Selecting the right mill partner: Contractor's Corner: July 2016
By Dave Stafford
Adefining moment for your company and its future success may hinge on your selection of a mill partner to anchor your company within the local, regional or even national marketplace. It is that important! Choose the right one and doors will open for you. The wrong choice may set you up for a damaged reputation and failure.
An account of my own experience will illustrate what I mean. As a commercial dealer, we were searching for a company that had a national presence, a well-designed high quality product line, reasonable prices, an impeccable reputation, an astute local mill rep, and an interest in an exclusive long-term relationship for government contract work.
I talked with a number of companies. Some already had partners, while others lacked the commercial product line depth, viable pricing structure or interest beyond regional business. In many cases, the acid test was its reputation and the experience of the local mill rep. Also in play was the mill’s financial stability and willingness to commit to a long-term plan. The potential was millions of dollars in business over decades, not just a few thousand over the next year or so.
After months of talking, cajoling, investigating and rejection, we finally settled on one company that agreed to work with us exclusively for all government contract product sales. What was the defining moment? When their president signed a letter stating, “We will supply your company with products for the contract duration.” This was an enthusiastic agreement based on trust and integrity. From the senior territory mill rep throughout the mill hierarchy, everyone was on board.
At the outset of our quest for a government contract, and during the bid response and contract offer, there were numerous legal and logistical challenges. At one point, without the mill’s financial backing, a bid challenge could have resulted in outright rejection. Through it all, and the seemingly endless requests for information from the government’s contracting officer, mill support was there.
After a quest of some two years, a government contract was awarded to us and so began a mill partner relationship that spanned 20 years. The foundation for our government business niche was based on this specific government contract award and resulted in tens of millions of dollars in business, an excellent example of how picking the right mill partner—for a specific business segment—can result in success.
Now that you have an example of a relationship that worked, let’s review the steps to take when you attempt a similar venture.
Identify the niche and what you need to win. It is rare that a single mill will have the breadth of product line that allows it to be dominant in all commercial flooring areas. Look at what has been a winning combination for your competitors. Even better, what is missing from current offerings? Be specific. This is an area where the smallest details can determine the type of product and installation offering you should consider.
What range of products will you need, which product types are crucial, and which items will be the big sellers? How important are high-end designer products as compared with more mainstreet items? As carpet tile takes over more of the broadloom business, how strong will that area be for you? Is there a complementary soft and hard surface lineup that will allow you to offer the complete range of products and installation? Be realistic. Do you have the capabilities to offer a complete installation and service package, or are you lacking in key areas such as ceramic installation?
Do your research. Who are the big players in your regional market? Certain mills specialize in specific segments, and while they do a fine job with institutional clients, they are quite lacking in the major corporate arena and do not have a coordinated offering for the typical designer. “Yeah, they make good school products but they have a boring product line,” I heard from one designer. “I want something with more ‘now’ colors that will fit with window fashions and an upscale furniture offering. If that’s all you’ve got, then you’re wasting my time.”
Who will be selecting the products you will ultimately offer: a designer, architect, space planner or facilities manager? The former will be more concerned with a range of color and style options and the latter with functional value and budget. As one facilities chief expressed, “I don’t care about making a fashion statement. All I’ll get will be questions about how I spent too much money. I don’t want to be cutting edge on this project. I just need something fresh that will perform in my building.”
Who’s available in your market area? Not all mills maintain a strong presence in every market area, especially if you are in a non-metro location. Even if they have a well defined following, they may have already aligned themselves with one or more competitors and are not looking to expand their dealer network. In more than one case, I was in the unfortunate position of being viewed as a second tier dealer rather than a key dealer—not a good position to be in from a support or pricing perspective. Of course, you may not be told this directly; rather, their actions may just indicate this to you. In one frustrating experience, I was unable to get a return call or pricing in a timely manner. In another, I was told, “You’ll have to clear the mill credit department before I can give you project pricing.” A stall tactic, for sure, but it told me where I stood with that mill.
You may have to choose a supplier with a product line that is lacking in order to compete within a market, or use two complementary product lines from different divisions of the same mill parent. The other factor to keep in mind is that things do change. One highly regarded supplier we had pursued without success came calling because its “strong horse” hit a financial tangle and ended up bankrupt. The mill was scrambling to hold onto clients within the area because they had some high profile mill-specified projects and limited key dealer resources with a strong credit line.
Investigate the candidates. Perhaps you’ve narrowed your focus to several qualified suppliers. What are their reputations for quality in manufacturing, prompt claims processing, on-time delivery and local support? The last thing you need is lackadaisical follow-through when there is a problem.
I once had a real disaster with a school project when the designer-specified product could not be delivered. Three mills were contacted, given samples and specs, and asked, “Can you manufacture and deliver this product in a custom color within four weeks from order date?” One said, “Yep, we can most likely do it, but we will have to depend on the yarn supplier.” Another said, “Oh sure, no problem. But you do understand that this may require special shipping and add to the cost, and we cannot guarantee the ship date until the order is placed.” As you can imagine, I was not pleased with these answers.
Finally, I went to a third mill rep, explained the critical nature of the situation, the 9,000 yards of carpet required, and asked what he could do. “After your call, we will put the necessary yarn on hold, and we can have it in house and set up for tufting in plenty of time to make your date. Yes, we will guarantee shipment and can duplicate the color mix, since we are using the same yarn. If we have to send a truck at our expense, we will do it. Okay?” That was enough for me. They delivered as promised, and we installed, looking like heroes to the designer who had been sweating blood. Now that’s a valuable supplier.
Pin down pricing. How does the mill work with its rep in your territory, and will he or she be the main contact for all mill situations, including pricing, claims help, credit and logistics? Is the mill rep seasoned or a newbie? What is the rep’s reputation for consistent, fair, credible management of the territory? Will the rep return phone calls? Does the rep keep good records of project registration and keep control of pricing parameters?
More than a few mills with good products have been abysmal failures because they did not understand how to manage their dealer networks and set pricing levels. Most successful suppliers have pricing set up in various levels: dealer list price, program or key dealer pricing, and specified or project pricing. Critical questions to always ask include: How do you handle pricing for your line within the territory? Who sets this? Whom do I call for a price? Who will be sending me a price on a project, and may I expect some consideration for specification work done on your behalf?
This may be a short conversation when you hear (as I did more than once), “Oh, that’s really simple. We give all of our dealers in the area the same price. That makes it simple for everyone, and I don’t have to quote prices.” Or, “We have three dealers in your area, and all of you will have key dealer pricing. You can fight it out.” The best answer is, “Of course we value your work on our behalf, and that’s why we may establish project pricing on a case by case basis after considering project volume and other parameters.”
Make sure you fully understand how the mill and the mill rep plan to deal with pricing, and pin down the answers. Nothing beats exploring real-life situations and experiences others have had with a mill. “I didn’t win that project with Jerry and his mill, but at least he was honest with me and told me I didn’t qualify for project pricing, so I didn’t waste a lot of time.” Or, “Paul was a real snake. He made me wait for two days, twisting slowly in the wind, and then finally gave me ‘key pricing.’ What a lie that was. I looked ridiculous with my bid. The purchasing agent even asked if I was trying to get rich on this job.”
Can you make a deal? After all of the thinking, research and investigations are done, what will make sense for you and your top candidate? This is the time to see if an enthusiastic partnership can be put together. Have you discussed your long-term strategy and annual goals? How can this supplier help you achieve these objectives? What kind of volume can they expect from you? What support (or leads) can you anticipate from them? How will you structure this new partnership, and how will it be promoted both within the company and to the marketplace? How often will the success or lack thereof be evaluated, and how will progress be measured by both parties?
Is this to be an informal arrangement or a more formal one? The more formal the pact, the less likely either is to violate the terms of the deal. Overall integrity is a fundamental part, recognizing that there will be bumps along the way and mistakes will be made. Like in a marriage, communication is critical.
Get everyone on board. A coordinated approach with senior company personnel and key mill management is preferred. Underscore the importance of the deal and make sure everyone understands. For the new relationship to work, everyone must understand the goals and be walking in the same direction. I suggest regular team meetings and training with the new mill partner on products. It will also help when mill reps can bring in solid leads they have developed. A profitable job with support by the mill will do more to foster a great team relationship than all the meetings and talking.
Review and consider the next step. Sometimes it works and sometimes it doesn’t. Nothing is 100%, and once you realize you’re on the wrong path, reevaluate, have a candid conversation and regroup. “We’ve been at this for two years, and even with all of the money and time we’ve put into it, this is not working in our market.”
Know when to stop. It can be quite painful to admit a mistake. In one case, the problem was not with product performance or market acceptance, but rather with the liability issues surrounding delivery and installation. And there was potential for catastrophic damage to company reputation. As the country song says, “You’ve got to know when to hold ’em, know when to fold ’em.”
The right choice in a mill partner can help grow your company into a major entity. The wrong decision can lead to slow or no growth, or bankruptcy. It is that important. Choose wisely.
Copyright 2016 Floor Focus