Inventory investment
To serve the market potential in a distributor's geographic area, additional stock sku's are necessary to support various customer needs.
Distributors need to consider: 1) when to add inventory, 2) the impact on inventory turns, and 3) profitability and cash flow. Distributors should consider a formalized vendor evaluation process when choosing to work with non-traditional vendors.
Recycling/Disposal
Each project exceeding minimum state and federal standards on lamp and ballast disposal must identify recycling and disposal resources.
Distributors should secure proper indemnification from their supplier for providing this service to their customers. Review NAED's Service Liability Study. Distributors should consider seeking out specialist companies to take over the recycling responsibilities. Distributors can then perform logistic services with customers and act as the expert for information about recycling. Distributors need to verify that the recycling company can ensure distributors' customers are compliant with federal, state, and local recycling mandates. For information on federal and state requirements, consult www.lamprecycle.org and www.epa.gov/bulbrecycling .
Trained staff
A well-trained staff can be a huge competitive advantage. Distributors may choose the level of expertise they develop in their sales people based on the overall investment they choose to make in serving these markets.
Traditional distributors exploring entry into the energy market can use existing sales personnel (with minimal specialized training) as the only investment necessary. The NAED Learning Center (NLC) provides access to more than 300 manufacturer training courses, so distributor members can educate their sales staff on energy efficient products. As distributors' business in this segment grows, they may consider hiring an energy sales specialist. According to NAED's Compensation and Benefits survey , a senior sales consultant earns $84,000 in annual salary and commission.
Lighting and lighting control design
Lighting design can be as simple as recommending basic lighting controls (IRR OCC sensors) or as advanced as comprehensive building control systems.
Distributors without an energy specialist on staff can make basic recommendations. For example, simple occupancy sensor products are popular ways to save energy. Distributors who invest in training for their sales force can provide lighting design capabilities for more complex projects. If project complexity requires additional expertise, distributors may consider working with an energy specialist. Lighting design capability lies in distributors' ability to have the applicable software to assist in the design, in addition to the internal expertise to make the required recommendations. Distributors must consider end users' budget constraints and/or end users' preference to achieve building performance and certification. Distributors have the option to engage in intense training from several manufacturers to incorporate owner's requirements versus having manufacturers performing services. Distributors engaged in advanced lighting design have more influence on end user relationships and can better "own the order." This separates the typical distributor and creates a referral mentality with end users vs. counting on manufacturers providing the service. Adhere to ANSI / ASHRAE / IESNA Standard 90.1 - 2007 Section 9 lighting standards for various interior and exterior lighting applications. LEED projects must meet or exceed this standard. Please refer to http://www.ashrae.org/technology/page/548 for more information on the standard.
Customer inventory reduction
By stocking appropriate inventory, distributors lower their overhead and improve end users' cash flow. This further differentiates distributors from agents or designers.
Designers may specify exotic lighting products, forcing end users' to maintain unnecessary inventory. Distributors can help end users achieve comparable results with value added solutions. Newer technologies with longer life/reduced maintenance costs can dramatically reduce end users' need for on-site inventory.
Perform energy audits
Distributors inspect end users' facilities to analyze current energy usage of existing systems including fixtures, switching, lighting and building controls, HVAC, etc. The audit generates a proposal for new technology to reduce energy costs.
Lighting accounts for 26% of all commercial building energy costs, 44% in office buildings, and 40% in warehouses (http://buildingsdatabook.eren.doe.gov/TableOfContents.aspx ). Because HVAC cooling fans and pumps use 18% of the energy in commercial buildings, consider Variable Frequency Drives for many motor applications for 10-50% savings (http://www.energy.wsu.edu/documents/engineering/motors/MotorDrvs.pdf ). Targets for energy audits are healthcare, institutional, property management firms, industrial, and government facilities. Most American businesses have a payback criterion limiting discretionary investments from 18 to 30 months. Review NAED's Green Goes Mainstream, page 9. Some utilities and state agencies (NYSERDA in New York and University of Dayton for example) offer low cost audits. A commitment from an end user to proceed with improvements suggested by an energy audit is a great way to "pull business through" a good contractor customer without the price pressures of responding to bids. Many distributors frequently charge for energy audits depending on the size and complexity of the project. These audits require a signed contract specifying charges to be assessed. Charges sometimes are waived if customers proceed with the project through the distributor conducting the audit. Distributors need to be aware that if charges are assessed for the energy audit, the end user ultimately owns the information.
Financial/Payback analysis
Provide the end user with a detailed financial analysis of retrofit energy savings from ROI standpoint.
Total upgrade cost (including purchase price and installation) divided by the expected annual savings = payback period in years. Saving a commercial building operator $100,000 a year in energy savings adds $1,000,000 to $1,500,000 to the building's value. Review NAED's Green Goes Mainstream, page 39. Many suppliers offer software solutions to produce the financial analysis. Some are available on NAED's Green Room Website. The target for the financial analysis may not be a purchasing agent, who is typically in-the-know about lowest procurement cost rather than energy savings. CEOs and CFOs are more receptive to financial analyses. Lighting is characterized as the "low hanging fruit" of building upgrades because it is relatively easy and inexpensive to replace outdated lamps with more efficient models. As of 2004, there were about 900 million T12s still in use, which offers a major retrofit opportunity. http://www.lightingtaxdeduction.org/tax2_1.html (Source: "Lighting Business Case: A Report Analyzing Lighting Technology Opportunities with High Return on Investment Energy Savings for the Federal Sector," Pacific Northwest National Laboratory, September 2005)
EPACT education
Distributors can educate customers on the tax benefits and incentives available through the Energy Policy Act (EPACT). By acting as educators, distributors can better position themselves to sell energy efficient products.
Raising awareness
Make end users aware of opportunities for energy savings, government or utility incentives, EPACT, LEED, and Energy Star to help them make decisions on capital projects and funding.
Based on estimates from the Department of Energy, lighting represents 40% of the electrical consumption in commercial buildings, equal to HVAC, but higher than all other equipment combined. http://www.lightingtaxdeduction.org/tax2_1.html Lighting accounts for 26% of all commercial building energy costs, 44% in office buildings, and 40% in warehouses. While HVAC cooling fans and pumps use 18% of the energy in commercial buildings, consider Variable Frequency Drives for many motor applications for 10-50% savings. Provide end users with source for project certification by using these guidelines. An overview of the new LEED V3 certifications and the point system can be found here. Information on what Energy Star can do for building performance is available here.
Local market/incentive education (utility rebates)
Distributors can differentiate themselves by understanding applicable utility incentives and educating customers about their options. Distributors may further facilitate the rebate process by assisting end users in documentation/application procedures.
Distributors will need to determine what rebates are available from the utilities in the markets they serve.
Feet Wet: enhanced traditional distributor model
Knee Deep: basic energy solutions provider model
Fully Immersed: advanced energy solutions provider model