The Productivity People
DGI Supply discovers that cost savings sometimes come in surprising places
by Rich Vurva
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| Senior vice president David Crawford says DGI Supply is recognized as "the productivity people, focused on saving customers money." |
Distributor account managers who are determined to look for new ways to help customers lower their costs sometimes find examples in surprising places. That's what happened to Mike Schnell, an integrated account manager for DGI Supply, who works out of a Trane plant in LaCrosse, Wis. While reviewing a spreadsheet that summarized Trane's top spending categories, Schnell noticed that the facility spent thousands of dollars each year on those little battery-charged chemical gel packs used in
restrooms, break rooms and office areas.
Schnell searched for an alternative product and located a 100 percent recyclable wick-style air freshener that lasts for 60 days instead of 30, and requires no batteries, making it better for the environment.
"It seems kind of goofy," admits Schnell, who more often works on projects to improve throughput, shorten cycle time or reduce stock outages.
Goofy or not, his suggestion resulted in serious dollar savings. The new room deodorizer generated nearly $9,000 in savings for the maker of heating, ventilation and air conditioning systems.
For the first nine months of 2010, the Wheeling, Ill.-based distribution arm of the DoALL Company accumulated more than $7.2 million in pending or approved documented savings for customers. That was up from the $6.3 million in savings generated the year before, which earned DGI Supply the 2010 American Eagle Value-Added Distributor Award from the Industrial Supply Association. In order to receive the award, a company must demonstrate its ability to generate exceptional documented cost savings or productivity improvements for customers.
A need arises
"Since 1927, DoALL/DGI has been known as the productivity people. Today, we call ourselves the productivity people focused on saving our customers money," says senior vice president David Crawford.
Crawford says that while DGI Supply always had a passion for increasing customer productivity, the effort escalated at the height of the recession, when many customers were fighting for survival. They depended upon suppliers to identify ways to reduce unit price, lower consumption, reduce inventory, shrinkage, freight charges and uncover other ways to help them save money. Often, saving money meant saving jobs.
"The largest obstacle we had to overcome with our account managers was the tendency to sell a product, not a cost-savings solution," says Crawford. "So we started asking for assignments that would lower cost and increase productivity. We'd inquire on what product, process or activity was causing our customer's pain, and we'd work on a solution that would relieve the pain and lower their overall cost."
To reinforce the effort, DGI Supply changed its compensation plan to reward account managers for documenting cost savings, and created a monthly bonus and recognition plan for associates that produce the most savings.
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| Chief operating officer Bill Henricks says the Web-based Productivity Form is a useful sales tool. |
Tracking progress
In 2009, DGI Supply documented 988 individual projects. The company tracks the projects in a Web-based Productivity Form that can be accessed by any of the firm's 100 account managers located in 45 sales offices throughout the United States, Canada and Mexico.
The form makes it easier for account managers and inside salespeople to record activities and tally total dollars saved. The online form groups savings by category.
Level 1 includes hard dollar savings such as a lower unit price, reduced insurance costs, decreased consumption
Level 2 covers cost avoidance, which might occur when a new product that completes both a roughing and finishing operation eliminates the need to buy a second machine tool
Level 3 consists of productivity savings, such as reduced labor hours or machining time
Account managers can export the data from the Productivity Form into Excel spreadsheets or export raw data for PowerPoint presentations to be given to customers. In some cases, customers may even log in themselves to track progress on specific projects.
The Productivity Form is useful for client retention and as a selling tool, says chief operating officer Bill Henricks. "We have to show the value we bring to our clients year over year. This is a mechanism for us to document our value," he says. Henricks adds that salespeople are becoming more adept at using the system to find out how other account managers have saved money for customers.
"As a salesman, suppose I have a customer that is a mold manufacturer," he says. "I can log in and find out what my peers are doing with other mold manufacturers across the country."
Some savings are relatively easy to uncover and quick to implement, such as when DGI Supply offers a lower unit price on an item that a customer previously purchased from a high-priced catalog.
Other projects can take weeks or months to finalize because they involve coordinating test runs and meetings with multiple supplier reps, plant engineers, machine operators and other personnel. For example, a current pending project started out as an effort to improve chip control in a machining operation where long, stringy metal shavings were clogging the chip conveyors. A new insert will provide better chip control and also replace six inserts with one and combine finishing operations into a single step, which will greatly reduce machine time.
"That project has to be approved by the lead engineer. We need to test products to make sure they meet quality requirements. The testing cycle takes time to complete," says Schnell. Once all of the test data are confirmed, the project could save $60,000 and possibly more if it can be rolled out to other production areas within the plant.
Overcoming barriers
Arming account managers with documented cost savings often opens doors, Crawford says. Some salespeople who typically deal with a shop supervisor or purchasing agent may have difficulty gaining an audience with a plant manager or other high-level executive who is more concerned about the total financial impact a supplier can make than a lower-level employee might be.
"When you can bring in a report that shows what projects you're working on and the estimated cost savings of those projects, you're going to get additional attention inside that facility," he says.
If a machine operator balks at implementing a change because he has a personal preference for a specific tool brand, the plant manager can quickly overcome that
objection if he's given proof of plant-wide cost savings that can be realized by standardizing on a single solution.
The Productivity Form also lists the name of plant personnel who initiated or approved each cost savings project, which elevates that employee's status with his or her supervisors. Employees who earn accolades from their boss for overseeing a project that saved the company money are usually eager to assign a new cost-savings project to DGI Supply.
Henricks says productivity solutions that DGI Supply recommends often satisfy lean manufacturing efforts and Six Sigma projects that many customers are trying to implement today. As of one of the nation's largest distributors of AutoCrib industrial vending solutions, DGI Supply has installed a variety of inventory dispensing systems that enable companies to dispense supplies at point of use and also gain better inventory control. A vending solution installed at one Texas manufacturing facility helped the company reduce its consumption of gloves and other personal protective products by 40 percent.
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| A trailer outfitted with industrial vending tools has shortened the sales cycle. |
The company has outfitted a trailer with a variety of AutoCrib vending solutions that salespeople haul to customers and prospects for onsite demonstrations. The side of the trailer features photos of vending machines and logos of major suppliers with the slogan, "Get lean with DGI Supply."
"The trailer has helped shorten the time to close the sale on inventory control agreements," says Crawford.
He adds that more customers now look forward to seeing the DGI Supply account managers come to their manufacturing facilities. "They know that our team wants to do more than sell them a product. They want to be part of the team that saves their company money, improves their profits and saves jobs," he says.
This article originally appeared in the Nov./Dec. 2010 issue of Industrial Supply magazine. Copyright 2010, Direct Business Media.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
