Wesco Distributions, Inc.

WESCO Distributions, Inc.

Objective for the next 5 years:-

1) $3 billion in sales

2) EBIT of 5%

Analysis: - To achieve an objective of $3 b in sales in 5 years, CAGR required is 6.4%. If we look at Exhibit 5, we see that except NA Customers segment none of the other segment could fulfill this target as all of their forecasted annual growth is in the range of 1-4%. Hence, to achieve our objective, we can't discontinue with NA customers. Again looking at Exhibit 5, we have the following analysis.

NA Accounts Price Index Cost Index Customer Value Index Price/Cost

Key 90 80 120 112.50%

focus 93 110 105 84.55%

other 95 100 100 95.00%

Other Industrial 100 95 95 105.26%

Industrial Contractors 93 105 105 88.57%

CIG customers 105 90 90 116.67%

International 105 110 95 95.45%

NA Accounts No. of customers Percentage by no. 1996 sales ($ mn) Percentage by sales Avg rev per customer ($ mn) YTD sales May 1997 ($ mn) PercentageYTD sales Change in sales ('97)

Key 50 16.67% 180 67.67% 3.60 89 69.53% 2.75%

focus 100 33.33% 52 19.55% 0.52 25 19.53% -0.09%

other 150 50.00% 34 12.78% 0.23 14 10.94% -14.43%

total 300 100.00% 266 100.00% 1.00 128 100.00% 100.00%

Looking at the Price index and cost index, we see that we have best cost index in key NA segment due to economies of scale. Have a look at the ratio of Price /Cost index; we see that for achieving profitability target, key NA segment, other industrial segment and CIG customers are best to chase as they would prove to be most profitable. Now, if we take a look at NA accounts, we see that its key accounts which has around 68% by sales, and this is the account which has increased this year in sales as well. Other NA segment has decreased in sales and also amount for a little of total sales.

Recommendations:-

 WESCO should continue with their NA program to achieve their objective.

 As seen from analysis, major focus should be to increase customers in key segment and retain them, and reduce focus on other NA segment.

 Traditional sales force has been hunters and the sales in contractor segment is not predictable, also, given the following trend in the market and looking at the future possibility of sales increase , WESCO should train their sales force to be farmers.

 Once the NA account moves into maintenance/development phase, NAM could be removed from the picture and their extra time saved there could be utilized in pursuing new deals. National sales support service team could handle this work.

 Current incentive scheme didn't take into account which customer segment is being served. To increase sales in key NA segment, incentive scheme should be changed to take this into account.

 They have to be proactive and selective in choosing the customer to whom they want to approach as reactive model could lead to them being the 2nd tier in some potential cases.

WESCO Distribution, Inc.

Section B, Group 11

Goals:

* Decide on $12 M budget in 1998 for NA program

* Over next 5 years, annual growth of 6% to 8% in sales, 12% to 16% in profitability

* $3 B in sales with 5% EBIT ($150M) by 2000 from $2.2 B with 3% EBIT ($66 M) in 1996 - 18% CAGR in EBIT

* Be recognized as leader in learning, adapting and responding to changing customer needs

National Account Program Issues:

* Poor alignment between corporate HO and local plants interests - local plants interested in maintaining relationships with local distributors, non-compliance with HO standards and BOM

* Other (low potential) NA accounts demand high service levels - opportunity costs high

* Impact on Contractor segment - serving NA accounts demand higher commitment or resources, perceived as competitive threat

* Contract terms not abided - customers contract with other inspite of exclusive contracts

Challenges:

* Managing different customer types

o Industrial - steady flow of EES products, long-term contracts, high level of service - Sales reps as farmers - cultivating relationships through satisfactory service and customer education

o Electrical Contractors - project to project basis, not stable relationship (bid-and-quote), low margins for WESCO - Sales reps as hunters - identify new bids, quote, negotiate, move to next

* Hunter mentality at WESCO - seek awards through new opportunities

* Standardization missing - some customers still prefer maintaining bid-oriented relationships with multiple EES distributors against industry practice of long-term contract with a few select

Competition:

* Speciality distributors - small product niches, retail generalists - hardware stores - broad range of supplies

* Regional Chains - sales more concentrated in regional markets, Local distributors - established local relationships with major customers

* Peer group - WESCO ranked third in sales volume - similar customer mgmt srategies

* Branch office - 279 branches - 33% serve customers in specific industry

* Compensation - fixed and variable (commissions) for sales rep.

o Commissions same irrespective of industrial, contractors or CIG

o Branch Sales rep. also receive commissions for sales to NA customer's local plants (in addition to commission to NAM)

* 300 NA customers - 50 Key, 100 focus, 150 others

o 60-90% of key customer's needs being met - exploit potential of focus, tap