Accella explains why distribution is a winning business model.
By Jen KramerIn the spray polyurethane foam industry, there is a time-honored business model that is a winning proposition for both the contractor and the manufacturer: Distribution. It is practiced in other industries to great success. For example, in the industrial coatings industry, distribution companies such as Single Source and PolyOne both command multi-billion dollar market shares by servicing the market in a cost-effective manner.
Often, however, the term “distribution” is misunderstood. Contractors often ask, “Why should I pay a middle man when I can go directly to the manufacturer?” Good question – especially given all the confusion. Here, then, are the reasons why distribution is a proven path to success for everyone involved.
Imagine that you are a contractor located on the West Coast. You need to order some foam from a manufacturer on the East Coast. Fine. Say that you have to place a small order – only two or three sets – because the project at hand is small and you have no bids out for this type of foam in the future. Can you imagine the freight costs? If you do bite the bullet and place a larger order to justify your costs, do you have the location to properly store the drums?
What if you run into a problem on the jobsite? Is there a local manufacturer’s representative who can be there within minutes? Or are you on the phone / Skype with someone on the East Coast? If your job is on the West Coast and you run out of product after hours on the East Coast, hopefully the manufacturer’s representative has some product properly stored for you, otherwise you’re done for that day, and probably the next too, while you wait for it to ship – and pay those freight costs.
Granted, these are all extreme scenarios, but they are rooted in truth.
As a contractor, when you work with a distributor, instead of “going directly through the manufacturer,” you enjoy an array of services that manufacturers simply cannot provide due to physical and geographic constraints.
Further, the distributor has been thoroughly vetted by the manufacturer – most manufacturers routinely audit and test their distributors for product knowledge, storage conditions, etc. Working with a distributor is, in essence, working with an extension of the manufacturer.
Because distributors are required by the manufacturer to know the product specifications, they are essentially manufacturer’s representatives.
WHAT IS THE “IDEAL DISTRIBUTOR?”
Imagine you’re that West Coast contractor. The ideal distributor not only sells spray polyurethane foam from a variety of manufacturers, but also probably stocks fiberglass and cellulose, which is helpful as that is part of your insulation package from time-to-time.
The ideal distributor is not only located in your town, but the distribution center is fully, and properly, stocked. The foam is stored at the correct temperature. Out-of-date material is not stocked. Since the distributor is local, if you have a question or a problem, the distributor is right there – in your time zone – often on your job site if requested. Distributors provide customized service at a level that manufacturers simply cannot.
Because they are required by the manufacturer to stock a certain amount of product, and to keep it in proper conditions, distributors are constant sources of product – almost like spray polyurethane foam super stores.
Further, because they are required by the manufacturer to know the product specifications, they are essentially manufacturer’s representatives. If the foam isn’t spraying properly, the distributor is right there to help with the technical advice and replace the foam if necessary.
The ideal distributor will often take this wealth of product knowledge a step further, combining it with their physical space, and offer industry training at their facility.
In short, working with a distributor, is a one-stop-shop. It is designed to increase your efficiency and improve your bottom line.
The distribution model is a sales force multiplier. As previously mentioned, multi-billion dollar companies across a variety of industries practice this technique to increase their opportunities. But why would a company move to the distribution model?
Imagine you are that East Coast SPF manufacturer in our scenario. The contractor on the West Coast ordering two or three sets of foam is as important to you as the contractor who orders truckloads, right? Having a West Coast distributor will ensure that the contractor gets his foam when he needs it. The ability to decrease delivery time isn’t the only benefit that distribution brings to manufacturers.
Distribution increases individual order sizes. That West Coast contractor may only be ordering two or three sets of foam, but the stocking distributor will be contractually obligated to maintain a pre-determined amount of foam on hand, at all times. Some manufacturers permit distributors to return unsold stock. Some do not.
Distribution increases sales force numbers – without increasing overhead. Acting essentially as the manufacturer’s representative, the West Coast distributor is selling the product. But so too is his counterpart in the Midwest. And in the Gulf Coast. And wherever else your product is in demand. Also, since these distributors are stocking your product (which has a shelf-life) in their warehouses (which have limited shelf space), it is in the distributors’ best interest to actively pursue new business to move product. In this manner, the distributors’ staff becomes the manufacturer’s sales force. The only real cost to you, the manufacturer, is initial effort / training and quarterly audits.
All of this allows you, the manufacturer, to focus on what you do best – manufacturing. If you are focused on your strength, rather than bogged down in logistics, you will be able to more readily develop new products, pursue new areas of expertise, and make more product. In short, distribution will increase your efficiency and add to your bottom line.
Distribution is a winning business model and a proven strategy that works – for both manufacturers and contractors alike.
If you would like to learn more about distribution and how it can make you more efficient, and ultimately more profitable, contact Accella Polyurethane Systems, LLC. They have a long track record of success with the distribution model and are proof that distribution works. •
Contact Accella Polyurethane Systems, LLC
Direct any questions about distribution to Accella Polyurethane Systems, LLC:
Photos Courtesy of Accella Polyurethane Systems, LLC
*Spray Foam Magazine does not take editorial positions on particular issues; individual contributions to the magazine express the opinions of discrete authors unless explicitly labeled or otherwise stated. The inclusion of a particular piece in the magazine does not mean that individual staff members or editors concur with the editorial positions represented therein.