A discourse on distribution
Ron Beal, president and CEO of Memphis, Tenn.-based Orgill, presented his views on hardware distribution during the President's Council meeting in Las Vegas. Here are the highlights.
The overview
"I've been at this a long time. One of the things that always impressed me is how simple distribution is to conceptualize, but how complex and how difficult it can be to actually execute. … It's pretty easy to understand why companies are not exactly standing in line to get in the business of distributing hardware products."
The challenge
"For the most part the items that we deal with are not high value, especially when compared with basic building materials. Many are not easily conveyable — think extension ladders or wheel barrows. And far too many are relatively slow-moving. So put simply, we deal with a lot of stuff. But stuff that is necessary to complete any home improvement or home construction project anywhere."
The cost
"A big thing, and one we spend a lot of time on, is operational costs. It's essential that we know operational costs — ours and those of our suppliers, as well as our customers. Hardware distribution is a transactional-based high-volume business, and cost is involved every time you touch a product."
The competition
"Price and efficiency are about the only ways to differentiate among [hardware distributors>. And price relates back directly to efficiency."
The infrastructure
"We're investing millions of dollars to make sure our systems and facilities and equipment remain modern and efficient. About 85% of Orgill's warehouse capacity has been placed in service within the last 10 years. Just in the last three years, we've opened two new facilities and we've closed two that were obsolete."
The finer points
"Another thing we think is important, is we don't dumb down. And what I mean by that is we don't subsidize any customer or any product at the expense of another customer or product. We don't do much bundling in our pricing because we prefer to give our customers as much flexibility as we can in picking the service mix that makes the most sense for their business."
The fleet
"We're also in the process this year of upgrading our delivery fleet, doing this to the latest high-performance diesel engine tractors that based on the tests that we run, we saw an 8% to 9% improvement in miles per gallon. Since our fleet is expected to travel some 26 million miles this year, that represents some really serious savings."
The statistic
"In a five-year period ending in 2012, we lowered our SWD (shipping warehouse and delivery costs,) as a percentage of warehouse sales by over 20%. This is very meaningful, and we were able to pass these savings on to our customers."
The understatement
"We know that we're not sending rockets to the moon, but on most days it's pretty much a full-time job."
