Distribution chain

Robert O'Brien

Curious to see what others think of the continued viability of the existing manufacturer-rep-wholesaler-contractor system? I think the days of it being sacrosanct are numbered. New products and manufacturers are locked out by being unable to gain space on shelves, should they just take their ball and go home? Nest would be unheard of if they had depended on others to market their product, instead they sold the company $3.2 billion in a few years. The next few years are going to be interesting.

hot_rod

I think it depends on what the product is. If it is technical and requires engineering, sizing, startup, etc I think the chain will stay intact. Commercial products like boilers, pumps, accessories will continue to flow through the chain I think.

Which link or links do you see going away?

Nest is manufacturer to consumer, many of the online sales are direct, but some flow through reps, or wholesalers.

It looks like wholesale is feeling most of the squeeze with box stores and online, overnight delivery?

Robert O'Brien

The existing system locks out new manufacturers and products. It won't be stocked until it sells in volume and it can't sell in volume until it's on shelves. Someone is going to break the Mexican standoff. Wholesalers here stock very few boiler parts, always need to be ordered. Why should I order from them and reward their negligence? I can order online faster and easier. Retailers were fat and happy and looked at Amazon et al as niche competitors, they aren't fat or happy anymore.

L Thiesen

This may not apply to heating products but I saw what happened to electritions in my area about 30 years ago, until then they sold light fixtures and such. Now all they sell is wire and conduit, and labor, everything else is sold by the box store or on the internet.
I am seeing the same thing happening with plumbing fixture and faucets. I think in the future the main customer for the wholesalers will the contractors that do commercial work. The residential contractors will still buy pipe and fittings from wholesalers but will buy fixtures on the internet. I am already seeing better prices online versus what the traditional wholesalers are giving me. And sadly little product knowledge from the counter people.

Mark Eatherton

I think that Runtal was one of the first manufacturers who did away with the multiple step distribution system, and that has been a LONG time ago. I remember their reps "wishing them luck" in their new adventure. They are still here and still selling stuff on the net.

Like everything in todays fast moving world, the days of brick and mortar stores are being replaced with internet sales. Even some manufacturers I know of (who shall remain nameless) are interested in increasing their products internet presence and sales. It's all driven by the almighty buck.

However, I am also aware of certain boiler manufacturers who refuse to warrant their equipment if it was purchased on line. They have no control of the product after it leaves their dock, other that letting everyone in the distribution chain know that they will not warrant their products if sold on line. Still doesn't mean you can't buy their products on line, just that you won't have any warranty...

The Europeans commonly sell direct from the manufacturer to the contractor. That's why Viessmann and Buderus put so much stock into attending ISH, and why there are contractors who bring their large check books to the show. They are buying their anticipated stocking needs for the next year or two, while at the show.

I don't know this for a fact, but I think the US is the only place that there is still 5 rungs on the ladder between the manufacturer and the end users. Personally, I like the 5 or 6 step system, especially when there are problems to be resolved. Having a rep or distributor that will show up on a job and "see" with their own eyes what it is that you are dealing with in the field is invaluable, Of course, this is where their factory training comes into play of "We've never seen that with this product before..."

More and more wholesalers are going to the JIT model of stocking (Just In Time), which I despise. If I'd known yesterday that I was going to need it today, I'd have ordered it the day before yesterday... More than one supplier has lost my trade business due to not stocking critical/common wear items that they should be stocking. This is what happens when the MBA's are running the show. I had an employee who had an MBA that decided he was going to tell me what I did and didn't need for a job that was 500 miles away from the shop. He threatened to cancel my company credit card. I threatened him with his well being, and told him if he did cancel my card, that he could find someone else to do the job. He was an EX-employee shortly thereafter.

Times, they are a changing...


ME

JUGHNE

As an electrician, it was almost a relief to see residential customers buy their own designer type fixtures. Perhaps 25-30 years ago there might have some discount off retail for the contractor. Today very little discount available at a wholesalers. Some are dropping their fixture display showrooms.
I would still get the recessed can/trim and utility type light sales.

Even with a little mark up available it was not worth the hassle of dealing with selections, getting my prices and then HO changing their mind and starting all over again. Lately I had just sent them to the showroom and told the wholesaler to give them my price. They would be delivered to the job site, any damages or shortage the supply house would take care of the problem. HO was usually surprised that there little mark up for the contractor.
Some HO would order everything from the internet.....damage.....short parts.....wrong color.....pad fan fails in 6 months etc. Not my problem but just holds up job and sometimes final payment up.

30 years ago the only place to get quality residential plumbing faucets was thru the plumber. Today it seems they are hardly available at all
People want "bling" faucets that seem to lose their luster pretty fast.

hot_rod

Robert O'Brien said:

The existing system locks out new manufacturers and products. It won't be stocked until it sells in volume and it can't sell in volume until it's on shelves. Someone is going to break the Mexican standoff. Wholesalers here stock very few boiler parts, always need to be ordered. Why should I order from them and reward their negligence? I can order online faster and easier. Retailers were fat and happy and looked at Amazon et al as niche competitors, they aren't fat or happy anymore.

I think it depends on the product, margins and buying plan that the wholesaler is on.

I visit a lot of wholesalers throughout the year, I always look to see what is on the shelves.

Interestingly the HVAC stuff is usually packed to the ceiling, AC condensers, furnaces, etc. Sometimes water heaters are heavily stocked, probably truckload pricing on these low margin products..

Remember also there are now buying groups involved, another link in the chain. The big boys determine who is allow into the group, so some manufacturers are blackballed from the distribution chain via that mechanism.

Robert O'Brien

Hot Rod, your products are very lightly stocked if at all on Long Island and it isn't the rep. Wholesalers just won't stock it, I buy it online.

hot_rod

Robert O'Brien said:

Hot Rod, your products are very lightly stocked if at all on Long Island and it isn't the rep. Wholesalers just won't stock it, I buy it online.

Oh, I know.
But generally the competitors item are not stocked either.
Unless the manufacturer is giving them to the wholesaler

Dumping iron is the phrase I've heard the pump guys accuse each other of.

Some wholesale brands use central distro centers, they move product overnight to branches so the local branch shelves are not as full as days past. And we can ship same day if requested.

Gordy

Don't you think this type of product management has opened up another area of jobs in shipping? Keep inventory low, and ship speedily when needed. UPS,DSL,FedEx,etc.. Near All business models go this route.

Robert O'Brien

> @Gordy said:
> Don't you think this type of product management has opened up another area of jobs in shipping? Keep inventory low, and ship speedily when needed. UPS,DSL,FedEx,etc.. Near All business models go this route.

A couple problems, the customer has no heat today for one. In addition,if the brick and mortar guys have to order it, why wouldn't I just do that myself?

ScottSecor

Many years ago we were able to buy some big ticket items directly from the manufacturers rep, I was told we spent more money with this particular rep than my local wholesaler did. This lasted for a few years until at least one wholesaler found out and made a big stink. We lost the connection and perhaps coincidentally the rep closed it's doors about six months later. We sold a lot that product during that time frame, and the customer actually benefited from our better than typical pricing.

Today, one of my local supplier carries almost exactly 1/4 of the inventory they used to (in dollars, not space requirements). We have a long standing relationship with the place and prefer to use them over others, but their lack of inventory causes many problems for us. For years I could count on this supplier and a few other locals at least mathing internet pricing and often beating them by ten percent. Lately I'm noticing the local places are not beating the internet prices all that often. I still have an allegiance to the local shops as they will bend over backwards on a Sunday night to help me, but with not so great prices, and little inventory I may have to start buying more on the internet.

I know of three suppliers that still almost always have what we need in stock, one is a national chain and two are independent. Just as an example how things changed, we used to spend about $1000 a month on average at Grainger. Could be tools, hardware, hundreds (if not thousands) of electric motors, lubricants, pumps, etc. We could count on them to have any electric motor we needed in stock at the local branch, worst I recall is we picked it up next day. About fifteen years ago Grainger decided it would use a central warehouse, they had about one in ten motors in stock and could get most others in two days. Two of the closest branches are now closed for good and last time I checked stock I was told four to six business days for the motor I needed to get the heat back on. Needless to say we rarely go to Grainger for anything anymore.

With regard to Caleffi, our local suppliers carry very little, however I can get almost anything in a day or two (this includes a 6" hydraulic separator or a 1" radiant manifold).

Another change I'm noticing locally is Home Depot is filled with contractors whenever I visit (many of them heating and plumbing). I also witnessed all but one supplier we frequent regularly now carries a full line of warm air furnaces, condensers, ductwork, etc. These same suppliers did not carry any air conditioning equipment twenty years ago.

Finally we have become friendly with a few of the reps over the years and as such end up specifying and purchasing the product they represent. Most of the time this works out well for all involved, until the rep decides for whatever reason to drop the line and you just installed hundred of the widget they used to sell and your local wholesaler used to stock. Ever try to get a boiler part (after installing about 125 of this particular boiler) when no one local stocks even an igniter? Ever have to explain to an excellent customer with multiple commercial sites that we can no longer get parts locally for the forty boilers that were just installed in the last two years?

Maybe the days of just installing Weil McLain cast iron boilers (every model) and anything ITT/Bell & Gossett produced (circulators, condensate pumps, boiler feed pumps, air vents, etc) was the way to go?

Gordy

I think that's where it's all headed don't you @Robert O'Brien

hot_rod

Robert O'Brien said:

> @Gordy said:

> Don't you think this type of product management has opened up another area of jobs in shipping? Keep inventory low, and ship speedily when needed. UPS,DSL,FedEx,etc.. Near All business models go this route.



A couple problems, the customer has no heat today for one. In addition,if the brick and mortar guys have to order it, why wouldn't I just do that myself?

Then the ONLY solution, if overnight is not fast enough, is to open a wholesale business or stock in your own shop?

Robert O'Brien

Is it unreasonable to expect a wholesaler to stock the commonly needed parts for the boilers and tankless heaters they sell? I don't think so. Overnight is a misnomer, order at 9AM on Monday and get at 5PM on Tuesday or order at 4PM on Monday and get 9AM Wednesday isn't my idea of overnight but is the commonly accepted version.

ScottSecor

I have no way of knowing, but I suspect that wholesalers are NOT making any more money with the current, "We can get that part for you" mindset but I could be wrong.

Robert O'Brien

Isn't having what's needed when and where it's needed the way wholesalers add value and justify their existence ?

Gordy

Maybe it has to do with the frequency in which they get those people who need it yesterday, and the ones that settle for they will take it when they can get it.

I don't think your claim is unreasonable Robert, and is what is suppose to make the wholesalers the place to go.

hot_rod

Robert O'Brien said:

Isn't having what's needed when and where it's needed the way wholesalers add value and justify their existence ?

I imagine from a wholesalers perspective it is about $$ and inventory turns.

Even typical pipe fittings are in quantities of 10 or less on the shelves, in places I visit.

Some of the new inventory software they use will kick out part numbers and delete SKUs if a product isn't turning according to their bean counter formulas.

Robert O'Brien

They'll have less beans to count when they're down to PVF

Gordy

When you get down to the beans. Inventory is a killer. It's negative dollars tied up with no where to go until someone purchases. That is the way of any business now days.

Robert O'Brien

> @Gordy said:
> When you get down to the beans. Inventory is a killer. It's negative dollars tied up with no where to go until someone purchases. That is the way of any business now days.

You can't sell from an empty cart

hot_rod

Robert O'Brien said:

They'll have less beans to count when they're down to PVF

What I see on a regular basis is the consolidation of wholesalers.
Perhaps in the next 10 years there will be only one or two corporations controlling the entire plumbing HVAC supply industry? Imagine the clout a local contractor will have will have then.

85% of the beef industry in the US is now controlled by 4 mega companies. And it looks like China is buying them up.

Gordy

Robert O'Brien said:

> @Gordy said:

> When you get down to the beans. Inventory is a killer. It's negative dollars tied up with no where to go until someone purchases. That is the way of any business now days.



You can't sell from an empty cart

Pockets aren't empty if the carts empty

Gordy

hot rod said:

Robert O'Brien said:

They'll have less beans to count when they're down to PVF

What I see on a regular basis is the consolidation of wholesalers.
Perhaps in the next 10 years there will be only one or two corporations controlling the entire plumbing HVAC supply industry? Imagine the clout a local contractor will have will have then.

85% of the beef industry in the US is now controlled by 4 mega companies. And it looks like China is buying them up.

Isn't that going back to the times of "The men who made America"

hot_rod

Gordy said:

hot rod said:

Robert O'Brien said:

They'll have less beans to count when they're down to PVF

What I see on a regular basis is the consolidation of wholesalers.
Perhaps in the next 10 years there will be only one or two corporations controlling the entire plumbing HVAC supply industry? Imagine the clout a local contractor will have will have then.

85% of the beef industry in the US is now controlled by 4 mega companies. And it looks like China is buying them up.

Isn't that going back to the times of "The men who made America"

Next on my reading list.

Robert O'Brien

> @hot rod said:
> They'll have less beans to count when they're down to PVF
>
>
> What I see on a regular basis is the consolidation of wholesalers.
> Perhaps in the next 10 years there will be only one or two corporations controlling the entire plumbing HVAC supply industry? Imagine the clout a local contractor will have will have then.
>
> 85% of the beef industry in the US is now controlled by 4 mega companies. And it looks like China is buying them up.

Imagine the clout the manufacturer would have?

hot_rod

Gordy said:

Robert O'Brien said:

> @Gordy said:

> When you get down to the beans. Inventory is a killer. It's negative dollars tied up with no where to go until someone purchases. That is the way of any business now days.



You can't sell from an empty cart

Pockets aren't empty if the carts empty

A good point, empty or lightly stocked shelves must lead to better ROI for the large corporate model? It's not something that happened recently, the minimal inventory model has been around for 10- 15 years.
Mostly the small mom and pop, well stocked suppliers are going out of business or being bought up by the larger shareholder run model.

What's the old saying, "when there is something you don't understand, look for the money"

Gordy

I guess it comes down to cash flow, or cash. If you can have cash invested earning money verses cash tied up in product on a shelf for an unspecified time before it earns money. Which is the better investment, and easier to track for the bean counters.

I'm quite sure that product of large quantity which rotates quickly off the shelves is stocked verses product that collects dust.

All industries are becoming lean, and mean in this manner.

L Thiesen

The Ferguson Supply in my area has a huge building but stocks very little, they then tell me they can get whatever I want from the distribution center. Then after waiting for several days for the item they try to add freight to the price even though it came by way of their truck. Just one of the reasons they have become the last resort for items for me.

Harvey Ramer

Wholesalers are starting to feel the pinch. Some of them are attempting their own version of online wholesale.

The bean counters have determined that if they don't sell a product in 6 months, it has cost them money rather than earned.

A local electrical distributor just quit stocking 1/2" PVC LB fittings. The computer said they didn't sell enough of them out of that store. It did not take into account the volume that was ordered through the store, just what was stocked and sold.

It will be interesting to watch.

Gordy

With the ability of computerized, and robotic warehouse distribution think about the human labor savings. That's where it's all headed folks.

Ironman

The thing that these "educated" bean counters don't grasp is customer service. As Robert and others have pointed out: if we can't get everyday parts and fittings off of the shelf at our local distributors when we come in and purchase a boiler, why bother with them at all?

Yeah, they saved a few beans by not keeping product on the shelf that wasn't moving quickly enough, but lost a major sale, and maybe a customer, in the process.

Real intelligent.

NY_Rob

^ it would be funny if the "bean counters" boiler broke down and no one stocked the part locally because it was a "slow mover"...

Steamhead

There is a certain supply house in Baltimore that you have to call every time you go there to make sure they have everything you want. Often they'll be missing a few items. I've told them time and again that if I can't get everything I need there in one trip, I'll go somewhere else that has everything. Who has time to make all those trips? But they just don't get it.

They run those places the way THEY want, and we can pretty much take it or leave it. And if @hot rod 's prediction comes true, it'll get even worse.

Robert O'Brien

.Why would manufacturers allow themselves to be held hostage by a few mega wholesalers?

hot_rod

Robert O'Brien said:

.Why would manufacturers allow themselves to be held hostage by a few mega wholesalers?

I'm all ears, as are most other manufacturers I suspect, if you have a work around suggestion

Robert O'Brien

hot rod said:

Robert O'Brien said:

.Why would manufacturers allow themselves to be held hostage by a few mega wholesalers?

I'm all ears, as are most other manufacturers I suspect, if you have a work around suggestion

The market will solve those problems, one way or another. I predict a vast change is coming

hot_rod

> @Robert O'Brien said:
> .Why would manufacturers allow themselves to be held hostage by a few mega wholesalers?
>
> I'm all ears, as are most other manufacturers I suspect, if you have a work around suggestion
>
>
>
> The market will solve those problems, one way or another. I predict a vast change is coming

If you can share any details about the vast change, maybe we all can help expedite it.

Harvey Ramer

It may become beneficial for manufacturers to allow direct sales to contractors for goods that can ship ups. I would like that.

Robert O'Brien

Harvey Ramer said:

It may become beneficial for manufacturers to allow direct sales to contractors for goods that can ship ups. I would like that.

I think eventually different manufacturers will go to business in ways that suit them and their customers best and that will vary quite a bit.