Distributors needed some room to spread out last year, as many have had to embrace e-commerce and differentiate themselves with specialized client services. Suppliers occupied more space, too, because they brought on more staff and added products to meet their customers’ and end users’ needs.

As companies try to keep pace with marketplace demands, the industry gets plenty of exercise. Both sides of the industry will tell you the external success of a company depends on healthy internal operations; like having a happy, productive staff and finding better ways to get things done.

Distributor And Supplier Staffing

The tight labor market continues to make some industry firms edgy. Just a few months ago, the unemployment rate sank below 4.0% for the first time since 1970 – the year the Beatles split up and only 19% of TV owners had color sets.

The bad news is that hiring difficulties will likely persist. Jerome Hoxton, vice president of marketing for distributor Newton Manufacturing Co. (asi/283300), says, “There’s always going to be a demand for the best and brightest. I think people who are ambitious self-starters, enthusiastic ... you’re going to have to work to have those folks.”

Some industry companies are constantly on the lookout for salespeople and other employees. Steve Weinstein, president of supplier Emblem Marketing Team (EMT) (asi/52263), notes that when he comes across a person he thinks has potential, he’ll make a position for them. “When you’re scrambling to hire someone because you have an open spot, you don’t usually find the most qualified candidates,” he says.

People Problems

Almost half (49%) of this year’s distributor respondents said their staff size stayed the same between 1998 and 1999. Overall, there was a slight decrease in the median number of full-time salespeople, as well as assembly, manufacturing and decorating staff.

On the supplier side, more than half (51%) of respondents indicated they increased their staff size during 1999. There was a healthy increase in the total number of supplier employees, the median rising from 35 to 44. Increases were also seen in the median number of production employees and art/creative staff.

Nearly all distributor respondents rated the ability to find qualified staff as “difficult,” with 60% calling the task “very difficult.” Says Hoxton: “It’s vital that we place the best possible people in the situations where they’re dealing with the lifeblood of the industry, which is customer satisfaction.”

On the other hand, far fewer suppliers said hiring qualified people was “very difficult.” One reason: To keep their larger staffs going, suppliers generally offer more employee benefits and job security. “We have a lot of longevity at our company,” offers Hank Riccitelli, president of supplier Providence (asi/79980). “We add accordingly. We add product and also manufacturing techniques. We’ve been very fortunate in that we’ve been able to staff to our needs.”

To Catch (And Keep) A Candidate

Is your company doing everything it can to attract good employees? “It’s a buyer’s market,” says Sherri Lennarson, executive vice president of distributor Bankers Advertising Co. (asi/131650). “I think you have to be very competitive in terms of your benefits, your work environment, the culture, training – all those things.”

John Lord, senior vice president at supplier Admanco Inc. (asi/32360), says they’re trying to find creative ways to bring on new people. “We did that with hiring bonuses ... if [new employees] stayed, they got a bonus which wasn’t built into their base hourly rate.” Other strategies included working with temp agencies and running radio ads. Admanco also raised its starting wage and increased referral bonuses.

Whatever the catalyst, industry firms are focusing more and more on the employee’s needs. “We’ve taken a lot of input from our current employees about what’s important to them, in terms of flex time and the ability to determine some of their own goals,” says Weinstein, “and incorporated that into our hiring practices to attract people who tend to be more independent thinkers.”

The bottom line: Companies can’t go wrong by showing commitment to all their people. Lennarson says Bankers Advertising treats its salespeople as family, even though it uses independent reps. “We’re an extension of that salesperson in that we really are a partner and our interest is in their success. It’s only when they succeed that we as a larger distributor succeed,” she explains.

Stay, Employee

Professional dog trainers tell owners that when their pet breaks the rules, it’s always the owner’s fault. No, we’re not comparing your employees to dogs. But employee training is a similarly serious responsibility for company principals and/or management, since it ultimately affects turnover. Today, employees will more likely stay with a firm that helps them develop their skills and expertise.

Newton Manufacturing invests continuously in education and training, and even set up a learning center. “Part of what makes an employee feel satisfied and rewarded is that they understand what our mission is, that the work is well-defined ... they know what they’re supposed to do and have the tools to do it,” Hoxton explains.

On average, distributors spent roughly $7,350 on training their employees in 1999; the median was considerably less ($500). The top three methods of training/support were providing subscriptions to industry-related magazines (73%), picking up the tab for attending trade shows (68%) and paying for membership in industry associations (63%).

Suppliers spent far more on employee training – an average of $21,500; a median of $5,000. The higher price tag is most likely because supplier employees need continual training on things like new equipment, new automation processes, new product lines, etc.

Suppliers also offer subscriptions to industry-related publications (62%) and pay expenses for their people who attend trade shows (57%). But in-house seminars (55%) also made it into the top three training methods.

Cross-training (done by 45% of supplier respondents) can save a lot of time and money. Riccitelli says if key employees can do several jobs, this ensures work gets done and saves the company from hiring more people. “We can take our workforce and move them around in the factory,” he says, adding that this is a critical asset.

Communication And Commitment

It may sound like marital advice, but open communication and demonstrated commitment are also proven employee-retention strategies.

Bankers Advertising does a lot of internal incentive programs, promotions and education geared towards different types and levels of employees. Workers are also told about the ins and outs of the business’ operations, including sales figures. “We talk monthly about what our sales were a year ago this month. Did we meet it? Did we exceed it? If we didn’t, why?” says Lennarson. “I think the more people know, the more they’re able to help you meet your goals. They feel a part of the bigger picture. They find ways they can actually improve operations.”

Industry companies know they need to be flexible and stay employee-focused in the current labor market or risk their position and future growth. “The challenge is to not get stuck in a particular style or mode,” offers Hoxton. “We’re of the mind that we must be as committed to our employees as we ask [them] to be to us, our salespeople and customers.”

Supplier Imprinting/Production

Despite the current labor shortage, there’s good news in suppliers’ workplaces. Almost three-fourths (73%) of survey respondents reported their production capacity rose during 1999. Size-wise, small and large suppliers were more likely to claim an increase. Of mid-sized firms (suppliers with sales volumes between $500,001 and $2.5 million), less than half experienced a rise in production capacity.

Still more good news is that suppliers’ facilities also continued to grow last year. More than half (57%) of respondents said they added/expanded facilities in 1999 or plan to in 2000. That’s considerably more than the 49% of suppliers who said the same on last year’s survey.

By fine-tuning processes and keeping workers focused, some suppliers are achieving impressive growth. EMT was recently honored as one of the ASI Top-10 Fastest Growing Suppliers. How did they do it? “We’ve had to automate quite a bit and streamline our paperwork processing,” Weinstein says. “What it’s done for us is create a leaner and more efficient operation, because we’ve had to do more with the same or less staff.”

Automation in the imprinting and shipping areas, as well as the elimination of internal paperwork, have helped EMT economize, Weinstein continues. The company has posted a better than 40% increase in sales volume with the same staff.

Rush Service Stressors

A major issue in recent years, rush service shows no sign of cooling off as a hot topic. “Of course it raises everybody’s stress level, especially at the busiest time of the year for us,” notes Weinstein. Suppliers said an average of 22% of their orders required a turnaround time of five days or less, and the average turnaround time on the majority of their orders was 12 days.

For the past several years, The Counselor has queried suppliers about how they meet rush-service demands. The most popular answer has changed year-to-year. In 1997, hiring additional staff was the top choice. In 1998, hiring staff came in second place behind establishing an inventory of products. This year, however, the most popular method of meeting rush-service demands was improved order entry/ tracking (52%).

EMT was one firm that made some scheduling improvements: “We had for many years tried to accommodate both rush orders and standard delivery through the same production line and found it was a virtual impossibility as the need for rush continued to grow,” Weinstein says. “For our most popular processes, we added a separate production line all together. We limit the quantity and so forth ... We don’t have a rush charge per se, but the pricing reflects the higher labor costs we have and also the kind of expedited delivery charges [for] getting the raw materials.”

The firm’s production strategy cut down a lot of the stress on its staff. “[It] enabled our customer service people to give immediate answers [to distributors] instead of constantly having to deal with breaking up a production schedule,” Weinstein notes.

Similar gains have been made with cross-training at Providence: “It’s helped us immensely in taking jobs,” Riccitelli says. “We just took a job in Lucite where we did 46,000 pieces in three-and-a-half weeks ... Due to the fact that we can move our labor force around – and also that we have some very loyal employees who work Memorial Day weekend, including Memorial Day – we were able to get that job done.”

Providence recently added a new product category of “Boutique” items, featuring things like designer keytags, picture frames, clocks, calculators and desk items. Riccitelli says the company added these products in order to grow its business, respond to competition and fulfill customer requests. “This product line does make it easier for us to meet rush-service requirements. The products are premade ... they’re in inventory on our shelves and we can just take them off and imprint them,” he says.

Stocking pre-made products and product components has helped Admanco with the time crunch too, Lord says. “This gives us three-day service and five-day service, where before it would be an eight-day sort of item. We looked at stocking more components that are precut and a little bit more done on the front end. That helps the manufacturing process further along so it’s not another day [before it goes] out the door.” Staff knows time is critical: Admanco educated them about lead times and how the company is competing with other suppliers that can ship in 24 hours.

Those strategies are working: “In 2000 ... the number of orders we’re shipping in nine days or less is up 25% over the same month [a year ago],” Lord relates. “Even 1999 was up over 1998. We’re trying to make people more aware of it.”

The Blanks Debate

Largely overshadowed by rush service issues, the percentage of suppliers selling blanks was pretty much unchanged between 1998 and 1999. Last year an average of 10% of suppliers’ orders were outgoing blanks (the median was only 2%). Mid-sized suppliers seemed to sell a larger percentage of blanks than their smaller and larger counterparts, while smaller companies were more likely to imprint blanks for distributor customers.

Of those suppliers who answered the question, “Do you imprint blanks for/from distributors,” over three-quarters (76%) said no. Yet numbers from last year’s SOI survey revealed that 39% of suppliers were imprinting blanks from distributors.

Why the drop? One likely answer is that distributors are getting blank apparel imprinted at local screenprinters or embroiderers. In fact, over 80% of distributors reported buying blanks for outsourcing to a third party for imprinting, so they must be getting these products imprinted somewhere.

Sometimes “Boutique” products are sold as blanks, Riccitelli says, since some distributor clients want to do their own imprinting and sell small lots to clients. “Also, some of the dot.com companies are offering real fast service. What [distributors] are doing is taking blank goods and keeping them on their shelves so they can respond faster. We do a lot of imprinting for those companies as well. Sometimes they want to do one or two or three pieces or small quantities for their customers. We aren’t in the business of [selling blanks], but to accommodate some of our customers who want that service, we do it.”

Importing Trends

Surveys and interviews with supplier companies reveal a movement toward importing, fueled by price pressure and shorter lead times. SOI figures show a marked decrease in the average percentage of products suppliers manufactured in the U.S. in 1999 – 61%, down nine percentage points from the year before. The percentage of products assembled, decorated and packaged in the U.S. also declined, suggesting that more of these services are being done for suppliers by foreign sources.

Mainland China (69%), Taiwan (40%) and Europe (19%) were the top three places suppliers imported products from. And nearly two-thirds of survey respondents who imported products or raw materials reported using an import broker.

Says Riccitelli: “I think there’s a trend [toward importing]. I would say it’s competition that drives it. Also, some of the factories there have just become really good makers and designers, so the quality issue isn’t what it used to be.”

EMT imports more than half its products. “The issue is price,” says Weinstein. “The only way to achieve greater service and combine that with importing is to inventory more product – and we do that. There’s so much pricing pressure in the marketplace that we just can’t provide the spectrum of price points that the distributors and end-users are requiring without offering an imported product.”

Admanco began to offer imported bags in its 1999 catalog, featuring them more prominently in 2000. Keeping warehouse space for different color combinations and options has been the biggest challenge. “We knew people in the past hadn’t looked to us as being an importer,” says Lord. “We’re more known as made-in-the-USA domestic products.

We knew the first year would be kind of an introduction. We hope the momentum would carry into 2000, and the results support that.”

Distributor Facilities, Sourcing & Imprinting

Here in the midst of the digital revolution, most of us are still waiting to see what the long-term effects of the Internet and e-commerce will be. But distributors in the promotional products industry don’t have that luxury of time.

The potential threat of e-commerce looms large … for some. They worry that there’ll be no place for them in a market where end-buyers can get nearly any logoed product with just a few mouse-clicks. Savvy distributors remain unfazed, however. They know they give their clients more than just products.

One way distributors are differentiating themselves from the commodity side of Internet selling is by offering their clients more services – warehousing, fulfillment, in-house imprinting and company store programs. To meet customers’ demands they’re expanding; both distributors’ facilities and product sources continued to grow in 1999, according to this year’s State of the Industry survey on Distributor Operations & Growth.

Close Quarters

In 1999, many distributors apparently saw the walls closing in around them. About 41% of distributors said they expanded their facilities in 1999 (or plan to in 2000). That’s up slightly from the 38% of distributors who indicated the same on last year’s survey.

Example: Nordbak’s Promotional Products & Awards (asi/284060) recently finished expanding its showroom. Not only does it give the distributorship an attractive way to display products, but it also improves the look of the office and helps increase sales, says Greg Nordbak, owner. “We just found that the more product a customer actually sees, it’s easier to sell them,” he says. “Plus, it adds legitimacy to the company. When our customers walk in, they walk into our showroom – the offices are to the left and the production is to the right – so it makes an impression on them.”

When Corporate Imaging Concepts (asi/168962) moved recently, it gave up its on-site warehouse and opted for a larger, offsite location, which has helped the company better meet its clients’ needs. It’s expecting a 400% increase in sales this year, partially due to the success of its warehousing and fulfillment programs, says Brian Abrams, president. “We have e-commerce, warehousing and fulfillment, a full-time graphic artist on staff – and for e-commerce we have our own tool to build a company store in less than an hour. It allows us to offer all of these services as a convenience to our clients – to have a one-stop shop for any or all of these services.”

Sourcing Solutions

In addition to expanding their workspaces, distributors kept up with a changing industry by diversifying their product sources. More than half of distributors who answered questions in this area said they sourced from more industry suppliers in 1999 than in 1998. However, 62% of respondents said they use non-industry suppliers, and 26% say they imported products from another country. The top categories in which they imported products: wearables, caps and bags, according to the survey.

Like most distributors, lower pricing is the primary reason Corporate Imaging Concepts imports products, Abrams says, but only when an order is for a large quantity and has sufficient lead time. The firm uses an import broker to help secure these lower prices and simplify the importing process. “The nature of my business is selling products, not sourcing imported products,” says Abrams. “I rely on those with more experience in the area to source the product for me. [Brokers] have access to factories that I don’t have access to, or their pricing is better than I can get. So, therefore, even with their profit margins tacked onto it, their pricing is more aggressive than what I can get.”

David Heavin, owner of Ideas in Action (asi/229635), has been importing products for about 10 years and has found it’s easier for the company to handle the details itself rather than hiring an import broker. “We contact the factories, forge the arrangement, and the only time we get a broker involved is if we need one for the shipping process,” Heavin says. “You’ve got to learn how to do it over the years.”

Other ways that distributors are meeting the increasing demand for products – especially wearables – is by buying blanks. Nearly all distributors bought blanks in 1999 (90%, according to the survey; a jump from the 83% of distributors who reported doing so in 1997). This increase in blanks buying can largely be attributed to wearables’ continuing popularity in the promotional products industry. It ranked as the top category in which distributors bought blanks in ’99, representing nearly three-quarters of such purchases by distributors. Other product categories lagged far behind, with only 8% saying they bought bags as blanks and 2% citing either glassware, awards or towels.

When distributors buy blank wearables, three-quarters report outsourcing those blanks for imprinting. A small percentage (18%) have the blanks imprinted where they bought them, while an even smaller percent (7%) imprint wearables themselves at their distributorship.

Service Sells

Although nearly 30% of distributors say they have some type of printing equipment in-house, about 65% of respondents to this year’s survey say in-house imprinting represents 1% or less of their annual sales volume. Of these distributors, the most commonly cited type of equipment was printing (35%), screenprinting (30%) and heat transfer (26%).

Control over costs and quality are the reasons Nordbak cites for imprinting in-house. Turnaround time is also a factor, he says. “I can call a supplier and get product delivered to me within 48 hours. I can embroider it in 24 and get it to my customer in 72 hours [total],” he says. “There’s not many suppliers that will do that.”

Bankers Advertising also offers printing, as well as warehousing, fulfillment and manufacturing. “It helps to differ-entiate you from your competition,” says Lennarson. “The more people can do one-stop-shop, I think [it] just shows more value, solidifies your relationship and allows our salespeople to be a lot more creative – because we’re not actually selling product, we’re selling solutions. And then we have the manufacturing capabilities behind us so that we can implement and execute some of these solutions.”

Having a fulfillment center has helped Image West (asi/230148) boost its sales, too, says Gary Murphy, CAS, owner and president. But in addition to all of the normal services that come with a fulfillment program, Image West also helps its clients help others. It outsources packaging to a local center that employs people who are mentally or physically challenged. “They give them repetitive work, so I work with their directors and say ‘I’m going to need to put these three or four items specifically placed in a box with some correspondence.’ They run a time study and give me the price it will take to facilitate it,” he explains.

Murphy adds that while the money goes to a good cause – paying the workers and supplementing their state funding – he and his clients get their money’s worth. “I go through all the things that the clients would normally do for themselves, saying, ‘Let us take over how cumbersome something is and we’ll do the whole thing for you,’” Murphy says. “I tell them up front – they can even go to the facility if they want to meet the people – and they feel very good about their decision. So it’s a win-win situation no matter how you look at it.”

Cynthia L. Ironson is features editor and Karen Akers is associate editor of The Counselor.