Feeling Their Pain

Welcome to the 21st century, an era of “trickle-down” economics. Your customers — commercial/institutional facility management departments and independent building service contractors — are hurting for budget dollars and business. Their economic woes are creating a throbbing headache for distributors faced with declining product demand and puny profit margins.

Misery loves company, and there seems to be a lot of it to go around these days all along the supply chain.

So, what to do about it? Ride it out and hope the markets you supply recover before you’re out of business? Or, think of ways to help customers weather the storm so both of you survive — and, once again, thrive down the road.

“For as long as I’ve been in the cleaning industry, the phrase was always that the cleaning industry was recession-proof,” says John Walker, president of Managemen and founder of Janitor University, based in Salt Lake City. “But for the first time I can remember, the cleaning organizations are actually suffering some type of setback or recession, and it’s big for a lot of them.”

One of Mid-American Building Maintenance’s biggest customers announced it was closing its doors last year — a big hit for the large cleaning contractor. On top of that, most other clients are downsizing, says Dick Ollek, president of the Wichita, Kan.-based company. There is simply less to clean.

Ollek’s company is not alone. Contractors and in-house staffs everywhere are facing revenue shortfalls due to labor and budget cutbacks, something that until now has been uncommon in this industry.

For customers, business is down and the cost of doing business on a smaller scale has, ironically, risen astronomically.

One $10-million end-user business saw a $1 million increase in insurance premiums due to worker’s compensation claims, says Walker. “Safety is a really big issue, sometimes bigger than productivity. Supply people don’t understand how much custodial operations are affected by safety.”

Other cleaning staffs are seeing their labor forces cut dramatically, sometimes by up to 40 percent. Doing more with less is the catch phrase of the day for struggling organizations.

As customer’s margins dwindle, they become more price conscious and aggressive in negotiating cleaning product and equipment prices with distributors. The good news is that this creates an opportunity for the distributor to make a difference in his customer’s world by suggesting ways to do things more efficiently and economically.

In fact, there has not been a better time for distributors to come to the bargaining table with a plethora of cures for whatever ails a customer’s operation. From inventory control to process enhancement to technical advice, distributors can make a noticeable impact on customer bottom lines.

Assessing Need
Cost-saving solutions can take on a number of forms depending on the customer’s particular circumstances. Distributors must spend time fact-finding to properly gauge the needs of their customers’ businesses before formulating a game plan.

Ollek’s company recently replaced its long-time distributor with one who came in, assessed the organization’s needs, and proposed a money-saving arrangement in which the distributor would take on the company’s inventory management duties, thus reducing cost.

“[Our distributor] actually comes into our corporate warehouse, takes our inventory, puts the order in and delivers it the next day. He’s become another warehouse person for us,” says Ollek, who buys 90 percent of his supplies through distribution. “I no longer have the full-time warehouse person who I was paying over $30,000 a year. We immediately saved one warehouse salary.”

Inventory is one good place for ambitious distributors to look when it comes to uncovering ways to save customers money.

P.B. Gast & Sons of Grand Rapids, Mich., has had much success with providing inventory management services to its customers.

“We have a number of customers where we manage their inventory,” says Fritz Gast, the company’s president. Rather than the customer paying for its own on-site inventory, the distributor owns the facility’s inventory instead, even though it’s housed on the customers’ premises. Gast’s company tabulates usage every two weeks and bills the customer for what needs to be replaced.

“They’re on a true pay-as-you-go basis,” he says. “They don’t pay for product until they use it.” Gast says it gives customers a cash-flow advantage they value in tough times, and it dissuades them from “panic-buying,” a phenomena that adds cost in the way of tacked-on delivery charges.

Chuck Holmes, president of Corporate Strategies Inc., an Atlanta-based consulting firm, recalls one distributor whose customer came to him, skeptical that the distributor could satisfy the edict that had been passed on to the custodial department to reduce its budget by 5 percent. “We took 10 percent off their bottom line by managing their inventory for them. Those extra services can solidify a relationship.”

Technical Know-How
Technical expertise in the area of equipment or product application is another highly prized benefit provided by a good distributor, according to end-user customers SM spoke with.

“We run into quite a few different kinds of tiles and flooring, and we call our distributor and say meet us here at 6 p.m.,” when a cleaning situation poses a challenge, Ollek says. “I cannot think of one time they haven’t joined us, and they stay until it’s over.” A willingness to help customers on nights, weekends — whenever — is extremely valuable to end-customer organizations.

Customers also look to distributors for special products and unique solutions to cleaning challenges.

“The most important thing a distributor can do for me is to be knowledgeable about what new products are around,” says the president of one Hackensack, N.J.-based BSC. “They must do research to find out what’s new and what works and get it to me.”

Product knowledge should also spill over into cleaning processes and product application, says Holmes.

It requires salespeople to take a little different approach and learn about how the customer is using the products, Holmes says. If a distributor can cut extraneous costs related to product usage, they will be perceived as a valuable partner, he adds.

“If you can cut some of the time required to do their jobs, or some of the cost of the product required — then make sure they recognize that you’ve done that — you become a valuable partner,” he adds.

Insightful strategies for solving customer problems are what the Hackensack-based BSC values from its distributors. That, and a cooperative customer-service ethic. This type of specialized service often must extend above and beyond what most distributors provide.

“All of the suppliers will give you good service — they’ll deliver it in the trunk of their car if they have to,” says the company’s president. But not all distributors can bring effective cost-saving ideas to the table, he adds.

“We had a situation with a customer who had carpet that we could not get clean, and we had this stupid vendor saying try this chemical and that chemical, which we did because we were desperate. Then we had a smart vendor who got the chemist from the company to come over, and the chemist said it couldn’t be done. The answer was to cut our losses,” he explains. The BSC could have saved itself a lot of time if it would have gotten the correct answer the first time around.

And time, as always, is money for cleaning organizations.

“If you’re a sanitary supply distributor or wholesaler and you go out and help your customer save money, you’ll be recognized. This buys loyalty,” Holmes says.

Gast’s company also approaches its customers to suggest workloading and accountability standards to lessen labor costs.

“It’s amazing how many people don’t have any idea what should be done in a particular time frame,” he says. Though references that list standard cleaning times have been available for some time through the International Sanitary Supply Association (ISSA) and other sources, customers value distributors who can show them where to save.

One purchasing manager for the township of Westwood, N.J., said he went to his distributor with the requirements of a huge job he was charged with completing — the stripping and refinishing of 15,000 square feet of flooring. The distributor was able to recommend a contractor who saved the municipality $2,500 in labor and product over other contractors. It was a service for which the customer was very appreciative.

End-user customers consider customer or tenant referrals from their distsributors an invaluable “freebie” and a big cost-saver during times when they are watching every penny.

Don’t Do A Disservice
Any shortcomings in a distributor’s service menu become more blatant during tough times and can cost business. Ollek’s company had worked with its former distributor for years, but began to question the company’s commitment to their relationship. Missed meetings, broken promises and lack of support made changing distributors an easy decision. Price was never the issue, Ollek notes. “We needed service, delivery and training. Price never entered the equation.”

As customers struggle with their finances, distributors must be aware of extenuating circumstances, too. Late payments should generally be handled on a case-by-case basis.

“People have lost customers based on how they treated them during difficult times,” says Holmes. “We need to be careful in bad times that we stay close to customers so we know how to help them out.” For example, Holmes says accounts-receivable personnel have the ability to inadvertently “fire” late-paying customers with rude behavior or unbending policies. Holmes recalls one distributor who lost a customer over a disputed $17.

“People are given policies and are told to defend them with their life, but they don’t always work because they can cost you good customers,” he warns.

What Comprises Cost
A greater understanding of what defines “price” gives cost-conscious customers a certain peace of mind with regard to what they’re spending.

Ollek’s distributor goes out of his way to explain all the aspects of total product cost, he says. “They tell us the margin they need and help us understand delivery costs and things like that.”

Negotiation is part of this process. For example, one of Ollek’s customers was located 80 miles outside the city and his distributor was delivering to the location free of charge. After three or four months, the distributor came back to Ollek and said it couldn’t continue to absorb those transportation expenses. The two companies struck a deal — they split the delivery cost.

It’s that type of cooperation that makes relationships work, he says. It works both ways, as well. Ollek recently questioned the markup his distributor was making on a new paper line his company took on. “I said what do I need to do from my perspective to get the price down?” The distributor explained that the markup was reliant on quantity, so Ollek upped his order sizes and lowered his price. It’s all about clear communication.

Communication and a strong empathy regarding current end users’ issues and challenges will position distributors to survive — with their customers — during the hard times. Customers have a long memory — working with them now is good medicine for business down the road.