Jennifer Murphy, President of NetPlus Alliance, joined us for a recent Wholesale Change episode to talk about the benefits of the buying group and what they are doing to bring value to the companies in their network.
Murphy is the president of NetPlus Alliance and is the fifth generation in a family business that began in the industrial distribution industry in 1885. As president, Murphy focuses on bringing manufacturers and independent distributors together to find strategic partnership opportunities for growth.
Distribution Strategy Group (DSG): Tell us about NetPlus Alliance. We’d love to hear how it works before we get into other topics.
Jennifer Murphy: Sure. The history of our business goes all the way back to our machine shop that started in 1885. Our family business was a member of the first industrial cooperative. When that group dissolved in the late 90s, my dad took a year off and wrote a business plan for NetPlus Alliance. He felt strongly that there was a need for a buying group that was different, where distributors who participated didn’t necessarily have to be the biggest or the only member in that geographic market and that the companies could be quite different and diverse.
Our membership is made up of about 40% industrial MROP distributors. Thirty percent of our distributors consider themselves to be contractor supplies STAFDA-type distributors. The other 30% are a mix of specialists that focus on cutting tools, fasteners, safety abrasives and more. These people have an opportunity, with all the suppliers they have access to within the group, to grow and expand their business – both with new customers and existing customers.
A factor that’s accelerated our growth is the fact that we accommodate many different types of distributors. Our group today is made up of 410 distributor members across about 2,700 locations throughout North America and 185 manufacturer wholesale and business services providers. We provide rebate pricing and other benefit opportunities to our members.
DSG: Growing and expanding businesses – that seems like an area where NetPlus has a particular focus.
Murphy: From the distributor’s side, during COVID, we all experienced the need to be agile to offer what customers needed. Our distributors were considered essential businesses. Fast-forward to today, with all the supply chain challenges, and they are more relevant than ever to their customers. They’re the ones customers can call 24/7 to get a product nobody else can.
On our manufacturers’ side, the diversity of our group helps to facilitate the growth they see across so many different channels. We have a backend CRM where we create and collect profile data on each of our distributor members, which gives our manufacturers the capability to find distributors for new business.
DSG: Do you work with end-users?
Murphy: We are more present to the manufacturers and distributors that are a part of our group. We don’t necessarily reach out to end-users, but we do work to create strategic partnerships with our manufacturer rep agencies. For example, in Salesforce, we have created connectivity between manufacturers, reps and the supplier brands they represent, so our distributors know exactly who they need to call to access a product line or a representative.
DSG: Your group provides the same scale benefits that a large distributor enjoys with its suppliers only extended to a group of midsize and smaller distributors, right?
Murphy: Yes. Our group is made up of distributors who range in size from $2 million or less all the way up to billion-dollar companies. In the middle of that mix, you have people constantly trying to prove their relevance to manufacturers. We’ve done more mediation this year than ever. As the supply chain has become tighter, we’ve been working to find more solutions for our distributors to access products and continue partnerships with our manufacturers.
Overall, 20% of the manufacturers and distributors are driving 80% of the volume. But truly, the purpose of the buying group is to take that combined value to negotiate contracts with our manufacturers. We plug in all kinds of value for our partners to ensure they are growing above their industry national averages. We also do onsite training with both our manufacturer partners and our rep agency partners. We have a lot of benefits that we bring to the distributors in terms of education and running their business.
DSG: How does someone maximize the benefits of being part of your group?
Murphy: When a new distributor joins the group, they identify the manufacturer partners they want to work with and have conversations on current product lines. Todd Washburn, our VP of Member Development, gets right in with those new distributor accounts to maximize the rebate opportunity they can achieve through the group.
Attending the annual meeting is something we beat the drum on, too. When you come to our national meeting, you have the opportunity to sit down with a mix of both current manufacturer partners and potential new partners. As a result, you’re increasing your success rate exponentially because you have the chance to learn about product lines you never even knew existed, even with your own suppliers.
DSG: What’s the profile of a successful manufacturer?
Murphy: We get asked that question a lot by our manufacturers. Milwaukee Tool is always top of mind because not only do they do an excellent job marketing to the end-user customer, but their products are front and center so they’re easy for distributors to sell. They also do a great job on product innovation. They’re always expanding the product line they have to offer to their current customers.
Milwaukee accessed all the marketing opportunities we have within the group to stay on top of mind. They host live annual trainings to talk about innovation and product technology and do a phenomenal job of getting into how they can help distributors continue to be successful.
DSG: How does the group ensure members are, in fact, compliant with these manufacturers?
Murphy: We have a member portal, both on the distributor and supplier sides. They each have their own access points to the portal, so the information we gather within the CRM includes purchasing information. We also do an outside spend collection. NetPlus is a little different from some of the other groups in that we do not process payables through our group. Instead, our suppliers report their purchases to us. The data is consumed by our CRM and goes into our portal. Then our distributors can see and reconcile those purchases actively throughout the year.
DSG: What is your members’ biggest concern? Is it big distributors consolidating? Is it ecommerce marketplaces? What are the forces of disruption that are most poignant for your members?
Murphy: Inflation is obviously a major concern of our distributors right now. Government changes in policy and hiring were significant challenges in this industry prior to COVID. It has only gotten much, much worse. There’s also a great demand for warehouse space as the relevance of fulfillment continues to grow. Understanding the next stage or step for distributors is something we want to work more closely with over the next couple of years.
The supply chain to China is a big concern, as well. I think more distributors are looking for manufacturers to domesticate their product manufacturing here in the U.S. I would love that, as well. One of the issues is that the largest players have access to allocations that small distributors do not. But fortunately, when you have a network of distributors that all buy products from your manufacturers, you have the ability to knit them together when you need to. We create resources within our group for our distributors to access products from each other when needed.
DSG: As you move from simple transactions to more complex transactions, it feels like branch-based businesses are at an advantage. Do you agree? If so, how does it play out with your members?
Murphy: I do know that our distributors who focus on providing a more complex level of service to their customers are the ones who are winning and growing. When you look at a smaller and midsize distributor, they focus on serving accounts that are probably within a relative distance to their business. They focus on success, and then they may work to expand out to different states.
One of our large distributor partners has an incredible network of branches that both fulfill larger accounts and local accounts. They make sure their networks serve each other. They look to the manufacturers in our group and bring people to our training to be sure they’re educated on product expansion. They are utilizing that network to grow beyond their core customers.
DSG: The integration of technology, product information and order management, is complex. Do you help distributors who may not have a technology platform or skills with integration?
Murphy: This past year, we became much closer to ES Tech Group and their strategic partner DDS. They are what we call our ecommerce collective. These companies help our small distributors get up and running on ecommerce. We don’t host our own PIM or have a data management system. We work with DDS to collect product content from our preferred suppliers to build their PIM. DDS scales its model of pricing depending on the type of distributor you are and what you need. Integrating with technology gives you the visibility and self-service to get what you need when you need it.
DSG: We know you manage rebates for vendors. Do you also help to negotiate prices?
Murphy: We have programs that offer entry-tier pricing or other-tier pricing for members when they come in as part of that program. But I think, as we all know, pricing has become incredibly complex. How many price increases have we gone through this year? A lot of negotiations and discussions come down to the regional or local salesperson managing that account. Pricing also depends on where the product is bought and sold.
We try to encourage opportunities for distributors to be able to get in on good pricing and negotiate other front-term benefits like prepaid freight. There are also base and growth rebates, and individual rebates distributors earn from working with manufacturers.
To hear the entire conversation about how Jennifer Murphy’s team at NetPlus Alliance help distributors fight disruptions, watch this episode of Wholesale Change.