Andrew Stroup (00:06)
Welcome to Leveraged Supply Chains, the show where we unpack how modern operators protect margin and out execute with data-driven processes. I'm Andrew Stroup, your host, and today we're heading to Cincinnati to meet Josh Cox, Vice President of Purchasing at General Factory Supply, a 75-year-old affiliate distributors member that moves everything from abrasives to MRO parts for factories across North America.
Josh's team wrangles over 13,000 purchase orders each year across more than 850 suppliers, and they've been rolling out AI-powered solutions like Leverage to help. We'll dig into why Josh ditched Classic EDI, how he chose Buy Over Build, and the early wins his three-person buying team is seeing.
Josh, welcome to the podcast. Give us the 30 second overview of general factory supply and your role.
Joshua Cox (00:53)
Yeah, Andrew, thanks for having me. General Factory Supply, as you said, we're a 75 year old full service MRO distributor, really servicing all manufacturing facilities across North America. My role within the organization is the supply chain if you will. So my job is to ensure that our supply chain stays robust, that we're able to deliver for our customers in a timely fashion.
Andrew Stroup (01:18)
Love that. Well, I know last year you processed more than 13,000 POs at General Factory Supply, which is, let's just assume probably around 45,000 PO lines interacting with over 850 suppliers. How did that feel before Leverage?
Joshua Cox (01:33)
Yeah. So before Leverage, it was a completely manual process, So we would send the purchase order off to the supplier. The supplier would send us an email back acknowledging if there were variances or deviations in what the PO was versus the acknowledgement. We had to manually control that, And really understand and see those things on a line by line basis. So it was completely overwhelming, especially for a small team of three buyers. It was not a tenable solution for us long term.
Andrew Stroup (02:03)
That definitely sounds painful. How many emails, PDFs, flooded the inbox on daily basis for you and the three buying team?
Joshua Cox (02:10)
Yeah. So recently we had a team meeting and we were discussing what, are some of the things that we could do differently and where we could pivot to. And one of the things came up was we were seeing 500 emails on average a day into our inboxes and managing that is just, it's not feasible, it's a really unproductive environment for our team. And it's really overwhelming. We see on average about 75 to 80 emails a day to our inboxes, which is a much more manageable ⁓ amount and it allows us to feel pretty confident that we're not missing anything.
Andrew Stroup (02:43)
That's a massive change, before Leverage in that scenario, there's always typically some tipping point, right? Or some like near miss story or something that almost went awry or did go awry that led us to us partnering together. Curious if there's something that comes to mind for you.
Joshua Cox (02:58)
Yeah, well, there's kind of twofold, So if we, if I go back to when we selected leverage as a partner, we would have customers reach out to us to check on product and product availability and when product was going to arrive and more than several times a week, we would hear from the supplier. we never received the PO, if the customer doesn't reach out for three or four weeks, sometimes you'd be four weeks behind, Which is a horrible place to be from a customer service perspective. So this was really a customer service decision for us. And that happened all the time. But even now today, when we have suppliers that are new or we haven't put onto the Leverage process yet, we still have those same things happen, And only it's in a much more manageable scale because the majority of our POs are with those suppliers that are on Leverage.
Andrew Stroup (03:44)
That's great to hear that each PO line can cost around $150 of bottom line impact. what risks did manual tracking create for the margin, the customer promises, whether it's late shipments, wrong pricing, over time hours, how you're addressing that or ultimately trying to measure, where you were then and then where you want to be in the future with, partnering with Leverage.
Joshua Cox (04:09)
The $150 on average is, it's a big number when you look at the amount of POs that we cut, but the real pressure comes from customer retention, it's not the 150. That's the easy quantifiable number. But there are a lot of studies that show that 10 to 15 % of your customers are lost after the first late delivery. So if you think about that, you have the ability to churn 10 to 15 % of your customers on one late delivery. And that number goes up three or four X for late deliveries beyond one. So if you do retain the customer beyond one on the second late delivery, you're 35 to 40 % churn. And if you think about the value of a customer and what it costs to acquire a customer, that's where you really start to quantify a solution like Leverage and make it make sense. It's not the $150 times the 13,000 POs. That's a huge number.
It's really the 300, 400 customers that you have the ability to lose times 15, 20, $30,000 in spend per year, That's when the number really starts to climb. and you just want to be really mindful that that customer experience is where you're going to grow. That's how you grow your business.
Andrew Stroup (05:21)
100%. I think that you hit the nail on the head. That's something that we've seen as well, When it comes to the concept that the purchasing organization, supply chain, and even the suppliers have a direct impact to the bottom line and the sale side, which I think is massively critical. Stepping back here, walk me through the moment you chose Leverage, not choosing headcount or building in-house software or picking a classic EDI solution, what was that process to try to use Leverage to fix the PO visibility and supplier performance problem set?
Joshua Cox (05:53)
Well, EDI controls a couple of things, It's very much a communication platform directly to the ERP system. what it doesn't do is it doesn't give you a really easy to use visual way to manage the supply chain process. It's still dumping data back into the ERP at its heart. That's what EDI does. What Leverage allows us to do, and this is why we selected Leverage is, it really gives us that one place to go look and see all the information that we need to see in a really relevant format that eliminates wasted time for our buyers. so that's why we selected Leverage as a partner, but build versus buy is a unique proposition because we're a small independent family owned business.
And when you're talking about building something out internally, you now are responsible for the maintenance and the future development and bug fixes and all of those things. so to quantify, where does it make more sense financially for us? It was an easy decision. We felt really confident that Leverage was going to allow us to customize where we needed to. And we were not going to be responsible for the long-term management of the platform.
Andrew Stroup (07:06)
there's always those hidden costs right? And ultimately defining where you get the most value and does it actually fit your workflows, which, we've obviously been very fortunate and thankful to be able to partner with you. taking it a little further down the journey, Leverage goes live, were there any early signals that told you Leverage was working? whether it's buyer time saved or cost exposures, zero touch POs that you're like, wow, this is like magic. I'm kind of curious that discovery process as you ramped up using Leverage when you first got started.
Joshua Cox (07:37)
Yeah, one of the largest indicators for us that Leverage was going to be a success was on our longer line purchase orders where let's just say 40 line POs and there may be one item on that purchase order that has a price deviation. And when you would get an acknowledgement back from a supplier, you have to go through all 40 lines and match line for line for line.
When you start to multiply it across multiple POs its significant. And so we noticed almost immediately that our buyers had more time because Leverage was telling us where the deviation was and that's all we had to review. the most significant win for us early on was that time saving. It allowed us to really focus on other things that were impacting our business from an inventory perspective in-house.
Andrew Stroup (08:24)
I'd to pull that thread a little bit too. you talked about how you were able to now move into exception handling mode, have Leverage pick up those deviations and massively long PO lines in a single PO. Now that the buyers could stop having to chase confirmations, how has their day changed? What are they doing now with that extra time and how are they focusing or reinvesting that time to help support General Factory Supply?
Joshua Cox (08:35)
The number one place that we reinvest time is in negotiations and sourcing with other suppliers and trying to really understand where the spend is, which Leverage also allows us to see within the platform. So it's kind of, carrying on with the integration of, Leverage into our daily process. And it has allowed us to increase our margins at the surface level.
So from the sales perspective, the margins are probably about six to 8 % higher today than they were in 2022 when we started with Leverage. the other thing that it allows our team to do, and I think this is almost more important is the stress level of the team has come down significantly. And so their ability to relate and interact and work with the rest of the folks on our team, they're not constantly under that pressure where, they're snippy or they're struggling to manage their day to day Leverage has taken that out of play. our folks are much happier. So where we had a lot of turnover in the, in the purchasing area for a long time, we don't have any turnover now. We've not had any churn since we, moved to Leverage and I attribute a lot of that to Leverage just because again, it's reduced the stress level.
Andrew Stroup (10:02)
That's great. I love the multi-tiered stack of how it's been helpful. And that's ultimately what we strive for. You actually touched on a very good piece around the additional insights or visibility that you're getting in Leverage because now you have these workflows automated data being placed in the system. And now you kind of see this overall performance. I know in the past we've talked a little bit about supplier performance and how that's changed or evolved by using Leverage. What's the biggest impact has been and how that's helped drive the conversations with suppliers to support you and your goals?
Joshua Cox (10:38)
There's this unique proposition, when we meet with our suppliers as a large group and we're kind of going around and we're having these conversations about, spend and what, what we can do to buy more from them. it's always been this one way street. It's been really difficult to put the data together to be able to explain to the supplier, something more tangible than you're not doing what you should do or we're not getting product on time, Getting that data aggregated and being able to present it to the supplier was always difficult. I use Leverage now with the supplier. So I will pull up the dashboard, I'll show them the supplier performance. We can have conversations about it. We can get granular to a SKU level if we need to while we're having those conversations. And now it brings us and the supplier together so that they really understand this is a pain point, right? We are coming up short or there is an opportunity here to address something.
Andrew Stroup (11:33)
That's great. Ultimately, you want to be able to have that constructive conversation and be able to pull that thread. And I think that's been great to hear. It's been helpful. All right, last question before we wrap. For other distributors that are watching, like the members of Affiliated distributors, what's your advice to them as they look to solve this type of challenge?
Joshua Cox (11:53)
Yeah, what I would say is lean into your distributor partners, lean into companies like General Factory Supply and other partners and find out what they're doing. And I think what we know from doing that is that there are other affiliated distributor members that are on Leverage. They're affiliated distributor suppliers that are on Leverage, And so there's kind of this blend already in this work towards delivering a standard that AD holds the suppliers and the members to and Leverage wants to be a good partner in that and they've exemplified that to us and I think in my personal opinion is it doesn't have to be headcount versus automation I look at it as if we're automating where can I use that time I don't have to get rid of someone because I'm automating. that's not always organic to what we want to do. But how can I repurpose that time? And I think Leverage is going to allow you to really repurpose your purchasing team and supply chain teams time to really grow your business. And that's, the most important thing.
Andrew Stroup (13:01)
That's great. Well, love that last piece of advice there. And we agree it's ultimately supporting your priorities and the business' priorities This wraps another episode of Leveraged Supply Chains. Big thanks to Josh Cox for showing how General Factory Supply is bringing AI to the front lines of purchasing.
Fixing inbox chaos, accelerating confirmations and giving buyers the bandwidth to focus on strategic sourcing, as we just talked about. If you're any mid-market distributor or manufacturer exploring PO automation, Josh's playbook is a great starting point. I'm Andrew Stroup Thank you for tuning in. See you next time.