Total Control

Total Control

Hargistics offers suppliers the benefits of warehousing without relinquishing control over pricing and product range selection, reports Chris Tackenberg.Suppliers have traditionally had two alternatives to service the independent hardware market – by either delivering their range of products directly to the store or through one of the major wholesaler’s warehouses. Both channels have their issues.

When supplying directly, suppliers often have to deal with the issue of small orders. They address this by imposing freight charges and minimum order quantities that are unpopular with hardware stores and can lead to losing the sale.

Supplying through the major warehouses brings a whole new set of challenges. For starters, the warehouses have enormous market power and can dictate terms to almost all suppliers. In addition, it can be almost impossible for a new supplier to force its way into the warehouses.

Existing suppliers must also constantly defend their product range against the threat of removal – something commonly referred to as ‘category management’. In the past two years, there have also been many examples of suppliers being tossed out of these warehouses.

In recent times, some of the branded wholesalers have made it harder for independent stores to buy from them because of their minimum order values increasing, while branded stores are given more favourable terms and pricing. This is where Hargistics can help.

Hargistics has committed itself to servicing the independent hardware market. It was established to provide suppliers with a reliable, easy way to service this market by eliminating the conflict caused by category management and replacing it with a consignment stock model.

Hargistics is no Johnny-come-lately. Its history as a wholesaler dates back 20 years, when its sister company began servicing the locksmithing industry using a similar business model. From a small, garage-based company, the group has grown into a business incorporating six different divisions, supplying everyone from cabinetmakers to the healthcare industry. Today, it employs over 80 people across five branches and deals with around 12,000 SKUs out of a possible 46,000 SKU count. Every day, Hargistics sends out around 400 consignments and does around 2,000 discreet picks and putaways.

By utilising consignment stock, Hargistics can let the supplier choose the product range that it wants stocked in its warehouse. This stock model also allows Hargistics to let the supplier set the price to the independent store. The fee Hargistics earns is calculated as a percentage of the sales value – regardless of its retail price – and it includes free delivery to stores, with no minimum order values.

Independent stores buy product from multiple suppliers under a Hargistics invoice. It is therefore Hargistics’ responsibility to pick and pack the stock, manage the account and handle any returns. By stocking through Hargistics, suppliers can save on administrative costs as well as freight charges.

Hargistics works under the assumption that a supplier of a product will always know that product better than any warehouse, especially when that warehouse has hundreds of suppliers and tens of thousands of products. It therefore makes perfect sense that the supplier should retain control over product range selection and pricing.

Another thing that a supplier does much better than a warehouse is selling. How can a warehouse sell when it stocks products from competing suppliers? So if a warehouse doesn’t sell, the supplier must, which makes sense because most suppliers already have their own sales force who know their own products so much better anyway.

To focus their sales and marketing efforts effectively, suppliers needs the sales data that warehouses currently control. However, this can be difficult to obtain. To that end, Hargistics offers the sales data live through a supplier website login. Suppliers don’t even need to ask for it.

In all aspects of its business, Hargistics has attempted to make itself transparent to suppliers because it sees no reason to interfere in the relationship between the supplier and the hardware store. As suggested earlier, Hargistics believes that a supplier is better placed than a warehouse to handle all aspects of supply, from product selection to pricing and selling.

In fact, there is only one reason a supplier would use a warehouse at all – consolidating supply from multiple suppliers to one hardware store is simply the most economically efficient way to get products out to market. It is also the most convenient way for stores to source product from multiple suppliers. But the benefits of warehousing should not require a supplier to surrender control of their product, yet all too often this is what happens.

The Hargistics message is starting to gain traction in the market. Hargistics currently services over 350 independent hardware stores. Fourteen suppliers have also made their products available through the Hargistics warehouse. These include 3M, WD-40, ASSA ABLOY, Duracell, Sika, Henkel, Osram, Bordo, Starrett, Powercell, Howard F Hudson, Tycab and Kevron. Coming soon are Hand Tools Australia, HR Products and Whittam Ropes. Others will be added.

The rollout of big box hardware stores by the major chains is no doubt a significant challenge to the independent stores. Hargistics can help the independents meet this challenge by ensuring supply at a price that has been set by the supplier.

Hargistics can also make the independent market a viable proposition for suppliers who were struggling with the issue of small orders, especially to regional areas. By supplying through Hargistics, there is no reason for a supplier to pull back from the independent market on economic grounds and no reason to disadvantage independent stores with higher pricing or minimum order quantities.

Independent stores will benefit from the new Hargistics warehouse because they can now source product from many suppliers through one warehouse, and on one invoice. They can now buy at a reasonable price that’s been set by a supplier without the inflationary margin added by a warehouse. And they can buy from an independent warehouse not affiliated with retail stores that compete with them. Hargistics is the only independent warehouse, and the natural ally for the independent hardware stores.