Co-op Students in Distribution

With the Memorial Day weekend upon us and summer about to officially begin, I have been hit with at least a dozen emails, LinkedIn.com connects and calls from both distributors and students on the topic of Co-op programs in Distribution. 

Co-op and Intern projects are good for distribution

Back in our father’s day, companies made room for the kids of employees, family and friends in their business.  It was almost like a job benefit, work here and we’ll find a place for your son or daughter during the summer.  There were lots of “make work” projects.  Painting and scrapping, sweeping and shoveling, stacking and unstacking were all on the menu.  Readers who grew up in wholesaling families can probably relate to some of this.  The point is, there were a lot of jobs that nobody wanted and kids often got stuck with them.  It may still be happening…

Today, business is different.  Our building is more professional (with fewer dark obscure rooms requiring paint), our warehouses better laid out and our processes more refined.  The role of the co-op, intern or summer helper has changed.  We’re more likely to see a co-op seated at a keyboard than swinging a weed whip in the jungle that’s grown up behind the warehouse.  But, there are still dozens of great reasons for distributors to make use of students during their off time.

Here is my short list:

• Reason 1:  Co-op programs give you an opportunity to learn about the next generation of worker.
  
• If you distribute technical products, the co-op student is likely to be a customer in a few months.  Interaction helps you learn how they think.
  
• Reason 2:  Co-op programs are a low cost ways to “interview” future workers.
• You get to see a potential new employee’s work habits, ethics, and attitude over a multi-month period. while they get to sample your company’s culture.
  
• Reason 3:  Co-op students have strong computer skills.
• If you need data scrubbing, data entry or customer files updated, they can handle the work.
• Reason 4:  Co-op students may also be qualified for other more technical tasks.
• Need a blog set up, social media based content or customer research done, again you’d be surprised at the depth of skills available.
• Reason 5:  Quality employees are hard to find.  Many of the students you hire may have never been exposed to the world of wholesale distribution.  They stumble into your place looking for summer work and march away knowing the value of our industry. 

A few tips for distributors with co-op…

Many people make the mistake of hiring co-ops without planning their work.  While I am not asking for direct supervision at all times, I believe a work plan should be developed.  This can include a number of departments; actually exposing the co-op to different groups does help them understand the business. 

I believe the following should be part of the plan:

• A “go to” person who can answer questions and remove roadblocks in their efforts.
• A set of tasks with instructions for how the task should be carried out and approximately what amount of time the task is expected to take.
• A weekly meeting with a manager to review progress and answer questions which may not be directly related the assignment.  For example, the co-op might hear the term gross margin and not understand what it means or the importance of gross margin to the distribution industry.
• A few well timed meetings with upper management.  Recalling, this young person may be a potential hire or a customer in a few months/years, I believe the time is well spent.
• The ability to participate in training opportunities.  Supplier training, sales meetings and other events provide “big picture” insight to your business.

Companies like WarehouseTWO have a wonderful grasp of this concept and provide sample projects that are perfect for interns/co-ops.

Advice to the co-op student…

If you have a co-op or have a young friend who has taken a role at some other company, you may want to share the advice we have pushed out to a number of co-ops over the years.

Congratulations on landing a position at what I understand is a great company.  The things I recommend are elementary, please don't be offended.  I understand that you are coming into this position with a number of skills.  I totally believe you are intelligent, ready to work and probably have an educational head start in life.  I have given this advice to many and years later a good number have taken the time to confirm my thoughts.

With that, here are my words of wisdom:

1. Always be at work 10 minutes early and ready to start promptly.  This is still valued by businesses.
2. Never eat alone when given the opportunity to have lunch with co-workers.  Getting to know the people you work with on a personal and professional basis will serve you well in later life.
3. If your group "socializes" after work, go.  Even if you only stay for a short time.  If alcohol is served and you are of legal age, feel free to drink.  But never more than two drinks.  Intoxication leads to dumb mistakes.  Dumb mistakes can set back your career.
4. Don't be offended by "none technical" work.  Companies sometimes assign not-so-glamorous work to co-ops because nobody else wants it.  Working your way through the boring stuff will demonstrate your work ethic.
5. Keep track of your accomplishments (on paper/computer.)   This is good for your resume and great for your ego.
6. Be successful with the existing process before suggesting a new way.  It never hurts to understand how the existing process came into being.
7. Establish a connection with everyone possible.  Create a personal file (I use MS Outlook, but I'm sure there is "an app for that") with the contact information and a few notes about the people you meet.  Logging some of the personal likes, dislikes, hobbies and other pertinent background information makes it easier to stay in touch later.
8. Create LinkedIn.com connections with as many people as possible. LinkedIn is the Facebook of business.
9. Never post criticisms or complaints about work on Facebook.  And, as soon as you read this, review your current Facebook posts.  Delete anything you wouldn’t want your boss or coworkers to see.
10. Ask for a written review of your work at the end of the summer.
11. When you get the review, never argue over the contents. It only makes you look petty.  Instead, ask for clarifications and pay attention to valid criticisms.
12. Remember co-op programs are often just a 480 hour interviews.  Be professional, optimistic and resourceful.  At the same time, you owe it to yourself to be interviewing your employer.  Ask yourself, is this the right culture for my personality?  What department looks like the most fun? Would I want to spend 8-10 hours a day in this organization?
13. Remember most people fail not because they lack technical skills, instead they fail due to poor interpersonal skills. 

With all this in mind, have a great summer.  And, if you are interested in learning more about the wholesale industry and distribution in general, feel free to join The Distributor Channel and don’t hesitate to reach out.  I would love to hear about your experience.

Inventory on the Shelf vs. Inventory When You Need It

Over the years I have heard some pretty amazing things said about distributor inventories.  Let me share a few of these:

• A peddler can’t sell from an empty wagon and a distributor can’t sell without a full warehouse.
• It’s the distributor’s job to provide local inventory.
• If the distributor doesn’t stock your product and lots of it, you’ll never get its full commitment.
• We want distributors to prove their commitment to our company by placing a large stock order up front.
• The distributor’s stock provides a margin of error for logistics problems at its suppliers.

While all of these probably made sense back in the day, those days are finito, over, dead and gone.  Or at least they are for the knowledge-based distributor.  Astonishingly, I still hear most of these words of wisdom bantered about; mostly by the sales teams of distributor supply partners.  What’s really bizarre is most of these folks never took the time to think seriously about their comments.

Let’s shoot a few holes in these antiquated theories.  First, a peddler selling from an empty wagon story predated Sears and Roebuck setting the retail world on fire by selling from a catalog.  It definitely came years ahead of Amazon Supply where many of the items are shipped directly from somewhere other than an Amazon warehouse. 

The local inventory argument…

The distributor role in local inventory is critical, but things have changed.  Allow me to share a story.  Back in the early days of my Iowa career (1978), I worked for a manufacturer with a plant 217 miles away.  We had a warehouse in Iowa to serve emergency needs.  Why?  Because (and I know this fact will be hard for Millennials to fathom) back in the days before Fed Ex and UPS arrived in Iowa, shipment time from Milwaukee to Davenport, Iowa was 4-5 days. 

The ideal local stock today would be items required for immediate use by the customer.  Pulling an example from the Automation Industry, I can’t even imagine a customer decided during lunch that he needs to start and complete an automation project during the afternoon.  The human time required to engineer and design the system requires days, sometimes weeks to accomplish.  This lag typically provides plenty of time to acquire and receive any parts and pieces needed to finish the job. 

What might be an immediate need for the customer and thus justify inventory?  Common spare parts for emergency breakdowns qualify.  Consumables may be justified.  Anything a customer requires on the spur of the moment are important.  OEM customers often place blanket orders with monthly estimated usage quantities, typically these are easy to drop ship, but things happen.  Distributors need to be prepared to immediately replenish failed items and handle those instances where larger quantities are required with short notice.

Distributor commitment tied to inventory?

Somewhere, somehow, manufacturers came to the conclusion distributors were more committed to suppliers with a ton of inventory sitting in the back warehouse.  Perhaps it appears this way on the outside looking in.  Here’s an example.  Friendly Frank’s Distributing has a great relationship with Acme Manufacturing.  Over the years, Friendly Frank (FF) and his team have developed a number of mutual customers.  Acme helps by providing leads, support and a quality product.  Customers make many purchases and, as described above, FF finds it necessary to carry more stock to service those sales.  To the supplier on the outside, it might appear as though the inventory drives the selling activities.  In reality, it is the other way around.

A few manufacturers, who are just launching their products, depend on distributors to assist in funding their launch.  Often, they covet the “initial stock order” as a tool for driving their profitability.  While a nice stock order does provide them with instant cash, one can only wonder what happens if the distributor stocks the wrong mix of product or, worse yet, the market doesn’t embrace their new products.  The whole thing turns into a force fit situation.  Distributors clamor for expensive stock rotations.  Product ages on the shelf creating issues with revision levels and old dusty boxes.

I have suggested this idea a couple of times without much acceptance, but wouldn’t it be easier for the distributor to pay something resembling a “franchise fee” which provides funding to the manufacturer without the hassles of inventory issues?  Perhaps this fee would enable the distributor to get better margins in the future.  Or maybe, the manufacturer could provide some other benefit to the distributor. 

If not inventory, how does the distributor show commitment?

For knowledge-based distributors commitment comes by way of investment in (in order of importance) product knowledge, application skills, careful selection of target customers and customer education.  By definition, knowledge-based distributors don’t just ship boxes.  They wrap every transaction in their unique blend of customer application and product knowledge. 

Covering breakdowns in Manufacturing Systems and Logistics…

Covering breakdowns in manufacturing systems does justify inventory.  However, we should set some parameters.  First, we’re not referring to breakdowns with regularly moving “A” products.  In today’s manufacturing environment, these come quite rarely.  Instead, the issue often falls with items which fall further down the line.  Items which are sometimes referred to as “pre-engineered;” the design work is finished, but the build is still done on an as needed basis.  The factory doesn’t necessarily stock all of the parts and pieces of the product so lead times can be lengthy. 

For most distributors, keeping a spare of this type of item is dependent on customer mix and customer usage.  To provide an example, a distributor in Gary, Indiana may have enough steel plants on its account list to justify a part specifically developed for a steel mill, but the guy in South Texas, with only a single small steel facility, may not.  Referring to the recent massive rainfalls in Texas, what happens when that single plant is flooded by 15 inches of rain in a two hour period?  Factory delivery times hamper restarting the plant. 

Most times, this type of emergency requires plenty of scrambling: Calls to the manufacturer, expediting of component parts and occasionally mad scrambles by distributor and factory people alike to find a replacement somewhere.  But there is an option…

A new solution is pushing to the forefront…

Distributors have looked for easy ways to share inventory for eons.  Some of the more progressive manufacturers have created plans for distributors to report inventory back to a central point for better sharing.  In spite of great enthusiasm along the way, the plans have mostly fizzled out with time.  For the most part the reason is simple, the work required didn’t justify the results.   At the same time, I have observed several informal distributor networks develop plans for sharing inventory.  Typically, these are established from the top down at the distributor, owner to owner or president to president.  These guys decide to attack the issue by promising to help one another.  They work, but often the cost of interaction is high because nearly every call involves some kind of touch by high level folks who are often hard to reach on a moment’s notice.  Good idea, but way too much human interface.

Last summer I became aware of a fresh approach to the issue, WarehouseTWO.  WarehouseTWO provides internet technology to an age old issue and takes things a few steps further.  Here’s a short list of the things I like:

• Distributors can get started for Free.  It’s the “freemium” model applied to distribution.  It cost nothing for a distributor to purchase from other distributors.  And, the costs to sell products is nearly free.  For instance, a distributor can list up to 1,000 items online for less than $70 per month (10,000 for $99 per month.)  Plus, there are no transaction fees; the cost is the cost.  A low monthly subscription fee is the only cost to use this service.
• The selling distributor sets the price.  Got overstocks, you can sell them for distributor cost less 10%, 20% or any other price that makes sense.  Other distributors can quickly shop for bargains and help you balance your inventory.  If you normally stock a “D” item and want to improve your turns, you can sell the product for cost plus 10%, 20% or “whatever.” You set the margin.
• This is a Distributor only program.  There are no concerns with your local end-customers “trolling” for bargains or checking out their local distributor’s price on products just purchased. 
• The site automatically limits interaction to only other authorized distributors.  Many distributor contracts prohibit the sale of products to non-authorized distributors.   This is not a source for bootleg materials.  Instead, authorized distributors share inventory within the authorized channel only.

One more point that appeals to our industry is this: Manufacturers can sponsor distributor interaction.  This allows the manufacturer to see what’s in stock throughout its distribution channel without massive IT outlays and without the constant maintenance tied to creating such a site.

Importantly, this outlet provides the subscribing distributor the option of automating the system.  You can easily send broadcast messages out to other distributors, simultaneously search for multiple items or establish a “bargain hunting” list.  And, if you really want to resort to selling on the web, WarehouseTWO allows for uploading a “browser searchable” list that anyone can locate using Google (or Yahoo or something else). 

Finally, I have had conversations with a half dozen distributors already using this service.  They report great results and are quick to report the value is getting better every month.  Why?  More distributors joining the program.  One was quick to point out that nearly every new distributor that joins the network adds a few more new items to the inventory.  One distributor was so enthusiastic he asked me to get the word out to everyone.  Consider it done.  Check out WarehouseTWO at www.WarehouseTWO.com.