It’s what you save that counts

Fuchs Machinery won the first annual ISMA Value-Added Partner of the Year award at the ISMA/ I.D.A. convention in Chicago for its value-added programs and its unique methods for selling industrial supplies.

Four years ago, Fuchs Machinery pushed products on the basis of price and popularity, just like every other distributor. The company was just another fish adrift in a sea filled with similar industrial distributors, and had become indistinguishable from its competitors.

Then, things changed. Instead of keeping the same old story, the Omaha, Neb.-based company developed a new one. It learned that in a world of commodities, a successful industrial distributor must stand out from the crowd. Now, Fuchs Machinery sells more than just products. It sells itself as a package, a solutions provider, a guide for customers who may be blind to the fact they are losing money hand over fist in a multitude of ways.

Tom Berger, president

“We had to show customers it’s not what we sell, it’s what we save,” says president Tom Berger. “The stuff we sell, you can buy from anyone. We have to give people a good reason to buy from us.”

With that philosophy in mind, Berger, along with cutting tools application specialist Dennis LaForge and manager of industrial products Bill Kiefer set off on a quest to change the selling style salespeople clung to. Today, their efforts have added up to more than $3.7 million in documented cost savings for its customers. And, its new, proactive style of doing business is a way of life.

But it hasn’t always been awards and accolades.

How old becomes new
When Fuchs managers proposed a change in direction four years ago, they were met with less than enthusiastic cheers from salespeople.

It took two full years to get buy-in from salespeople, according to Kiefer. Sellers wanted to continue to talk about products and price. They slowly came to realize that customers were more interested in talking about process improvements, reducing manpower or eliminating obsolete inventory from their storerooms. Once they understood that, salespeople took ownership of the program.

“You’re just viewed in a different light,” says Kiefer. “When our guy walks through the door, he’s viewed as valuable to that customer’s organization.”

Customer buy-in was also tough in the beginning. During the economic boom of the mid- to late-’90s, work-swamped customers had no time for distributor salespeople trying to cut costs and improve processes. But as the pendulum swung, and manufacturing slid into recession, customers became more receptive.

With the economy in the tank, cost savings became more important, says Kiefer. Before, customers didn’t have time for a band saw test or a cutting tool test. Today, it’s all they want to know about. Customers are beginning to understand on their own terms.

Suppliers also understand selling value. Some developed their own value-added forms to demonstrate how much they save a customer per part. Each year, Fuchs invites eight to 10 suppliers to semi-annual planning sessions to discuss the kind of savings Fuchs can pass along to its customers. Only suppliers with the potential to make a significant impact on the productivity of Fuchs’ customers get to participate. At the end of the day, the supplier representatives leave with a written customer-specific plan.

“Enlisting the support and obtaining a commitment from key suppliers significantly increases our ability to bring meaningful cost savings to our customers,” says Berger.

When it all falls together, everyone wins. For example, Fuchs worked with Simonds Industries to secure a bid on band saw blades for one customer, a manufacturer of irrigation systems. Fuchs and the Simonds representative went to the customer with documentation from the past two years detailing cost savings achieved through process changes and operator training. After showing the customer all that Fuchs and Simonds saved him, the distributor secured the contract. Not only did Fuchs beat out the competition, it also increased the price of the blades.

“It’s really a very simple process once you get buy-in,” according to LaForge. “You have to know what our suppliers are able to provide. You have to know what your customers want. And you have to have salespeople with knowledge about product application to make it work. When you put those three pieces of the puzzle together, you’ve laid the foundation for providing cost savings and increasing business for everyone involved.”

Teaching value-add
Fuchs salespeople began to learn about cost reduction and value-added documentation by attending seminars conducted by industry consultant Tim Underhill. A year and a half ago, Fuchs took 12 outside salespeople to one of Underhill’s presentations on value-add at the Industrial Distribution Association’s spring convention. That presentation confirmed that Fuchs was doing things right, and also gave the company ideas for improvement.

“There’s not a lot of magical stuff,” says Berger. “A lot of the things we are doing are things that our association has been introducing us to for the past three years.”

But there is a significant step between understanding the concept of adding value and showing customers you know what you’re doing. Fuchs took that step at the National Association of Purchasing Management’s Sioux Falls Product Show in South Dakota and Omaha Product Show in Nebraska. Fuchs transformed its run-of-the-mill product display into a demonstration dedicated to adding value.

After years of demonstrating products every other distributor at the show carried, LaForge created a booth filled with customers’ products. The display included real-life examples of projects totaling nearly $575,000 in annual cost savings provided to customers. It was a huge success.

“We even had one customer who recalculated a little more savings than we had initially thought. He took the time to write with a black magic marker on each of the parts how much money he saved per part,” said LaForge.

Another customer was so impressed that he invited Fuchs to look at several new projects and opportunities.

Turning the corner
The display demonstrated the attitude Berger is trying to instill in his salespeople: It’s not what we sell to customers; it’s what we save them. Berger believes the Fuchs approach to value-add makes it easier for a customers to buy from his company, creates a symbiotic relationship between suppliers, customers and his distributorship, and turns his company from a commodity into a valuable rarity.

“There is a lot of discussion today about the added value that distribution brings to the channel and in particular to customers,” says Berger. “It is our hope that customers view Fuchs Machinery not in terms of the value we add, but rather as a valuable resource to their organization.”

This article was prepared exclusively for ValueAddedPartners.org. Copyright 2002.

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