A Lesson in Building Value - Modern Distribution Management

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A Lesson in Building Value

Heres a manufacturers customer-first success story.

I think Southwire is a lot like Amazon. It might sound odd to hear the comparison because Southwire isn’t an online selling behemoth, but they both share a core DNA – an intense focus on putting the customer first.

If you aren’t from the electrical business, you may not know much about Southwire. The company manufactures electrical cable and wire and now many other products, but the core of their business is making wire and cable that conducts electricity. It’s considered a commodity product in the electrical distribution channel.

The price of copper drives the business; because it’s the bulk of the wire cost, even small changes in copper prices can change prices dramatically. Early in my electrical distribution career we would price wire aggressively to get the project, and then try to make money on everything else. It’s hard to think of a more difficult environment to add value, when close to Southwire’s entire line was considered a commodity by their distribution partners.

Then Southwire introduced a new product about ten years ago – SIMPull cable. They disrupted distribution by designing a product that saved their end customer (the electrical contractor) time and money on the jobsite. They understood that the biggest cost for an electrical project wasn’t the cost of the products, but the labor costs to install it.

On most larger projects, when you install electrical cable through conduit, you have electricians at both ends of the conduit. It took two or more people. The wire they pulled required a lubricant to prevent it from getting stuck in the conduit.

The electrician who applied the lubricant was an entry-level job. In this role they basically slopped goop on the wire as it was pulled. It was messy and costly to pay for an extra employee to make the wire pull work. It was in this environment that Southwire introduced SIMPull cable with a new slick outer jacket. The new jacket allowed you pull the cable without lube and eliminate labor.

It reduced an electrical contractors’ costs and they loved it. On electrical message boards a decade ago, you would see comments like this: “You save on labor, which means less work, more production, and more money to spend on wire and new tools!”

My favorite comment was this: “What I want to know is how we'll break in the apprentice if we no longer need to have him stand at the pipe opening and lube all day?” I guess even electrical industry message boards have comedians.

SIMPull came with a premium price and it wasn’t popular with many electrical distributors. It was a big change to how the product was sold and installed for over 50 years. Plus, it didn’t exactly help sales of lube and clean-up supplies.

The SIMPull solution was a home run with contractors and they drove their distributors to stock and provide the solution. Over time you started to see comments on the message boards like this: “My supplier finally started carrying it. Small town area. I used some on a service up the other day and it is nice. Especially for a one-man shop.”

Southwire’s drive to produce better solutions for their electrical contractor customers has helped them move from being a commodity to value solution provider. They continue to launch new SIMPull products regularly and now even sell their own tools to install the products. They didn’t believe they couldn’t add value, and they did something about it.

I have to admit that at the time SIMPull was launched, I doubted it would be successful. I wasn’t Nostradamus on that prediction. It’s a good reminder for B2B distributors. If you focus on expanding your critical value-added services for your customers, you can differentiate your business and it can pay off big.

Are you building value in your company by focusing on expanding services that meet your customer’s needs? More importantly, do you have a formal process that motivates your team to dig deep and test what might be a game changer for your company? That obsessive focus on the end customer is where Southwire and Amazon are like brothers from different mothers.

As always, we value your feedback. Feel free to comment below or contact me at john@mdm.com.

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