How are you growing your HVACR distribution business? Selling more to your existing customers, expanding your customer base and running a lean and efficient operation are all important ways to increase sales and profits. But in a time when margins are declining, suppliers are increasingly selling directly via the Internet and larger companies are acquiring midsize distributors, is it enough?
Lawson, a global provider of software and service solutions for a wide range of distributors including HVACR, knows about growth and, perhaps more importantly, the barriers to growth. HVACR wholesale distributors that continue to grow, according to Lawson, are those companies that have mastered the supply chain. That is, they are expert at fulfilling customers' orders quickly, having just enough product in the right place at the right time and getting paid for value-added services. Also, each part of this is interdependent on the other so that the entire process is integrated.
This is a tall order indeed, but Lawson says such strategies are essential for HVACR distribution companies, particularly midsize and large distributors, to remain viable in the years ahead. Since 1975, this St. Paul, MN-based company has offered business management software solutions to customers around the world. In 2006, Lawson merged with Intentia, a Swedish-based software vendor with extensive experience working with distribution companies, including HVACR distributors, in other parts of the world but not North America. The new Lawson is now prepared to assist midsize and large HVACR distributors in North America in growing their business with its Lawson Distribution software solution.
For Lawson, working with HVACR distributors in North America is a natural fit — Intentia brings a sterling reputation for developing business solutions with HVACR distributors in Europe, Asia and Australia, and Lawson has more than 30 years of experience developing and perfecting its business software. “That's one of our strengths: We know the supply chain, the problems around distribution and value-added solutions,” says Julian Archer, marketing director for Lawson. “We can offer distributors that platform for growth.”
Lawson works with Dr. Adam Fein, founder and president of Pembroke Consulting, and has surveyed the markets here in the United States and in Europe and Australia to analyze growth strategies for distributors. (Visit www.lawson.com/dis_growth to download Dr. Adam Fein's white papers on growth.) Lawson has incorporated this work into its business software. The applications, Archer adds, are comprehensive, covering everything from warehousing inventory and logistics to sales and marketing, and customer relations management. “It's a complete business application dedicated to distribution companies,” he says. Lawson Distribution also provides the ability to electronically link employees to create a more seamless communications system.
Because it is an integrated software package, distributors see very clearly how every part of their business operates. If you eliminate the “silos” that separate the various sectors of a distribution business, distributors get a more enhanced understanding of how they are doing business — and where they may be leaving money on the table.
For example, customers who do the most volume with you may often not be your best customers, Archer says. “Who are your best margin-earning customers; how many people pay you on time? Are you being paid for value-added services?” he asks. These are valuable questions that can help grow your business. Do you have good answers?
It is accurate to view Lawson Distribution as a “one-system approach” that can support all of a distribution business's functions. “You don't have to buy different pieces of software,” Archer says. “When customers don't have massive IT budgets, they want one guy to do it all.” With its foundation built on open, Java-based technology, it allows a distributor to integrate internally and externally with other systems. Lawson customizes each distribution solution with its team of consultants and engineers who work directly with the HVACR distributor to configure the system based on that distributor's business.
This flexible approach is a particular strength of Lawson. The business software is supple and agile to adapt to a business's changing needs. As a distributor grows, Lawson Distribution grows with the business. Because Lawson decouples the applications from the underlying technology, it can upgrade the technology on a timeline that is best for the business. The process is easier, faster and less expensive.
Throughout the entire supply chain cycle, Lawson Distribution addresses each step in the distribution process. From forecasting demand to sourcing and purchasing supplies and managing the inventory, all the way to managing the various sales channels that get the product to customers and the value-added services, Lawson Distribution provides every tool that distributors require for their business, giving them greater control of what may sometimes seem to be an unmanageable process.
Such a business solution, Archer says, transforms an HVACR wholesale distributor's supply channel to a strategic channel and prevents the perception that the distributor is nothing more than a “box-shifter,” where a distributor merely acts as the conduit between supplier and dealer. The distributor is now empowered to make better decisions about how he operates his business. Those smarter decisions, in turn, create efficiencies throughout the supply chain and make the distributor a much more valuable partner to the suppliers and the customers.
By forecasting product needs in advance, a distributor conducts business more effectively with his suppliers. By having products ready at the exact moment that the customer needs them and by offering additional services, the distributor does business more effectively with his customers. Suddenly, “there is great value in being in the middle,” Archer notes. “It's being the conductor of the orchestra, standing in the middle of the supply chain with this great knowledge of the customer and being able to pass that information back to the manufacturer.”
It all comes down to having the information and the ability to track it in many different ways. “There's a level of transparency in the data that you've never had before,” Archer says. “If you're the CFO, you want to see that. You've got better information. Having one central location that can be sliced and diced lets the CFO and the management team pinpoint the areas where they see problems.”
One distributor discovered that he could significantly increase his profits by switching his method of discounting for customers. Using Lawson Distribution, he was able to review item by item what each customer was buying and his margins on those sales. In the past, the distributor's practice was to offer a standard discount per customer, but his examination revealed that he could significantly increase those margins by instead providing discounts on the individual products purchased by the customers. “He was leaving millions of dollars' worth of business on the table because the business didn't have the sophistication to analyze the sales data,” Archer says. “They found themselves earning so much more money after that.”
Lawson Distribution is not for all HVACR wholesaler distributors, Archer says. It gears its products to those distributors with sales from about $75 million and above. “We're offering a platform for growth for distribution companies.” All distributors, regardless of size, need to have a strategy in a global marketplace, he says.
While this configured approach represents the majority of Lawson's sales, Lawson's QuickStep for Distribution is an out-of-the-box configuration of the standard solution for companies in the $50 million sales range. Lawson Distribution designed QuickStep, Archer says, for those companies that need comprehensive software support but lack the resources to implement over an extended period. Facing the same business issues and market pressure, QuickStep for Distribution offers distributors a faster time to benefit of the full solution. Lawson touts QuickStep as a specially designed and preconfigured solution that gives distribution companies a “jump start” on the competition. QuickStep offers comprehensive core functions that allow for immediate implementation but are flexible enough to meet a distribution company's specific needs.
Distributors should not overlook the importance of value-added services that are part of Lawson Distribution, Archer says. Lawson's research shows that American distributors often give away value-added services, while their European counterparts are much more successful in getting paid for such services. Listening to customer needs and responding creatively with value-added services can bring in more business and earn higher margins.
He cites a European distributor of safety gear and equipment that listened to customers and was able to provide a valuable service that resulted in higher margins. The company offered delivery of the safety gear for its customers' employees directly to their homes so they could report to their jobs ready to work. “That takes a lot of the hassle away from the customer,” Archer says. “And they can earn higher margins on that sort of service than on just selling safety glasses.”
Because the company utilized Lawson's business application software, it was able to keep records of the delivered equipment, expected delivery dates and the sizes of the equipment. Just as importantly for the distributor, they were able to demonstrate the value of this service to the customer and receive payment for this service.
In May 2007, Lawson released Lawson M3 Distribution, the most advanced version of its distribution software in its history. Archer calls this very significant because it demonstrates the company's commitment to its customers. “This was a terrific statement around our dedication to distributors. Don't think that we're going to stop supporting this product,” he says. “We know distribution, and we know software.”
HVACR distribution companies today need to be masters of their own destinies. It's no longer a question of just selling to more and more customers. Growing revenue in wholesale distribution today comes from, according to Dr. Fein of Pembroke Consulting in his white paper report for Lawson, “a deceptively simple combination of selling more products and/or services (volume), achieving higher prices for those products and/or services (price), or a fortunate combination of both factors.”
Making it happen, however, is much more complicated. Successful and sustained growth requires an integrated and sophisticated management system that can effectively understand and help to direct every facet of the business. That begins with a platform for growth. Lawson Distribution has the platform in place. Are you ready to step up?
Michael Maynard is a business writer in Providence, RI, who writes on issues related to HVACR, construction and architecture. Contact him at michael.[email protected].
Best Practice: QuickStep Distribution
Definition and Example: Lawson QuickStep for Distribution is a preconfigured ERP application package created specifically for the needs of distribution companies. Lawson QuickStep for Distribution is designed to help distribution companies cut traditional ERP implementation times by up to 50 percent, reducing the cost of implementation services and allowing firms to be up and running on their enterprise applications more quickly, which ultimately helps provide a faster return on investment.
Significance: Research shows that distribution firms need and demand technology solutions that will provide operational efficiency and improved business processes. QuickStep for Distribution provides tools to help foster operational improvements and growth in a package that simplifies implementation. Distribution firms can't afford a lot of downtime for complex IT projects. We designed QuickStep solutions to help these companies achieve the benefits of a powerful ERP solution, faster. Lawson QuickStep solutions package Lawson's industry-specific functionality with the company's deep knowledge and understanding of distribution — combined with Lawson's implementation skills. Lawson has been introducing QuickStep solutions for targeted industries since November 2006. The solutions incorporate industry best practices that we base on the expertise Lawson has gained by carrying out thousands of implementations for more than 20 years.
Benefits: Lawson QuickStep for Distribution is a full-functionality enterprise application suite providing the functionality that distribution firms require. Specifically, QuickStep for Distribution helps companies:
- manage the high velocity of transactions common in a distribution firm's supply chain;
- handle the complexities associated with a distribution firm's diverse range of product types and units of measure;
- coordinate a variety of delivery methods, including drop-ship, buyer collect and joint delivery;
- execute high-volume processes, including cross-docking and automated transport planning;
- support flexible pricing, discounts, rebates and promotions;
- control specialized “buy-to-order” situations, particularly for goods that are outside of a distribution firm's standard product catalog; and
- support value-added services such as light manufacturing and servicing.
In addition, Lawson QuickStep for Distribution provides online sales statistics, including overall sales, margins and service analysis at both the organizational level and the product level.
Procedure: Contact Lawson for additional information.
People involved: Lawson QuickStep solutions address two major challenges for our customers — the need for full-functionality, industry-specific enterprise software solutions and the need for rapid implementation and time-to-value. The solution is designed and built on our expertise and understanding of the specific needs of distribution organizations. Distribution firms need powerful solutions that are simpler to own, implement and use — with the kind of visibility into supply chains and other enterprise activities needed to help them compete globally.
Timing: Varies based on customer requirements.
Cost: The Lawson QuickStep for Distribution helps reduce implementation time by up to 50 percent, helping to minimize project costs and deliver faster time-to-value. Contact Lawson for a quote.
Other considerations: Contact Lawson for additional information.
Contact: Barbara Scoglietti, regional marketing specialist, 847/413-1786, [email protected]