story
Branch Office Organization
Has 279 branches in US Maintains own inventory and own P&L responsibility. Substantial autonomy in its own territory Marjory serves customers in a specific industry 1 branch manager, 4 outside sales reps, 4 inside sales
reps, 1 warehouse specialist and 1 administrative officer Outside sales reps acquire customers, while inside sales
reps ensure their retention Disadvantage of serving narrower customer base and
cooperation between branches is limited
Trends in the EES industry in 1980s & early 1990s
Examining the procurement costs, improve supply chain efficiency, reduced inventory, long-term collaborative JIT contracts
Some customers still prefer old ways and are resist to change
Total Procurement Cost
Cost of Product itself
Cost of Acquiring the productRequisitions, negotiations, issuing POs,Receive materials, invoices handling, Accounts payable records, distribute
Cost of Handling the productInventory control, taxes,Insurance, Depreciation,
Obsolescence, storage area
WESCO National Account Program
Significant savings for both customers and WESCO by establishing long-term contracts, started in mid 1995
Customers will receive competitive, year-long, national pricing regardless of volume
Major contracts are product driven and minimal value added services and 80% are just for lamps
By 1997, there were 300 customers Based on sales volume & commitment, customers are
classified into 3 groups – Key, Focus and others 18 National Account Managers (NAM) across the country Each complement 10 to 15 customers plus 15 to 20
prospects Local Sales Reps are assigned to look at local level
Building NA Agreements
NAMs called the customers of high potential / Prospects Presentations are made at Corporate level on Total cost of
ownership, inventory reduction, emergency Service ‘ An average MRO order from an Industrial customer
ranges from $135 and the processing of an order takes $150’
When the prospect shows interest, then NAMs moved to local level and presentations are made to DMs
NAM become part of National Implementation Team (NIT) travels to the customer site for finalizing contract
Meet with Local Implementation Teams (LIT) and implementation of program starts
Getting customer visits by NIT after implementation
Success story & Integrated Supply Reduce the Inventory costs, energy costs and procurement
costs by EDI at entire customer local plants Acquiring 2 local distributor branches and opening a new
branch to serve customer better Sales has increased tenfold and reached $1 mn/month WESCO was able to document 20% cost savings to the
customer, far more than expected For most of the customers, 70% of the annual procurement
budget is accounted by top 5 – 10 suppliers The purchase dollar volumes and effort makes customers to
go beyond Transactional, and focus on TCO Commitment to change from the top management is vital Customers are demanding to form Supplier tiers NA Customers/prospects as us to take up different business
Analysis – What should WESCO do? A proactive approach in managing the NA program
would definitely fulfill the company’s visions of becoming a $ 3 billion company with an average EBIT of over 5% by the year 2000 (from its 1996 figures of $ 2.2 billion company with an EBIT of around 3%.)
Though the current position was not conducive to continue the program further, because the company was already at a loss of complete 2% in their revenue as compared in the previous year, still looking towards a long term prospective this program can gain higher margins if a planned strategy and proper segmentation of customers is created by the management
Effectively managing the sales team is also essential for the management because a substantial amount of cost is incurred in maintaining this force
Proper training is to be given to NAMs and Sales Reps
Analysis – What should WESCO do? Should continue and coordinate MRO procurement and
materials management activities across multiple locations for industry-leading industrial and commercial companies
Individual roles and responsibilities may vary, but it's a sure bet you and your company have a number of things in common with WESCO's other national customers. You want leverage. Leverage gained through a well-coordinated, national program that delivers:
A uniform, competitive price across all locations National programs combined with local service and support Knowledgeable people and effective processes for nationwide
contract administration, opportunity identification, and problem resolution
e-Procurement readiness and leading-edge technologies Rapid, effective implementation Documented cost savings, year after year
Analysis – What should WESCO do? WESCO's Value-Add Services leverage every possible
cost savings opportunity to add to your bottom line. Lighting Audits/Energy Audits for energy savings Consignment Services for reduction of inventory costs Electronic Procurement for reduced transaction costs Buying Power for uniform competitive pricing at all
locations Proxy Distribution Network for reduced supply chain
management costs Customer Inventory Management for increased
productivity and reduced maintenance Application Engineering for product quality
improvements Training Services for increased productivity
Analysis – What should WESCO do? Customer-based activity levels – as measured by order
processing, delivery and invoicing transactions – declined Although order volume and the workload associated with
processing, picking, packing, and shipping remained nearly constant, the revenue value per transaction declined, as customers drove down inventories and conserved cash through reductions in capital spending
Restructuring of the distribution network to be done and more number of new branches to be acquired/installed
Should also make use e-procurement with suppliers and Online shopping tools for customers to get globally