A recurring accusation by contractors against certain wholesalers has to do with ordering mistakes in the wholesaler's favor. Some wholesalers, contractors have told me over and over, repeatedly pad invoices with items not ordered, or they short the contractor on the delivery end. Besides being cheated, contractors complain that distrust forces them to spend more time than they ought to checking each order for accuracy, and then getting the supply house to correct mistakes.
The world being what it is, I'm willing to believe that some small percentage of wholesalers descend to such sleazy business practices, but I can't believe it's widespread. I suspect that most order foul-ups are unintentional, and as likely to be in the customer's favor as the supplier's. The world being what it is, I think many contractors tend to remember quite vividly the mistakes that go against them but forget the times they picked up some extra elbows and tees at the wholesaler's expense.
Sort through all the finger pointing and the real issue comes into focus. That is, whether paper or electronic transactions, the entire industry suffers from too many mistakes. It happens with transactions between vendors and wholesalers, vendors and reps, reps and wholesalers, wholesalers and their customers, and between those customers and their customers. A mistake at any step then reverberates throughout the supply chain.
Some revealing data just came out detailing this not so funny comedy of errors. It focused on electronic transactions in the electrical industry between manufacturers and distributors, but the patterns uncovered almost certainly apply just as well to first step of distribution in the PHCP industry. In fact, one of the participants in the study was Hughes Supply, which is a big player in electrical distribution as well as the PHCP side.
The study is titled “The Cost of Unsynchronized Product and Pricing Data.” It was conducted by the Industry Data Exchange Association (IDEA), a for-profit e-commerce service provider combining resources from the electrical manufacturers and distributors associations.
IDEA examined almost 74,000 unique UPC records submitted by 10 manufacturers and eight distributors participating in the study. The purpose was to find the degree to which manufacturer data matches distributor data. Results:
-- 5% of the records matched between the manufacturer and distributor on all fields.
-- 21% of the records matched between the manufacturer and the distributor on UPC, but were null (blank or zero) on one or more fields, i.e., part number, minimum quantity, price and units of measure.
-- 22% of the records matched between the manufacturer and distributor on UPC, but mismatched on one or more fields.
-- 40% of the records were found only in the manufacturer data files.
-- 12% of the records were found only in the distributor data files.
Reasons for the data disparities were:
-- 25% resulted from mismatched catalog numbers.
-- 5% from mismatched minimum pack quantities and units of measure.
-- 10% from distributor price and units of measure.
-- 20% from trade price and units of measure.
-- Significantly, 60% of the total items were mismatched in critical order data and invoice fields.
Some 30,000 items were in the manufacturers' systems, but not in the distributors' systems. These items were therefore not visible by the distributors and thus potentially a source of lost sales.
More than 8,700 items were only in the distributors' systems. These would be a major source of transaction errors caused when distributors attempted to order products that don't exist in the manufacturers systems. This would lead to time-consuming manual intervention at either end on purchase orders and invoices.
Costs attributed to all these errors were estimated by IDEA to be about 1% of sales for manufacturers and about .75% for distributors. In the PHCP industry, that would eat up about a third of all the profit dollars for the average wholesaler. The dollar losses range from $73,000 for a $10 million distributor to $1.46 million for a $200 million firm - even more for manufacturers.
The IDEA study served as ammo for people in the electrical distribution field urging manufacturers to participate in the Industry Data Warehouse project. That is an attempt in the electrical distribution field to establish common numbering and other data parameters to facilitate e-commerce. It has parallels to what ASA has been promoting for the last several years with its Industry Database project. The electrical industry study shows firms that choose to stay aloof from a common database pay for it in the form of order processing errors, invoice adjustments, extended billing, invoice aging and product returns.
To learn more about ASA's database project, contact Kevin Price at kprice@asa.net or 800-608-7308 or visit: www.asaidb.com.
