Turning Myth into Reality: The Vendor Review Tool

Feb. 1, 2009
Paul Neustadt, president of Downer's Grove, IL-based Neuco, is a precise fellow. Not in the bean-counting, how-many-pennies-in-my pocket way, but in the

Paul Neustadt, president of Downer's Grove, IL-based Neuco, is a precise fellow. Not in the bean-counting, how-many-pennies-in-my pocket way, but in the deliberate questioning, even challenging approach he invokes to solving problems. That's why, over the years, the vice chair of HARDI's Controls Council thought a great deal about impromptu or emotionally negative comments made about manufacturers assuming certain conduct or conditions that bordered on the absolute.

But for Neustadt, these generalizations were never grounded in fact. Indeed, as Neustadt points out, a manufacturer might be doing nine of 10 things well, but one might only hear some unflattering comment that disproportionately created a negative image.

Neustadt was chatting with HARDI Vice President Talbot Gee one day, when the latter mentioned that he had witnessed the successful creation of a vendor review tool — a report card — used successfully in another industry. He suggested to Neustadt that it might offer benefits to controls distributors.

For Neustadt, it didn't take much thought to quickly understand how such a tool could provide a far more accurate assessment of the relationship dynamics between distributors and manufacturers.

As Steve Roe, Controls Council chair, noted, the review tool would help us “better understand what we are really asking. The feedback from distribution to our suppliers is more relevant and more easily applied to their decision-making process.”

For Neustadt, the Council finally had a tool that offered a “concrete” judgment.

Roe credits Neustadt as the “primary mover” in creating the vendor review tool, exerting enormous energy creating the first model, which they launched in 2007 with 12 wholesalers.

Neustadt and other wholesalers refined the questions to better reflect the industry and controls wholesaler, and 20 wholesalers participated in last year's assessment. Peter Walsh, president of Columbus Temperature Controls, a Council member and Honeywell Liaison Committee Chair, created an accounting tool where members could log on electronically to tabulate responses. After several years of conducting the review, it will also allow both parties to gauge their progress, Neustadt says.

The current version consists of about four questions in each of 13 sections. Wholesalers only answer questions that apply to their business.

The participants will again distribute the tool this fall before the HARDI Annual Conference.

After the review, wholesalers then meet with their respective vendors and have an opportunity to discuss the results.

While at face value a vendor review tools makes sense, Neustadt points to several specific benefits that help wholesalers and manufacturers.

“It takes the emotion out of it,” says Neustadt. What he means is there is no finger-pointing based on generalities or assumptions. Whether a manufacturer agrees or disagrees with the assessment, he certainly wants to know how the wholesaler views the relationship.

It also adds clarity to how both parties view the relationship. Neustadt points to one manufacturer who felt they might have a problem with customer service. After reviewing their score, they discovered their overall customer service score was excellent, but there were some issues raised about delivery.

One of the surprises that emerged from creating the tool is how it became the focal point of discussion during liaison meetings between wholesalers and manufacturers. Rather than drift about for a topic, everyone was interested in the tool and how it related to such subjects as product delivery, customer service and sales representation, Neustadt said.

“It got people talking,” Neustadt said.

In the case of one manufacturer (there is a total of seven distributors who assess via the tool), there was a company policy that drew negative comments in the review regarding payment terms. “They're [the manufacturer] not going to change because to do so would be contrary to their company policy and philosophy, but it at least got them talking about their approach,” Neustadt said. Even when a change doesn't occur, the tool helps foster conversation across the board and serves as a basis for discussion. That alone makes the tool valuable, he says.

Neustadt makes it very clear that this assessment is not an accusatory tool but rather a solid, informative benchmarking mechanism that assists both wholesaler and manufacturer.

“Overall, the suppliers seem pleased to hear from us and view our actions as both proactive and positive,” says Roe. “We realize that, as in most relationships, communication is two-way. It is also a reality that the need for continual growth is a necessary component of each supplier's business. Where this feedback isn't an endorsement of a supplier, it is certainly a way we can offer honest feedback in a quick, repeatable manner so that we all can get better at what we do.”

“We knew some of this,” a vendor told Nuestadt. “But this tool puts it in black and white.”

Tom Peric' is the editor of HVACR Distribution Business magazine. Contact him at 856/874-0049 or [email protected].