The Livingston & Haven Story
Networking, Innovation and Teamwork
In distribution, the most innovative companies are quite often the best connected. They share best practices with a cadre of others. They build de facto cartels for exploring new concepts. They gather the best ideas, improve on them, develop process and then share the results back for the betterment of the industry they serve. When this happens it's typically driven from the top down and ultimately becomes a part of the cultural DNA of the organization. What's more, the culture of sharing spawns internal partnerships, teams and teamwork which fertilize the seed of innovation.
In the heart of the Southeast, Livingston & Haven literally radiates this attitude of networking, innovation and teamwork. Providing solutions in automation, hydraulic, pneumatic, advanced lubrication and connectors, Livingston & Haven applies all of their resources towards the success of the American manufacturing sector. Offering up technical capabilities and the services necessary to drive factory efficiency, productivity and profitability across a six state area, their 180 employees strive to develop answers to the toughest manufacturing challenges.
To illustrate the depth of this commitment, Clif Vann, the company's CEO, while speaking at a company wide sales meeting challenged every employee of the company to do "whatever it takes to insure the long term health of U.S. Manufacturing." Networking, innovation and teamwork play a big part in the strategy. Here's how an example.
Bob Decker, Livingston & Haven's Director of Strategic Initiatives, was visiting relatives in Louisville, Kentucky when he decided to pay a networking visit to fellow distributor Air Hydro Power. Because they have a few product lines in common and similar thoughts about distribution, benchmarking made a great deal of sense. During this visit, Bob began to hear of their results with a pricing strategy - specifically the Strategic Pricing Associates process. As is often the case with networking, during the next few months Livingston & Haven hear similar stories from other networking partners.
The idea of building of margin improvement wasn't a new one to Livingston & Haven. They had invested considerable time and effort to margin improvement with minimal results prior to deciding to make a switch to an outside plan. Further, when a new data driven plan was brought to a leadership meeting some argued for a renewed attempt at a home-grown plan. But, the stakes were high and the need for margin control great, so the decision was made to explore outside offerings.
The software system used by Livingston & Haven is a legacy system developed through the years internally. This was both a blessing and a curse. The blessing comes via a system which is very closely tailored to Livingston & Haven's needs. The curse comes via the remnants of many previous programs. And, unlike most distributors who use Epicor or Infor ERP systems, Livingston & Haven had no pre-engineered port for data. To quote Linda Gardner Livingston & Haven's Director of Program Management, "We feel like we learned the ins and outs of SPA better than most people because we didn't have a neat plug in..."
This better understanding of the Strategic Pricing Associates algorithm led Livingston & Haven to build a team around "innovating" the process. One of the first important decisions they made was to clean up internal data prior to going live. "We discovered that we had way too many price classes that really didn't count. These came via very small vendors and second sourced products..." again per Ms. Gardner.
They found they needed to rethink their whole plan for handling second source materials. Through the years of working to assist customers with locating oddball items, the practice had left Livingston & Haven with a number of unanswered issues. Topics like how to handle freight, lack of specific product knowledge and customer warranty risks had gone mostly unanswered. These had to be explored, understood and policies established to improve the whole concept of their customer service.
In addition to these issues, the implementation team found themselves facing a few other issues. Jamie Blackburn, L&H Pricing Manager, commented, "We had over 72,000 line items to review. Believe it or not, we had over 60 years of exception based pricing embedded into our system. Our team is all about getting things right for the customer and each of these needed to be researched, an outcome created and a decision made before we could go live with SPA."
But the Strategic Pricing team at Livingston & Haven feels the effort has paid dividends. For example, Mr. Decker relates, "Prior to applying the SPA process, exception pricing - deviating from the system standard - was over 67% of our business and we only counted price drops greater than 10%. This created issues with consistency and really complicated the job of our inside sales team. Today this practice has dropped to nearly zero. The system does not allow downward pricing adjustments, the inside sales team can only adjust upwards."
According to pricing team member Blackburn, "This whole new way of thinking about pricing has allowed us to change the direction of our margin percentage. We are seeing the typical two point increase that SPA talks about, and then some." Bob Decker chimed in, "Salespeople can no longer cave instantly to negative price messages. Our process requires them to get pricing adjustment approval from someone on the management team and that little delay often allows them the opportunity to think about the value we provide and justify the L&H price in their own mind."
"There are only a few examples where our pricing process has caused us to lose an order. But that doesn't mean we don't face pushback from the sales force... ", says Decker. Interestingly, this comment is a prominent part of most successful pricing programs. The pricing team at Livingston & Haven regularly jokes they would never win employee of the year if sales guys got to vote. Bob quipped, "If you don't like just a little conflict with your sales types, then the pricing process team probably isn't a good spot for you."
In the spirit of networking and innovating, the Livingston & Haven team provided a few tips for those considering a journey with pricing process. First, they recommend extended communications from the top. Your company's President, VP of Sales and other leaders need to "talk up" the process often. The world is full of negative price messages. Nobody ever says, "Your price is too low". The sales group must understand the importance of extra margin to fuel the customer centric service and projects necessary to drive a solution-based organization.
Training is essential. Once more per the L&H team: "David Bauders and his team do a nice job of training and coaching around various points of the Strategic Pricing Process. However, this is a cultural thing. We have been working on this for two and a half years and our sales culture is still adjusting. We still have people who wish the SPA process would go away. In spite of making higher margins, more commission dollars and providing better customer service than ever, they still believe they understand market pricing better than anyone on the planet."
The team is glad they're not going it alone. Pricing Manager Blackburn comments, "I was responsible for our in-house pricing plan prior to bringing in Strategic Pricing. We worked hard to make it work. But, without tools, measures of pricing adherence, and all the scientific analysis provided by Strategic Pricing Associates, we just couldn't get to the right place."
In the two and a half years since first signing up, the L&H team has continued to push the innovation envelope. Six months after going live with SPA, they upgraded their service from SPA's Silver Cube to the Platinum level. They are working on buying better, targeting the right customers, and accelerating the growth of their organization.
During the first year of the process, the team spent a full day together every Thursday further refining the pricing process. The meetings continue, but today a portion of the day is invested in other important points. The team continues to reach out to fellow distributors to benchmark best practices, innovation never stops, and the Livingston & Haven team, armed with Strategic Pricing Associates tools, continues to provide innovative improvements to their company.