Technology Benchmarking Survey

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ELECTRICAL DISTRIBUTORS

NAED

Executive Summary

Technology

Benchmarking Survey

This Technology Benchmarking Study was the brainchild of NAED’s South Central Region Council. The objectives of the study were: Benchmark technology implementation; Identify technology issues and challenges electrical distributors face; and Identify areas where NAED can facilitate improvement.

The study requested distributor executive input on the following topics:

• Technology Priorities, Challenges, and Opportunities

• Website Functionality

• E-Commerce Capabilities

• Adoption of Mobile Devices/Technology

• Back Office Technology Implementation

This study creates a baseline of the status of technology adoption in the electrical industry in a format that can be used as an on-going industry benchmark. It allows individual electrical distributors to evaluate where they are today, develop a roadmap to world-class performance, and benchmark progress. In addition, a task force of volunteer distributors will use the results to build an awareness of technology issues so the industry is up-to-date on these issues, while allowing individual distribu-tors to leverage their own unique competitive advantages.

What are the industry’s greatest technology challenges? Data dominates the list. Of the 94.2% of respondents with websites, only a select few of-fer the E-Commerce functionality available at competitive B2B websites, such as Grainger.com. While Smartphones and tablet computers offer new opportunities to “connect” with customers, only 50.7% of respondents rated employee expectations that the workplace keep pace with the latest

Table of

Top Technology Concerns 2

Methodology 2

Participants 2

Data & IT Roadmap

3 Website Functionality 4

E-Commerce

Functionality 5

Mobile Devices/

Technology 6

Social Outposts

7

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methodology

The data contained in this report was collected via an online survey during the summer of 2011. The survey questions were formulated from input from NAED’s South Central Region Council. Emails were sent to NAED Distributor Delegates and Alternates.1_{Follow-up invitations were sent to Information Technology (IT) contacts} at NAED Distributor member companies not responding to the earlier invitation.

Participants

Responses were received from 69 individual distributor companies, representing 15.6% of NAED Member Companies. Eighty-three percent of the responses were from NAED Distributor Delegates or Alternates; 17% of the responses were from Information Technology contacts.

69 companies responded

Top Technology concerns

• Ensure data in business system is accurate and up-to-date • Ensure data security across all locations and devices

• Finding a reliable source for accurate pricing and product information • E-Commerce deployments or improvements

• Create an information technology (IT) strategic plan, technology roadmap, or revise current IT strategy • Adoption of mobile devices/technologies

• Website creation or enhancements

For comparative purposes, the chart above uses the sales volume breakdowns from NAED’s Performance analysis report: The Benchmarking Tool for operations (Par).

< $10,000,000

$10,000,001 - $25,000,000

$25,000,001 - $50,000,000

$50,000,001 - $100,000,000

$100,000,001 - $400,000,000

$400,000,001 +

9%

28%

19%

20%

7%

17%

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The Findings

Data & iT roadmap

Concerns about data are not unique to electrical distribution. However, the priorities placed on ensuring the data in a distributor’s business system is accurate and up-to-date (Critical or High Priority to 92.8% of

respondents), data security across all locations and devices (Critical or High Priority to 84.1% of respondents), and finding a reliable source for accurate product and pricing information (Critical or High Priority to 73.9% of respondents) are noteworthy.

Creation of an information technology (IT) strategic plan or technology roadmap could address and possibly even remedy the respondents’ concerns about data. However, it ranked 4th on the priority list, behind data, as a Critical or High Priority to 65.2% of respondents.

critical

or

high Priority

92.8% 84.1% 73.9%

Ensure data in business system is accurate and up-to-date Ensure data security across all locations and

devices

Finding a reliable source for accurate product and pricing

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Website Enhancements

A distributor’s website can be a significant contributor to internal productivity improvements by providing instant access to product information, inventory on hand (stock levels), etc., from any Internet connection. If website navigation is easy and they are trained where to find specific information and use specific features, even customers find it time saving to “self-serve” for routine inquiries 24/7/365.

Website enhancements were rated as a Critical or High Priority by 58.8% of respondents. However, while a few respondents measure the number of website “hits”, the majority did not know how many customers ac-cess their website monthly. Of the distributors that measure customers’ acac-cess, 70% of the respondents esti-mate that less than 20% of their customers access their website monthly.

94.2% of Respondents’ companies have websites

2

If it is easier for customers to get information online, they will self-serve.

But distributors must train customers how to find the information.

100% 90% 80% 70% Purchase Suggestions online help Technical Data Sheets/mSDS Social outposts Stock levels advanced Search Quote capability Basic Search links to manufacturers contact information

Website Functionality available Today

0% 10% 20% 30% 40% 50% 60% 8% 10% 24% 31% 41% 43% 46% 51% 82% 97%

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E-commerce deployment or improvements

Internet technology continues to revolutionize industries. Wikipedia upended the encyclopedia industry. iTunes changed the music business forever. Amazon’s online book sales led to the demise of many independent booksellers. Now Amazon, Grainger, and even Fastenal (a fastener distributor) sell a multitude of electrical products online.

E-Commerce was rated a Critical or High Priority by 66.7% of respondents. However, of the distributors with online ordering capability, many distributor executives don’t know how many customers are entering orders through their website or the percent of total company sales entered online.

Grainger’s 2010 online electrical sales were almost $1.8 billion

Customers will take the path of least resistance:

Ordering online must be easier than phone or fax ordering

Sales Tax Estimates advanced account management online Payment customized Search results Basic account management linked to ErP for real Time results Customer Specific Pricing Personal Product lists online ordering login capability

E-commerce capabilities available Today

28% 35% 45% 47% 49% 51% 53% 53% 59% 63%

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adoption of mobile Devices/Technologies

Mobile Devices/Technologies offer mobility, flexibility and productivity and were rated as a Critical or High Priority by 59.4% of respondents. Apps, mobile-optimized websites (.mobi), and QR codes are in the early stages of adoption, tablet computers are gaining a foothold (84% of Tablet Computers are iPads), while Smartphone and laptop use proliferates.

Smartphone Platform market Share

During the year ending September 2011, 87.4 million people in the U.S. owned Smartphones, a 12% increase from the preceding quarter. Google’s Android operating system ranked as the top Smartphone platform with 44.8% of the market, up 4.6% from the prior quarter. Apple was ranked 2nd, growing 0.8% to 27.4% of the Smartphone market. RIM (Blackberry) ranked 3rd with 18.9 percent share, followed by Microsoft at 5.6% and Symbian at 1.8%.3

Smartphones proliferate, Tablets usage increasing

In contrast to the U.S. Smartphone market, Blackberry currently dominates in electrical distribution. However, one has to wonder if this phenomenon will continue in the face of recent RIM service problems and the

proliferation of Android Smartphones.

Blackberry currently dominates in electrical distribution

Suggested Apps: Locate branches near you; take photo,

get product info; stock levels

100% 90% 80% 70% Qr codes .mobi aPPs Tablet computers Text messaging Smartphones laptops

mobile Devices available Today

0% 10% 20% 30% 40% 50% 60% 6% 12% 15% 42% 79% 84% 92%

Smartphone operating Systems (oS) used by ED’s

Blackberry ioS

apple ioS

android

microsoft

6%

46%

27%

20%

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Social outposts (Facebook, linkedin, Twitter, youtube, reddit, etc.)

Social Outposts were barely on the radar screen, with only 18.8% of respondents viewing it as a Critical or High Priority. However, it is an emerging trend to monitor closely since it accounts for a tremendous amount of Smartphone usage.

Back Office Technology Implementation

While back office technology “runs” the business, one size does not fit all. Successful implementation of back office technology requires it be tailored to each individual company’s processes as well as the needs of individual users. For example, Sales Force Automation (SFA) must be tailored to the needs of the sales representative, Cus-tomer Relationship Management (CRM) to the needs of the cusCus-tomer, Warehouse Management Software (WMS) to the company’s operations, etc. Perhaps this explains the low levels of adoption in electrical distribution.

Technology that “runs” the business

100% 90% 80% 70% SFa rFiD crm Truck routing Software gPS WmS online meetings voiP Bar coding

Back Office Technology Available Today

0% 10% 20% 30% 40% 50% 60% 15% 19% 22% 31% 46% 47% 47% 55% 57%

An emerging trend to

monitor closely

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next Steps

Since there are opportunity costs of not investing in new technology, it is in every distributor’s best interest to keep pace. This study creates a baseline in a format that can be used as an on-going industry assessment. In addition, NAED formed the Strategic Technology Task Force to provide recommendations and guidance to the industry.

What you can Do

1_{In the two instances where both the Delegate and Alternate of the same company responded, only the response of}

the Delegate was included in the results.

2_{Respondents with no website had sales less than $10 Million}

3_{Com Score Reports September 2011 U.S. Mobile Subscriber Market Share}

Now more than ever, information technology is an investment in the future of your business. Assess the technology your company uses today and evaluate where you’d like to be. Develop a plan to bridge the gap. The innovative use of technology will allow your company to attract the best and brightest workforce and allow you to lead your customers to a profitable future.

Invest in the future of you business

The mission of the Strategic Technology Task Force is to:

• Provide a roadmap for the industry to respond to technology innovations • Offer recommended solutions to common technology issues

• Educate the industry on how to use technology as a competitive weapon to cement the viability of the channel into the future

• Develop a mechanism to evaluate and measure the ongoing level of technology usage as a channel

The Strategic Technology Task Force is using the results of this study to develop tools to allow individual distributors to assess how they measure up against best-in-class performance – a continually moving target – gather customer input about various technology features, and expand the IT metrics in NAED’s Performance Analysis Report (PAR).