10 Distributors Form Powerhouse Alliance

Ten regional distributors have formed a distribution network called the Powerhouse Alliance. The alliance members cover all 50 states with 30 locations, 750,000-square-feet of warehouse space and nearly $500 million in cumulative sales.

The members are EDI, Volutone, Mountain West, WAVE Electronics, Autco, CED, CTD, 21st Century Distributing, M.Rothman & Co., and MRI.

"Our slogan is 'Distribution with a Local Touch. I think that says it all quite well," says Dennis Holzer, executive director of the Powerhouse Alliance, referring to the strength of each members' personal touch often personified at the Will Call windows.

"There are other national distributors out there that might have an office or a sales rep in an area, but they don't have the same capabilities in regards to training, will call and shipping that Powerhouse Alliance members have within their territories," Holzer says. "We have feet on the street."

Benefits of the Alliance

According to Holzer, there are several benefits of the alliance: Manufacturers will be able to gain a 50-state reach via a single contract.

Manufacturers will reduce shipping costs and billing headaches. The alliance’s plan, especially for overseas manufacturers, is that vendors will only ship products to two or three Powerhouse members’ warehouses instead of 10, reducing shipping costs from their factories. Powerhouse members will then disseminate the products to other members. There will also be less a streamlined billing process for the vendor.

Integrators will benefit from faster shipping. Some of the distribution members have national accounts, such as M. Rothman. So for example, instead of Rothman having to ship a TV from its warehouse in New Jersey to Texas, Powerhouse member WAVE Electronics can ship the product. In the end, Rothman cuts its shipping costs, WAVE gets a cut of the transaction, and the purchaser gets the product faster.

Integrators will benefit from lower product costs. As manufacturers reduce shipping and billing costs by working with the alliance, the cost savings will be passed on to dealers. Currently, the 10 members carry 500 different product lines.

The alliance will soon be signing deals with “base lines” that each member company will be required to carry and meet particular quotas. However, Holzer says that "in no way, shape, or form" will Powerhouse members have to drop their individual brand names.

While Holzer says the group is "not necessarily" looking for more members, he did not rule it out.

Initial Reaction

With four branches in the Southeast and 25 years in business, 21st Century Distributing is excited about the new alliance. Marketing director Mike Pote says all the members are "like-minded" in that they have no ambitions on growing outside their respective territories and they want to maintain product margins. He also hopes to present a stabilizing influence for vendors who are struggling with how to reach custom installation dealers.

Volutone vice president Trevor Hansen says the ability to openly discuss challenges and business issues with other members is beneficial. "We all face the same challenges," he says, noting that the group has a weekly conference call and has already had two face-to-face meetings.

Hansen says the determination of the base product lines is forthcoming, but "we are not breaking out the hammer today. There is no rush. Other groups have failed in the past because all the members didn’t take on a particular line. We will all be required to pick up core lines. Likewise, we will only drop a line if a manufacturer forces us to with a deal that’s too good to be true."