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In 2013, MDM is recognizing distributors that are innovative in their approach to their markets. Replenex, Eden Prairie, MN, was selected as an MDM Market Mover for making finding and documenting cost savings and improving profitability for customers as a part of the industrial distributor’s culture.
This article originally appeared in MDM Premium, a newsletter for wholesale distribution executives. Learn more about MDM Premium.
2013 MDM Market Mover
Headquarters: Eden Prairie, MN
Leadership: President Matt Cohen
Details: Industrial distributor Replenex has made finding and documenting customer cost savings a part of its DNA, including building a Web-based tool to help salespeople track progress toward customer savings goals. Replenex shares its approach to value-add in this MDM Market Mover profile.
Getting beyond piece price savings for customers is industrial distributor Replenex’s goal.
“Piece price reduction is tangible and is an easy way to measure savings. Not to mention that many organizations incentivize their purchasing around piece price reduction,” says Matt Cohen, president. “Nevertheless, piece price savings hardly scratches the surface of opportunities to save customers money.”
Cohen says customers expect more. Fill rate, product assortment and other similar metrics are assumed, he says. “If you’re not providing them today, you’re not going to stay in business long.”
Instead, Replenex has centered its business on reducing total cost of MROP products for its customers, primarily looking at the manufacturing process as a whole. “We’ve seen an increasing demand from our customers to show them the value they are getting from the middleman in the channel,” Cohen says.
For example, the distributor worked with one customer to create capacity in its manufacturing facilities. They examined the customer’s manufacturing processes and recommended the best products for the applications. “This approach actually caused piece price and total tooling cost to go up – way up in some cases,” Cohen says. “Because we were focused on the process rather than the piece price of the product we were selling them, the result was amazing.”
The customer eliminated overtime and weekend and third shifts. “And they were able to maintain the same level of throughput,” Cohen says. In addition, the customer had a lower scrap rate and better initial product quality. “The customer has tracked savings in the hundreds of thousands of dollars,” he says.
To track cost savings and value-add for its customers more effectively, Replenex developed a Web-based tool in 2009.
“It really is part of our DNA,” Cohen says. “We were already documenting cost savings a variety of different ways. But when the market is down, and the economy is not doing well, there’s no better time to reinvest in your business and invest in tools that ultimately will help you bring value to the customer.”
Salespeople use the tool to contribute, manage and archive cost savings projects. The tool, which customers can also access, creates visibility for Replenex so that the distributor can show the value of what they’re bringing to the relationship and progress toward goals they set with the customer.
Salespeople at Replenex are measured by the quantity of cost savings projects and the value of the savings those projects represent.
The tool itself is easy to use, according to Cohen. But actually identifying cost savings projects requires training. To that end, the distributor has monthly meetings where salespeople share best practices and what’s worked and what hasn’t. “That best practice sharing creates an environment of continuous improvement that allows people with less experience to glean information they can take to their customers to test and engineer cost savings,” Cohen says.
The company recognizes that cost savings projects can come from anywhere in the organization, and it encourages other departments to contribute ideas. “Everyone is supportive of looking for ways to add value to customers,” says Doug Rovner, manager of customer relations. “… The employee who is also responsible for pricing and price file maintenance is just as likely to identify an opportunity for cost savings as someone in outside sales.”
Suppliers are also involved. They are leveraged for new savings ideas or for new solutions to old problems. They are also utilized for training on new products and their applications.
Cohen says the distributor wants to redefine what integrated supply means. “Originally the term integrated supply meant one supplier taking over for all other suppliers,” Cohen says. “But when you view your mission as helping customers decrease their total cost of ownership, integrated supply really means integrating your organization into your customers’ business and manufacturing process to help them drive total cost of ownership down.”
The distributor’s approach to partnering with customers seems to be having a positive effect. Since 2009, the company’s top line has grown by double digits, and as a result it has grown its net income and EBITDA.
The distributor’s broader vision is that it can contribute to helping manufacturers keep production in North America “If we don’t find ways for customers to reengineer their processes to drive costs out, to drive throughput up or create efficiencies,” Cohen says, “manufacturing won’t be able to continue to sustain itself in the United States and Canada.”