How important is "cloud" for graybar?

368 Part Three Key System Applications for the Digital Age INTERACTIVE SESSION: ORGANIZATIONS GRAYBAR GOES FOR CUSTOMER ANALYTICS END Graybar, a Fortune 500 corporation headquar- tered in St. Louis, Missouri, is one of the largest employee-owned companies in North America and of these customer segments. a leader in the distribution of high-quality electri- cal, communications, and networking products. The sales representatives had been focusing their for salesforce deployment, pricing, marketing, and salesforce compensation is required to handle each Like many other firms in the industry, Graybar 8 attention primarily on customers that spent the most money. Graybar's business is very transactiona processing 21,000 orders with 90,000 line items each day. About 97 percent of Graybar's 117,000 custom- ers do less than $25,000 worth of business annuall Graybar had been focusing primarily on the small percentage of customers with large accounts. Graybar needed to find a way to determine which of these customers it should cultivate and which it should ignore. mpany also provides related supply chain man- ment and logistics services. With more than $5.7 billion in revenue, Graybar procures, warehouses, and delivers approximately 1 million products from 4,100 manufacturers to 117,000 customers It has 7,400 employees and more than 250 North American distribution centers in the U.S., Canada, and Puerto Rico. Graybar is a wholesale distributor and does not sell to retail customers directly 5 2 Despite many years of success, Graybar could do better. For instance, it was not following best practices for analyzing and understanding i customers. These practices were becoming essential for wholesale distributors as well as for retail companies. Traditionally, distributors have acted as middlemen in their supply chains, but they are starting to face pricing pressure from customers The customers expect reduced lead times and better services, but at the same time, refuse to pay for the additional services. As a result, distributors' profit margins are being squeezed The sales reps needed to be able to identify which customers required the most attention determine whether they could be transformed from a drain on resources into more profitable customers. The company needed to find out if a geographic or product-line strategy for allocat ing customers to salespeople was appropriate because these approaches might give some sale reps a disproportionate share of either profitable or unprofitable customers. Graybar collected a great deal of customer data, but some pieces of data were missing, and it lacked the analytical tools to segment ere becoming essential determine whether they NS GB study of the distributor pricing prblem by customers along the recommended lines. researchers at Texas A&M University recommended that distributors such as Graybar embrace a stra egy of customer stratification. Customer stratifi- cation measures how much business a customer does with a company (sales), the profitability of that customer in gross margins, how loyal the customer is to the company, and how costly that customer is to serve. Using these dimensions, the study identified four types of customers: core, opportunistic, marginal, and service drain. Core customers are profitable customers who transact in high volume on a regular basis. Opportunistic customers tend to buy infrequently when their regular supplier stocks out, so they are less profit able. Marginal customers buy infrequently in low sales volumes and require either low prices or igh service levels, so that serving them may lose money. Service-drain customers are high-volume customers who consistently require higher levels of service while demanding low prices, and often In July 2011, Graybar's vice president of business development started a project to create a data-drivern customer stratification model that would incorpo- rate best practices and enhance profitability. He assembled a cross-functional team with members representing marketing, operations, finance, and information systems. Having team members come from field operations helped ensure that the project paid sufficient attention to field-level customer needs The team spent the following year analyzing best e team spent the following year analyzing best practices from industry research and tailoring them Graybar's business. It identified the data fields from the company's existing ERP system that would be required for customer stratification and wrote queries to extract the data from the company's SAP NetWeaver data warehouse. The specific factors that were most important for Graybar's customer analysis, such as revenue, customer buying power and product line penetration, had to be assigned lume of returns. A different strategy