Wesco case B2B case study

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  1. 1. Business to Business Case Submission
  2. 2. Electrical Equipment Supplies (EES) products distributor. Value to suppliers : generating demand for their products. Value to Customers : Offered one stop solution, inventory management & cost reduction. Manufacturers Strong ties with 150+ suppliers. Introduction
  3. 3. CUSTOMERS Electrical Contractors Bid & Quote Business Shortlisted Distributors Offers with lowest overall price Industrial Customers Ongoing need for EES Products Maintenance, Operations & Repairs (MRO) activities Several industry segments (Utility, Transport etc.) CIG Customers The smaller WESCOs business Commercial customers : hotels & motels Institutional customers: hospitals & universities Small, stable & low potential customers to WESCO
  4. 4. Goal Annual growth rate of 6% to 8 % in sales and 12% to 16% in profitability over the next five years. Premise Large contracts could mean significant savings for both customers and WESCO. Benefits Competitive Advantage Customers & Suppliers Competitive Prices Regardless of volumes Inventory Reduction Inventory Management JIT Delivery Efficiency Improvement (Price, Reports, IT etc.) National Account Program
  5. 5. NA CLIENTS Key NA Clients 50 Key Clients Turnover - $180 Million Average $ 3.6 Million per customer Cost Index - $80 Million Focus NA Clients 100 Clients Turnover - $ 52 Million Average $ 500K per customer Cost Index $ 110 Million Other NA Clients 150 Clients Turnover - $ 34 Million Average $ 250K per customer Cost Index $ 100 Million
  6. 6. SALES DISTRIBUTION Branch Sales Representatives Outside Sales Rep * Served 20 40 Customers * Visiting Customers Regularly, identifying new sales opportunities and developing solutions together * Hunter Mentality Inside Sales Rep. * For each outside sales rep there is an inside one * Process new orders, Expedite existing orders, and provide all necessary service & support NAMs 18 NAMs across the country Functions : * Expected to call prospective customers * Lead the active selling and implementation process with new NA customers * Maintain long standing relationship with existing NA customers ACQUIRED RETENTION
  7. 7. CAUSES OF FAILURE FOR NA PROGRAM
  8. 8. TOO much burden on NAM o In case of any service requirement/defects problem/replacement of parts etc. local plant manager contacts the local branch manager, who in turn contacts the National Accounts Manager(NAM). o NAM tries to resolve the problem with his NIT counter part at the local level. o Every NAM has 10-15 current customers to handle along with 15-20 prospective clients. Also every customer has on an average 5-20 plant locations across US.
  9. 9. TOO much burden on NAM o If we take on an average of 12 current customer with each having 10 plants(average) across US, then each NAM is handling (12 x 10) = 120 plants at a time. o Apart from handling these 120 plants every NAM is responsible for other 15-20 prospective clients with whom he may be at any stage of active selling, intensive implementation stage etc. o If you consider a particular NAMs total time, he is totally burdened with sheer numbers of plants locations and the investment of time for the prospective clients. At any given point of time, he may be handling some current accounts as well as some process of new customers.
  10. 10. NO coordination between customers HQ and local plants o In case of some customers, the local procurement officers are procuring materials from the local distributors irrespective of being the NA customer of WESCO. o The reason for plants team still favouring the local distributors is that they have good relationship with them and thus dont want to change their system.
  11. 11. NO coordination between customers HQ and local plants o If the customers corporate HQ has done a Rate Contract with WESCO, then the local plant managers are not ready to procure the materials from them. o Local procurement is still doing the procurement of EES items in their own individual capacity despite their plant being included in the Rate Contract.
  12. 12. Mentality of sales representatives o Mentality of sales person needs to be changed. If they are catering to the industrial customer then they have farmer mind-set and when they are searching for electrical contractors then they have hunter mind-set. o Also, one of the sales rep say that he doesnt want to serve a NA plant which is giving $50,000 revenue per year. o If we see the overall scenario, then that customer is of $5.4 million revenue per year across all plants.
  13. 13. o Considering the fact that it is a NA customer and assuming that this customer is having 10 plants across US, it is highly inappropriate for this sales rep not to serve that plant. o Just because a location is generating little revenue doesnt mean that he will not serve that location. This phenomena is totally against the arrangement of the nation wide Rate Contract with WESCO. o The customer is hugely profitable to WESCO, and however it is unprofitable in a certain location, it is a source of huge revenue in other 9 locations. o That sales rep is viewing the scenario in isolation and not as a whole system. Mentality of sales representatives
  14. 14. Possible solutions to correct NA PROGRAM
  15. 15. o Increase the number of NAMs in the long term so as to lessen their burden. In this way they can devote their time effectively to each current customer as well as prospective customer. o Have a dedicated sales team for the major key accounts and assign them to each NA so as to have better monitoring and coordination with every plant location.
  16. 16. o Grooming of the sales representatives through a training program should be done. Currently in a particular branch office, each rep is handling 20-40 customers. These will comprise NA as well as other customers. Hence to that rep, NA customer is just another customer to serve. He is not giving that due importance to NA customers as he doesnt differentiate between NA and others. o Also through these grooming sessions their mentality shall change from hunter to "farmer. Farmers must have a long term view to have a strong relationship with the local procurement team of that plant.
  17. 17. o WESCO must ask its local sales rep to improve and strengthen the relationship with local procurement team. In this way they will generate orders from them which were previously being given to the local distributors. o Perhaps WESCO can include the clause of local buying through its branch offices in its Rate Contract made with the customers. In this way plants will buy through WESCO only. o Corporate Head Quarter of customer must channelize the information to its local plants procurement team though circulars etc. This will keep both the parties at the same pace. Also they should clearly notify the local procurement officials of the items which they can procure locally and which items they should procure nationally if they are NA customers.
  18. 18. Analysis based on Price and Cost Index -20 -15 -10 -5 0 5 10 15 20 Key NA Customers Focus NA Customers Other NA customers Other Industrial Customers Industrial Contractors CIG Customers International Profit base on Price and Cost Index o The above chart depicts the profit that might be earned from various customer segments. The assumption that the operating margin is 3% on a base average selling price of $ 100 is used to calculate the above figures with the price and cost index (Exhibit 5).
  19. 19. Future road map for Industrial NA customers As the growth potential is high and there is a scope of long-term relationship with NA customers , Wesco should be proactive in acquiring them. Wesco being the third major distributor occupies the sweet spot of the customer list and has the potential to forge long term relationship with the industrial NA customers who are willing to go beyond transactional relationships. Pitch for Value added services to these customers and convert non- exclusive to exclusive NA contracts. Convert reliable focus NA customers into Key NA customers.
  20. 20. Contd To cater to the new trends of Integrated solutions WESCO should for tier system rather than an alliance because Alliances involve investment in learning about each others businesses. Scope of each customer coming up with a different set of suppliers and distributors. Compete with competitors of alliance partners. Being proactive will enable WESCO to be in the first tier and hence earn profits by marking up the prices provided by second tier. For example ,in India Blue Star Air Conditioning services provides Facility Management Services through outsourcing.
  21. 21. THANK YOU