The value of documentation

by Rich Vurva

T&A Industrial Distributors wins 2008 ISA Value-Added Distributor Award

The sales team at T&A Industrial Distributors in Brookfield, Wis., is no different from most industrial distribution salespeople. They’d rather spend energy working on the next sale than fill out paperwork pertaining to something that happened in the past. But paperwork is critical when customers demand proof of performance.

The issue is so important to the management team at this Milwaukee area company that T&A requires salespeople to turn in reports on their value-added activities. Avoid doing so, and the salesman’s employment is at risk.

To make the paperwork as painless as possible, vice president of sales Tom Simonson developed a simple Microsoft Excel-based Value-Added Worksheet that uses a fill-in-the-blanks approach. Salespeople enter the pertinent data, which is then transferred into a Microsoft Access database and merged into a Microsoft Word document to generate Value-Added Cost Savings Reports that are e-mailed to customers.

“We tested the worksheet last summer with two sales guys that were more value-added-savvy. We made a couple of refinements and began using it in September. Up until that time, they had samples of the different kinds of things and they would write them and we would edit them and send them out. The data sheet raises the quality of our reports significantly,” says Simonson.

T&A Industrial Distributors was named the 2008 Value-Added Distributor Award winner by the Industrial Supply Association. The company was recognized for its Value-Added Reporting program that defines the value-added activities its salespeople perform for customers and assigns a point value to each activity. Since the program began, salespeople have recorded nearly 2,500 value-added reports.

“Salespeople hate paperwork. The easier we made reporting these activities, the easier it was for them to accept it. Today’s form is very simple. You just check boxes,” says Simonson.

Salespeople are encouraged to turn in the report the same week an activity takes place so reports can be generated within 10 days. They’re often e-mailed to more than one person.

“The more people we can send it to, the better. We also do summaries at the end of each quarter and then an annual summary. We try to remind them what we’ve done for them at every possible opportunity,” says Simonson.

Company president Jim Ketter believes the program has had a major impact on his company’s success.

“The fact that we have this value-added program has helped us retain and gain new customers,” he says.

The program puts the focus on value-added activities such as vendor-managed inventory, employee training, and tool inspection and repairs rather than price reduction.

“Customers are looking to save money. They know they can’t save it year after year in price reductions. But you have to continue to demonstrate value by saving them money,” says Ketter.

The point system
The company requires salespeople to earn 200 points a year in value-added activities. Points assigned to each activity vary according to how much they’re valued by customers. For example, completing an expedited delivery is worth just one point, while a product conversion carries a value of six points and a process improvement is valued at eight points. (Click here to see how T&A assigns value to each activity.)

If salespeople turn it at least 50 points a quarter, they earn a $100 bonus. If they turn in more than 51 points in a quarter, they earn $150. Failure to keep current on their value-added activity means their commission earnings suffer.

“If a salesman doesn’t make his 50 points, he can lose 2 percent of his unique commission rate. We’ll reduce his commissions by 2 percent for the next quarter until he gets his points,” Simonson says.

Salespeople are also required to participate in joint sales calls with preferred suppliers and perform a specified number of product tests within a quarter. Simonson says all of the activities combined help position the company as a value-added vendor for major customers.

New business
The Value-Added Reporting program has helped T&A grow business with existing customers and attract new ones. For example, a T&A salesman had been calling on a steel fabricator in central Wisconsin for three years. He’d take saw blades for test runs, but could never convince the company to switch suppliers. One day, a new purchasing director asked, “How do you save us costs and add value and document it?”

“Our guy was totally prepared. When he finished explaining our Value-Added Reporting process, she promised to write a blanket order within the week,” Simonson says.

Because of its Value-Added Reporting program, T&A:

Won an additional commodity contract from an existing customer after documenting more than $220,000 in savings
Remains in contract compliance with a major electric utility that requires documented 10 percent annual cost savings
Completed 612 value-added activities in 2007, totaling $234,764
 

Simonson says the program is a work in progress, that’s continually being refined and improved.

“From the very onset, we’ve considered this process to be something that would differentiate ourselves from other distributors,” says Simonson. “We’re extremely pleased to be recognized by ISA for this award.”

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