Innovative technology and old-fashioned service give independents an advantage.
Just try telling Tom Tabor that direct-selling manufacturers have the upper hand in the forms industry. With today's innovative technology allowing distributors to tap into high-tech capabilities, while still maintaining custom-ized service, the attempt would be futile.
Said Tabor, vice president of Duluth, Georgia-based Data Supplies, "With the e-commerce applications that are available today, there is no account that is safe for a direct."
In the past, direct-selling manufacturers were able to wow customers with their large size and mass-producing machinery. Their ability to handle heftier accounts and eliminate the proverbial middleman was a seemingly attractive quality that set them apart from independent distributors and manufacturers. But what was once deemed by some to be a faster and easier process can actually be more of a hindrance than a help.
According to Tabor, directs can't keep up with the pace of today's ever-changing printing processes. And to make matters worse, they aren't able to provide the attentive service that independents have been honing for years.
"It's like trying to steer a battleship with a little rudder. There is so much steel on the floor and documents are changing at such a warp speed that directs just can't change fast enough," he said.
In addition, directs have the added pressure of answering to stock holders. This causes them to be more focused on revenues and less on client customization—a key solution customers are demanding.
As a result, said Tabor, independents have an opportunity to win accounts from directs. Currently, Data Supplies manufactures about 20 percent of what they sell. The remaining 80 percent is doled out to other independent manufacturers which makes it easier to accommodate clients' special requests.
Directs, however, don't have such flexibility. In fact, any job that is forced outside of a direct manufacturer's network results in a penalty to the salesperson.
Tony Kegowicz, corporate vice president, The Graphics Solutions Group, Glenview, Ill., (a division of North American Corporation of Illinois) knows all too well that major manufacturers are bound by a bureaucratic mindset. Having worked for a large manufacturer for 20 years, he can explain the directs' basic motivation.
"One of the main concerns of a major manufacturer is how to keep its lines running. Once orders run below a certain capacity it needs to find a way to make up the difference," he said. "Sometimes that means selling a product the customer doesn't need since directs lack the motivation to decrease consumption and change production."
Basically, added Kegowicz, the more pounds a direct manufacturer can put through, the better its overhead absorption is which greatly increases its profitability. Independents are free of such restrictions and, thus, a bigger asset to their customers.
Said Kegowicz, "As independent distributors we can more easily think out of the box and provide consulting services that ensure customers get the best value in the market place."
For example, when Graphics Solutions was approached by a large customer who needed to aggressively reduce costs, it searched for comparable items from competitors.
"By reviewing the weight and size of the product, we decided that products were over-specified at the customer's expense and we were able to reduce their cost by 25 percent," he noted. "Afterward, the customer told us that we are now the benchmark for any other vendor it uses."
It is not unusual for independents to go above and beyond typical protocol for customers. "Many times customers expect an independent to be narrower in the scope of products it can offer. That is why we bring them to our location," explained Kegowicz.
The first step is for an introduction between potential clients and the company to take place. This includes a facility tour with visits to the design services department, production and account management division. In addition, Graphics Solutions uses a consultative approach with clients to develop credibility. This involves reviewing new or existing customers' needs and deciding whether or not Graphics Solutions can help them.
Provide Alternatives
"We will come up with ideas on how to change some programs, like resizing labels or changing a form. And we won't hesitate to use laser-printed forms," said Kegowicz. "Some customers just need to set up their own e-file."
Such regard makes a difference when competing against directs for large accounts.
"We have taken over business from substantially sized majors in several situations. We got those accounts because of our expansive offering of products and services with special consideration given to us based upon our ability to provide consulting services," said Kegowicz.
Still, some customers maintain that independents are merely middlemen that only increase the time and money spent on a project. But this misconception can easily be squelched, said Kegowicz.
"In reality, the manufacturers have their own 'middlemen'. Their sales organizations need to be compensated and typically their costs to serve are high because they do not have the array of services and flexibility an independent has," Kegowicz noted. "They also have built-in costs in equipment and facilities that are, in many cases, obsolete."
Through internet utilization and multiple suppliers, however, independents have access to the newest and most technologically advanced equipment available.
Roger Kimps, president and CEO, SFI, Norfolk, Va., can't imagine operating without e-commerce these days. By harnessing the capabilities of the Internet, Kimps said independents are able to increase value and become real members of their clients' teams.
"With every new function the Internet offers, our customers can streamline their entire print purchasing programs," he said. Kimps added that through SFI's iGetSmart.com system, clients can get up to a 37 percent cost reduction overall as opposed to the five percent or 10 percent savings they could get by bidding a direct manufacturer.
Inherent Problems
Customers also get smoother operations. Although some large corporations may have felt that majors offered easier service, Kimps said such customers now recognize that there are inherent problems in dealing with several different direct manufacturers.
"Each major has its own sales person with an individual way of doing things and his or her own personal eye for quality. Majors also have their own equipment restraints, operations staff and procedures. "These specific quirks contribute to management hassles for the purchaser and increase the risk of inconsistency in product quality and image," noted Kimps.
In contrast, an independent provides a single contact who is available for clients throughout the entire process on every project. This develops a rapport and provides a predictable, well-honed working relationship and operating procedure.
There is no question the combination of e-commerce and quality service has been the driving force behind independents' success. According to Kimps, SFI's sales increased from $129 million to $196 million so far this year, with an anticipated $265 million in sales by year-end.
"Truth be told," said Kimps, "I imagine most direct manufacturers are intimidated by us."
By Sharon R. Cole