Wesco Distribution: National Account Management

Wesco Distribution
Wesco Distribution, Inc. is USA’s third largest full-line wholesale distributor of electrical construction products,
electrical & industrial maintenance, repair and operating (MRO) supplies. The USP for Wesco is that the
company specializes in helping customers lower the supply chain costs, improve efficiencies, and act as one stop
access to all kinds of electrical equipment and supplies.

Wesco primarily serves three types of customers: Electrical Contractors, Industrial Customers & Government
(CIG) institutions. In order to nurture long term business relationships and to move from single site, single
product to multisite, multiproduct relationship, WESCO has launched the National account program (NAP).

This analysis evaluates the current status of NAP, to identify any improvements that can be made to the current
processes and finally summarize the recommendations to take the NA program to next level of growth and
profitability.

National Account Program (NAP)

The NAP is designed to serve large high potential customers with the USP that large contracts could mean
significant savings for both customers and WESCO.

Evaluation of NA Program
a) High Growth & Profitability potential
Exhibits 1 and 2 clearly indicate that the Industrial segments are in a growth phase and the concept of NAP
to nurture long term business relationship with large customers is a good strategy to capture the national
level electric supply/distributor business (High Customer Value Index and Projected revenues of approx. USD
1.82 Billion). However the inefficiencies in the current program’s processes hamper profitability.

b) Agreement / Contracts
The current NA contracts award customers competitive, year-long national pricing and servicing regardless
of sales volume. This strategy of no restriction on the minimal sales volume has proved counterproductive as
most of the customers restricted themselves to individual products and the profitability is being eroded due
to the demands of the service not commensurate with the sales volume.

c) Customer Noncompliance to the contract

Many customers, including the Key accounts do not have total compliance and fall short of the total
implementation of multi product and multi-site relationships. Due to this, NA program is unable to scale to
serving the national level EES needs of the customers. The non-exclusive, product only accounts make a

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significant amount of current NA accounts. These make a significant dent on the potential profitability of the
program. The revenues are constrained to the individual product segments.

d) Poor Alignment between Customer’s Corporate and Local Interests

Though the NA customers have an agreement at the corporate level, some of their local plants are reluctant
to abandon the local distributors due to strong relationships. Thus in many accounts, NA program has not
managed to bridge the gap between the customer’s local plant personnel and WESCO’s branch sales reps.
This has resulted in improper implementation of the initiatives, thus leading to high costs and lower
margins.

e) Issues with the approach of local sales reps

The local sales reps seek reward through constant pursuit of new opportunities, without focusing on the
advantages of building and maintaining the relationships with the local branches of NA customers. This
results in the local customers preferring the regional chains and local distributors while looking for new
products and services.

Recommendations
1. Integrated Information and Logistics Management.
While serving new NA customers, WESCO should leverage its operational experiences with other NA
customers in the similar segment. This is possible only when there is an integrated database management
system across all the NA programs. Having a one stop source for the data related to all the customer
projects would enable WESCO to implement end-end logistics management capabilities along with inventory
visibility across all the locations. Leveraging the past experiences and inventory optimization would reduce
the operating costs thereby increasing WESCO’s profitability.

2. Commission Payments need to be appropriately restructured.

Currently both NAMs and local Branch managers/Sales Reps are paid commissions for the sales volume.
Having same incentives at all levels mean that some of the sales reps and NAMs may rely upon each other
while pursuing deals at local levels. Instead the commission structure should be modified in a way that the
NAMs have their majority KPIs centered around profitability where as Sales Reps have their incentives based
on the sales volume. This would mean that NAMs will work on the customer contracts not only on the basis
of sales volumes but also focus on profitability aspects.

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3. Involvement of Branch Managers in all stages of NA Program.

The NA Managers form key personnel in taking up the program to the next level. In the current process,
NAMs are too involved with every phase of the project (from the prospect to maintenance phase), thereby
getting limited scope and time to build the relationships at local level. The case points out that some of the
key skills at the NAM level can be effectively tackled by local branch managers also. Thus it is imperative that
the Branch Managers take part in the customer interactions at the plant level as early as from the active
sales phase. This leads to the lesser involvement of NAMs in the later implementation phases. This enables
NAMs to channelize their efforts to build the relationships at local level.

4. Distribution Channel Restructuring

5. Educating NA Customers in implementing collaborative processes & inventory reduction programs

6. Alliance strategy with local distributors & Electric contractors

The regional chains and local distributors have strong relationships with major customers at local level and
WESCO needs to seek partnerships and alliances with the local players in order to make inroads in the local
channels. The alliance method should not be looked as a threat to WESCO’s expansion plans, instead, as an
opportunity to work with various competitors and partners (Electric Contractors, Regional Chains, and Local
Distributors) at various stages of the interaction with NA customers. As customers seek to reduce the total
cost of procurement, WESCO is in the best position to take leadership role within the alliance and establish
itself as a trusted tier 1 supplier/distributor who can steer other alliance partners during different phases by
managing and monitoring different small suppliers and contractors. This means that WESCO has clear
understanding with the different partners as which activities they would not be competing; thus alleviating
threat to partners like electric contractors.

7. Be more selective in pursuing NA customers; evaluate potential customers for a good fit at the national
and local level.
A scaled down version of the NA can be implemented for customers who are not a good fit for the NAP
encourage.

8. Use NA/RA strategy for some of the larger Government orders as well.