WESCO Distribution Inc.

By:

Deepak Chavan
Y.Sreenivasa Reddy
Praveen Katiyar
 Start up
 Founded in 1922, as the distribution arm of Westinghouse
 After disappointing performance in the early 1990s, sold to the
investment company of Clayton, Dubilier & Rice (CD&R), in
1994
 Roy Haler taken over as CEO and rebounded the revenue to
$2.2 bn, became third largest distributor in EES (Electrical
eqpt. and supplies) in USA by 1996 globally

 Suppliers :
- have strong ties with over 150 suppliers
- majors–Cutler-Hammer, Thomas & Betts, Philips and Leviton
- Suppliers make only part of customers total EES
requirements, cannot deal with small volumes and unable to
add value at all stages of the sales process
Products:
 Primarily electrical products, MRO (maintenance,
repair and operating) Supplies, and supplies for
industrial Original Equipment Manufacturers (OEM’s):

 Electrical Supplies – fuses, terminals, connectors

 Industrial Supplies – cutting and other tools, safety
equipment, etc.
 Distribution – circuit breakers, transformers, etc.
 Lighting
 Wire and Conduit
 Control, Automation & Motors
 Data Communications – premise wiring, patch
panels, etc.
 Cont…
Customers: Segmented

1. Electrical Contractors
 $17.9bn total business of which WESCO gained $465mn in
1996. Referred to as ‘bid-to-quote’. Transactional in nature
 Installs lightning and electrical systems for construction
projects. Preference will be given to timely delivery of supplies

2.
Industrial Customers
 $1bn in 1996 & expected to grow
 Maintenance, Repair and Operations (MRO) is main
 Serving segments include utility, manufactured structures,
pulp and paper, lumber, petrochemical, mining and metals and
Transportation
 Collaborative in nature and look for long-term contracts
3. Commercial, Industrial and Govt. (CIG)
 $148 mn sales – include hotels, motels, hospitals,
universities and institutional customers

Competitors:

1. National Chains – 5 Competitors - placed third in sales

2. Regional Chains – 8 competitors
3. Full line Distributors – Sales ranging from $20-$200
million – 250 Local Distributors
4. Full line Distributors – Sales ranging from $0-$20 million
5. Specialty Distributors
6. Others - Retail generalists
Major Competitors
 WESCO Selling story

Customer works with Customer does not

WESCO on next value creation recognize need or opportunity

Value is created,
Recognizes Customer
demonstrated and
need or opportunity
documented mutually

Customer Commitment Customer recognizes

towards WESCO value & decide to act

Ensures that customer

identifies WESCO as
potential solution
Branch Office Organization

 Has 279 branches in US

 Maintains own inventory and own P&L responsibility.
 Substantial autonomy in its own territory
 Marjory serves customers in a specific industry
 1 branch manager, 4 outside sales reps, 4 inside sales
reps, 1 warehouse specialist and 1 administrative officer
 Outside sales reps acquire customers, while inside sales
reps ensure their retention
 Disadvantage of serving narrower customer base and
cooperation between branches is limited
Trends in the EES industry in 1980s & early 1990s

 Examining the procurement costs, improve supply chain

efficiency, reduced inventory, long-term collaborative JIT
contracts
 Some customers still prefer old ways and are resist to
change

Total Procurement Cost

Cost of Acquiring the product Cost of Handling the product

Requisitions, negotiations, issuing POs, Inventory control, taxes,
Cost of Product itself
Receive materials, invoices handling, Insurance, Depreciation,
Accounts payable records, distribute Obsolescence, storage area
WESCO National Account Program

 Significant savings for both customers and WESCO by

establishing long-term contracts, started in mid 1995
 Customers will receive competitive, year-long, national
pricing regardless of volume
 Major contracts are product driven and minimal value
added services and 80% are just for lamps
 By 1997, there were 300 customers
 Based on sales volume & commitment, customers are
classified into 3 groups – Key, Focus and others
 18 National Account Managers (NAM) across the country
 Each complement 10 to 15 customers plus 15 to 20
prospects
 Local Sales Reps are assigned to look at local level
Building NA Agreements
 NAMs called the customers of high potential / Prospects
 Presentations are made at Corporate level on Total cost of
ownership, inventory reduction, emergency Service
 ‘ An average MRO order from an Industrial customer ranges
from $135 and the processing of an order takes $150’
 When the prospect shows interest, then NAMs moved to
local level and presentations are made to DMs
 NAM become part of National Implementation Team (NIT)
travels to the customer site for finalizing contract
 Meet with Local Implementation Teams (LIT) and
implementation of program starts
 Getting customer visits by NIT after implementation
Success story & Integrated Supply
 Reduce the Inventory costs, energy costs and procurement
costs by EDI at entire customer local plants
 Acquiring 2 local distributor branches and opening a new
branch to serve customer better
 Sales has increased tenfold and reached $1 mn/month
 WESCO was able to document 20% cost savings to the
customer, far more than expected
 For most of the customers, 70% of the annual
procurement budget is accounted by top 5 – 10 suppliers
 The purchase dollar volumes and effort makes customers to
go beyond Transactional, and focus on TCO
 Commitment to change from the top management is vital
 Customers are demanding to form Supplier tiers
 NA Customers/prospects as us to take up different business
Analysis – What should WESCO do?
 A proactive approach in managing the NA program
would definitely fulfill the company’s visions of becoming
a $ 3 billion company with an average EBIT of over 5%
by the year 2000 (from its 1996 figures   of $ 2.2 billion
company with an EBIT of around 3%.)
 Though the current position was not conducive to
continue the program further, because the company was
already at a loss of complete 2% in their revenue as
compared in the previous year, still looking towards a
long term prospective this program can gain higher
margins if a planned strategy and proper segmentation
of customers is created by the management
 Effectively managing the sales team is also essential for
the management because a substantial amount of cost is
incurred in maintaining this force
 Proper training is to be given to NAMs and Sales Reps
 Analysis – What should WESCO do?
 Should continue and coordinate MRO procurement and
materials management activities across multiple locations for
industry-leading industrial and commercial companies
 Individual roles and responsibilities may vary, but it's a sure
bet you and your company have a number of things in common
with WESCO's other national customers. You want leverage.
Leverage gained through a well-coordinated, national program
that delivers:
 A uniform, competitive price across all locations
 National programs combined with local service and support
 Knowledgeable people and effective processes for nationwide
contract administration, opportunity identification, and problem
resolution
 e-Procurement readiness and leading-edge technologies
 Rapid, effective implementation
 Documented cost savings, year after year
Analysis – What should WESCO do?
 WESCO's Value-Add Services leverage every possible
cost savings opportunity to add to your bottom line.
 Lighting Audits/Energy Audits for energy savings
 Consignment Services for reduction of inventory costs
 Electronic Procurement for reduced transaction costs
 Buying Power for uniform competitive pricing at all
locations
 Proxy Distribution Network for reduced supply chain
management costs
 Customer Inventory Management for increased
productivity and reduced maintenance
 Application Engineering for product quality
improvements
 Training Services for increased productivity
Analysis – What should WESCO do?
 Customer-based activity levels – as measured by order
processing, delivery and invoicing transactions – declined
 Although order volume and the workload associated with
processing, picking, packing, and shipping remained nearly
constant, the revenue value per transaction declined, as
customers drove down inventories and conserved cash
through reductions in capital spending
 Restructuring of the distribution network to be done and
more number of new branches to be acquired/installed
 Should also make use e-procurement with suppliers and
Online shopping tools for customers to get globally