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DSG Branch

Operations Manual

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DSG Branch Operations Manual

CONTENTS

DSG Creating Value through Operational Excellence

Section 1 – DSG Overview

Section 2 – Branch Organization and Segments

Section 3 – Branch Management

Section 4 – Branch Sales Processes

Section 5 – Branch Operational Processes

Section 6 – Branch Pricing Processes

Section 7 – Branch Inventory Processes

Section 8 – Branch Warehouse Processes

Section 9 – Branch Financial Processes

Section 10 – Branch Human Resource

Section 11 – Branch Information Technology

Section 12 – Branch Marketing

Appendix

A.1 – Rules of Engagement between Branch/Segment/Corporate Teams

A.2 – Branch Month End Checklist

HOW TO USE THIS MANUAL:

The branch operational manual is to be used in conjunction with the DSG Groupnet. The

Groupnet is the DSG intranet where you can find more detailed procedures, processes, tutorials

and forms referenced throughout this manual.

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DSG Creating Lasting Value through Operational Excellence

There are many ways to create value for our customers, vendors and ESOP, at DSG; we create

long term sustainable value through a focused effort on operational excellence. To achieve

operational excellence in all DSG branches requires a set of proven process guidelines plus

employee owners with a passion for continued process improvement.

At the core of DSG we start with the “The Power Of We” … We go beyond making transactions

and create successful partner encounters. For our customers this means knowing that they are

going to get outstanding service no matter who they work with, what the job is or what product

they buy. Decisions can be made quicker, answers can be found faster and jobs can be done

better when working with a DSG branch focused on achieving operational excellence.

Equally important to our success is “The Power Of We” for our supplier partners. DSG creates

successful supplier encounters by having efficient processes and trained people they can work

with to grow markets and deliver solutions consistently in all locations.

The local branches will continue to have the flexibility to operate in an entrepreneurial manner

to meet unique market and customer requirements but must do so within a framework of

proven business processes needed for a well-run profitable branch and our growing company.

What follows is DSG’s Branch Operations Manual which provides these proven process

guidelines needed to create operational excellence and with it sustainable value for customers,

partners and employee owners.

Todd Kumm, Dan Miller,

CEO Dakota Supply Group Chief Operating Officer

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SECTION 1 – DSG OVERVIEW

What We Do

Since our establishment in 1898, we at Dakota Supply Group (DSG) have worked hard at making a name

for ourselves as a full-line distributor of electrical, plumbing, HVAC, refrigeration, communications,

utility, automation, waterworks, filtration and metering technology products and systems. We provide

innovative products and experienced service solutions for:

Electricians

Plumbers

HVAC/R technicians

Contractors

Communication companies

City utilities and rural cooperatives

Municipal and rural water systems

Electric, water and gas utilities interested in the latest in metering technology systems

Any company or contractor who utilizes filters and filtration systems

DSG offers more than 850 lines and more than 65,000 products. With our logistics system and broad

inventory, we can provide customers with same-day service by processing, picking and shipping an order

within minutes. We’re ready to serve our growing economy by working with our current vendors and

searching out new products and services that will help our customers grow.

Because of today’s rapid changes in our product lines and technology, we realize the importance of

continuing education. Our employees participate in training sessions and seminars to stay on top of

changes in product technology. This valuable knowledge is then utilized to better serve our customers’

needs.

DSG’s corporate headquarters are located in Fargo, North Dakota, with additional North Dakota

locations in Grand Forks, Bismarck, Minot, Dickinson and Williston. In South Dakota, DSG has locations in

Aberdeen, Sioux Falls, Mitchell, Pierre and Rapid City. DSG’s Minnesota locations are in Alexandria,

Bemidji, Burnsville and St. Paul. DSG has locations in Wisconsin in La Crosse, Madison, New Berlin,

Plover and Rice Lake. DSG also has locations in Montana in Bozeman, Helena, Missoula and Kalispell.

Core Purpose

In late 2010, DSG’s employee owners came together to introduce our Core Purpose Statement – a

statement that defines who the company is, differentiates it from our competitors and explains why

DSG exists for the customer.

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DSG’s core purpose is: To put The Power Of We in every interaction. Going beyond making

transactions and creating successful partner encounters in everything we do. With each employee

owner focusing on fulfilling this core purpose, DSG can reach its full potential – to become a partner

with each and every individual and company that it works with. As these partners succeed, so will DSG.

Why Encounters Are Better Than Transactions

Every time DSG interacts with a customer, one of three things can happen: our relationship with them

can become weaker, it can stay the same or it can improve. Mere transactions are not memorable and

have no positive effect on relationships. Encounters, however, have a lasting positive effect. They are

more than the trading of goods and services; they are meetings with a meaning.

What Does The Power Of We Mean To DSG Customers?

When we believe in, connect with and act on our core purpose statement, each of us recognizes a single

philosophy in regards to serving our customers – become a partner, then help that partner to succeed.

In practical terms, it means consistency and focused dedication in each encounter at DSG. Our

customers know that they are going to get outstanding service no matter who they work with, what the

job is or what product they buy. Decisions can be made quicker, answers can be found faster and jobs

can be done better.

It is critical for employee owners to share a common vision so that customers experience a consistent

high level of customer service. The Power Of We At DSG will act as our focal point for recalling and

reinforcing the specific values that are the foundation of DSG’s business philosophy.

DSG ESOP (Employee Ownership)

ESOP stands for Employee Stock Ownership Plan. Essentially, it means that DSG is owned entirely by its

employees. Dakota Supply Group believes that those who build the company should own a part of it,

sharing both in the company’s success and the responsibility for that success. What does that mean to

customers? When you deal with DSG, you are always working with the owner. That means better

service, higher standards and quicker decisions.

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SECTION 2 – BRANCH ORGANIZATION STRUCTURE

DSG and Typical Branch Organizational Structure

DSG introduced its new organization in November of 2011 with the heart of this change focused on the

Power of We. DSG's new organizational chart is a circular structure and is a great way to illustrate how

important our customers are. The outside of the circle is the largest part of the chart because it's the

most important. The folks on the front lines, from salespeople to receptionists to delivery drivers to the

warehouse team – they work with our customers every day and are mission critical to our success.

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DSG Business Segments

At DSG we don’t just supply products, we supply solutions. DSG’s segment focus is on creating

customer solutions through a combination of products, services and experts that help customers get

exactly what they want. These solutions are then delivered locally through the DSG branch network.

The eight business segments at DSG are:

● Electrical ● Plumbing ● HVAC/R ● Automation

● Utility ● Waterworks ● Metering Technology ● Communications

Segment Managers provide the leadership and strategic plan needed to profitably grow the overall

segment and are the voice of the company as it pertains to negotiations for programs that will benefit

the entire company. Segment managers work directly with the branch manager to identify local growth

opportunities to pursue with our key manufacturer, rep agencies and other supply and service partners.

They also work with the sales team within the branch so everyone understands the focus of the segment

at the branch and overall corporate level.

Segment managers are the voice of the company as it pertains to negotiations for programs that will

benefit the entire company. They are the primary relationship holder and also responsible for the

vendor scorecard. The vendor scorecard helps us focus on areas of improvement in our vendor

partnerships to make them more profitable for DSG. Key to the scorecard success is accurate and

complete information. Everyone at the branch level; branch managers, inside, outside, counter,

quotation sales personnel have a role to ensure we enter all bids and follow-up to maintain accurate

vendor scorecard information.

Segment Managers also plan and promote DSG and our vendor partners to our current and future

customers. This includes introducing new or existing products through the Spotlight, Connections

magazine or any other collateral material that have a direct benefit to the company. The segment

manager will maintain a marketing / promotional calendar and work with purchasing to ensure we have

product on our shelves to support the promotion.

Training is very important to develop the expertise needed in each segment. Segment Managers will

coordinate through the DSG training manager which manufacturers have factory schools and on-line

programs from industry associations that branch personnel should participate in. When visiting a

branch the segment manager will work with the branch manager on a curriculum for employees that

would develop the needed skills and knowledge for future advancement within that segment.

A more detailed description of the “rules of engagement” that help clarify the interaction and roles and

responsibilities between the branch associates and segment leaders is contained in the appendix.

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SECTION 3 – BRANCH MANAGEMENT

Branch Manager

Branch locations at Dakota Supply Group operate in an entrepreneurial manner within a framework of

proven business processes. This provides the flexibility to meet ever changing customer needs in local

markets with proven processes that provide the foundation for a well-run and profitable branch.

The Branch Manager is the local DSG leader within their market and tasked to ensure the profitability of

their branch. That being said, there are some processes and procedures that DSG has in place to

ensure operational consistency across all locations, benefiting our customers and associates.

These procedures provide operational efficiencies within your branch that reduce cost, help retain and

gain new customers, and create a positive work environment for our associates. It is the Branch

Manager’s responsibility is to oversee and to ensure the associates support these processes for the

continued success of our customers, and DSG.

Branch Management Processes

A. Edit Review Process - Daily

Sales orders and credit memos to be invoiced each day are presented in the morning via Mincron; refer

to figure below, and via paper printout. To view the daily edit, use fast path “OEC”, option 23 “Edit Batch

Inquiry”, and enter the branch number you would like to review. A hard copy of the report prints on a

designated printer at each respective branch by 8:00am.

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Referring to figure above and edit inquiry: an asterisk in the “BGO” column indicates the order came

from a back order; an “I” in the “lost” column indicates a lost sale due to insufficient stock; and a

highlighted gross profit number in the “GP%” column indicates all or part of the freight was prepaid by

DSG.

This is an important tool for the Branch Manager to assess the sales and credits at their location. Any

orders with a negative GP, or low GP, will be reviewed to ensure accuracy of billing. Any changes to the

sales order is done by the clerical associate, per the Branch Manager’s instructions.

As a branch manager, low margin items should be inspected for correct pricing, shipping terms, SPA

discounts and customer purchase history. GP improvements made through this daily inspection process

will increase the profitability of your branch. It is an important and proven process at DSG.

This tool also provides insight into inventory issues associated with items continuing to be on the

backorder list or being sold out of other locations. Further investigation of these items will ensure you

have the proper inventory items and levels in your branch needed to retain and grow customers.

B. Accounts Payable Vendor Invoice Entry Process -Daily

A clerical associate in each location is responsible for entering vendor invoices onto the A/P system. A

calendar has been set up by the A/P Manager informing all clerical associates of cut off dates for

entering invoices prior to the check run.

Date and entry accuracy are vital to ensure we are taking advantage of the cash discounts as provided

from the manufacturer. Missed cash discounts cost your branch and the company money. It is the

Branch Managers responsibility to understand which vendor cash discounts are available, when they

occur and to provide the local A/P process oversight needed to ensure they are processed.

The detailed process steps and job duties are posted on DSG’s “Group” net under Accounts Payable.

This is DSG internal intranet website for associates to get needed training and information.

C. Accounts Receivable Process - Daily

Branch Managers work daily with the Credit Department in setting up new accounts, managing accounts

with outstanding balances, defining accounts for sales territories, and maintaining the process set forth

by the Credit Department on proper credit procedures.

A clerical associate in each location is responsible for reporting and depositing any cash sales or money

brought in locally.

Detailed process steps and job duties are posted on DSG’s “Group” net under Accounts Receivables.

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D. Month End Checklist

At the end of the month a series of branch management reports are generated from MINCRON that

must be inspected and processed to close out open issues and to identify opportunities for continuous

improvement. The month end close out list of reports is included in Appendix 3.1. These reports will be

discussed in more detail in the subsequent sections this manual. Customer open orders and

backorders are discussed below:

D1. Open Orders and Backorders Procedures - Month End Checklist Report

Open order and open backorder reports (Mincron reports OEROOBEB and OERBOBEB respectively)

are generated monthly, prior to the 25th. The open order report, Appendix 3.2, is reviewed by the

inside sales associates (order taker) to identify orders and credits that may have been inadvertently

missed in the review process. Monthly review of this report is important to ensure DSG is billing our

customers in a timely manner. The open backorder report, Appendix 3.3, is used by the inside sales

associate to expedite open backorders and clear the system of old or invalid sales orders and

purchase orders.

E. Branch Manager Scorecard Review Process – Quarterly

The Branch Manager is the local DSG leader within their market and tasked to ensure the profitability of

their branch. As such, each quarter the Branch Manager reviews their key financial performance

metrics and quarter goals with corporate. This is process is aided with the use of the DSG branch

scorecard. See Below:

YEAR END

Example Branch

SCORECARD

J

A

N

F

E

B

M

A

R

A

P

R

M

A

Y

J

U

N

J

U

L

A

U

G

S

E

P

O

C

T

N

O

V

D

E

C

G

O

A

L

GP BUDGET

PPI

OPERATION EXPENSE

T & E

ROA

COOPERATIVE

FIVE FUNDAMENTALS GOALS (1st Quarter 2013) Achieved5,000 FT VIEW Yes/No

A. VISION

B. COMPETITORS

COMMUNICATING/LEADING

A. COMMUNICATING

B LEADING

TEAM BLDING & PS

A. TRAINING & HEROES

B. PROBLEM SOLVING

OUTSIDE SALES

A. TERRITORY ANALYSIS

B. ACTION SELLING

FINANCIAL ANALYSIS

A. COMMITMENT

B. UNDERSTANDING

OTHER

A. OTHER

VARIANCE ( YTD ACTUAL vs BUDGET)

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The top half of the scorecard provides the key financial metrics of GP Budget, PPI, Operations Expenses,

T&E and ROA. The definitions and formulas are defined in Appendix F.1. The bottom half of the

scorecard is for listing and tracking the quarterly goals. Goals should be structured against the principals

presented in the book “5 Fundamentals for the Branch Manager,” by Jim Ambrose. This is required

reading for all new branch managers to DSG.

F. Branch Manager Budget Process – Annually (starting in October)

Branch Manager establishes the yearly branch operating budget starting in October. The annual process

starts by working with the branch sales and segment managers to establish the first draft of the

business/budget. This is then reviewed with corporate, adjustments are made and the final plan for the

coming year established.

The two key tools used in the process are: 1) Branch Business/Budget Plan and 2) What-If

spreadsheet. These are included in Appendix 3.4 and 3.5

G. Branch Disaster Recovery and Business Continuity Plan

The Branch Manager is responsible for the local disaster recovery and business continuity plan. The

local disaster recovery team is comprised of warehouse, operations, clerical and safety and compliance

personal. The plan utilizes two major elements: 1) First call contact list of local authorities, contractors,

corporate disaster recovery team and all employees; 2) Checklist of responses needed for various

disaster scenario’s. These documents are maintained, both local and on the DSG GroupNet.

For a more detailed overview of the DSG disaster recovery and business continuity program please refer

to the DSG GroupNet.

Other Processes:

Other processes that require branch manager leadership include, sales management, order

processing, inventory management, warehousing, delivery and human resources. These are

contained in the subsequent sections.

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SECTION 4 – BRANCH SALES PROCESSES

The DSG Branch Sales Team is the engine of DSG’s business. The various DSG branch sales associates

are described first followed by the processes they use.

DSG Sales Associates

DSG’s sales team is comprised of counter sale, inside sales, quotations, outside sales and the sales

manager (at DSG this is typically a Branch Manager role). Each role overlaps in some regards, but each

has its own uniqueness and importance in providing service to our customers.

City Desk and Counter Sales

City desk, or counter area, is a main customer service center, as well as profit center for DSG. Sales

people at the counter work with customers stopping by the office for daily project needs, will calls,

general service support, and retail customers. City desk associates can take orders and inquiries on

any one of DSG segments and will utilize insides sales people for expertise in specific segments if

necessary.

Merchandising of product is the responsibility of the city desk associates with direction from the

branch manager and/or city desk supervisor. The city desk is a first impression for our customers.

Clean and well stocked shelves tell our customers we value what we sell. Merchandising displays of

new or seasonal items is integral to repeat customer business and attracting new customers.

Depending on the manufacturer, product displays and signage are provided free of charge, or a

required purchase. Vendor Co-op funds (marketing funds provided by the vendor to promote their

product line) can be used to purchase displays and signage.

Refreshments and snack(s) are provided to the city desk customer. A fountain pop machine,

donuts, popcorn, etc. are some of the common choices. The branch manager/city desk supervisor

works with the local suppliers to arrange delivery, replenishment and maintenance.

City desk hours vary from the regular office hours of 8:00am – 5:00pm, Monday through Friday. All

City Desk/City Counters open by or before 7:00 a.m., and some locations remain open after 5:00

p.m. depending on market, customer requests, busy season, staffing availability, etc. Some locations

may be on Saturday mornings from, 8:00 a.m. to 12 noon. The Saturday shift is staffed by city desk,

inside sales and outside sales personnel, on a rotating basis. A six month work schedule is sent out in

advance to allow for resolution of scheduling conflicts.

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Inside Sales

As an inside sales associate for DSG one of the most important responsibilities is the ability to

effectively interact with internal (fellow associates), and external (contractors, manufacturer’s, and

manufacturer’s reps.) customers. This is done in several ways including phone skills, e-mail

etiquette, verbally, professionally prepared bids, etc... Listening and communicating with customers

and co-workers is invaluable.

The primary functions of the inside sales person include: writing orders; supporting incoming calls

related to price checks, inventory availability (stock and non-stock), product support, order status,

and delivery; preparation of sales proposals based on customer needs and expectations, and

general quotes using the Mincron system. Providing sales support to the outside sales associates is

an integral part to servicing our customer and building a trusting, long lasting partnership. By

working together, the inside and outside sales associates can identify what a customer isn’t

purchasing from DSG, why, and work to turn that into DSG business.

Participation by the inside sales associate in ongoing product training programs, via instructor led or

using online resources allows DSG to educate customers to create product awareness,

understanding and solutions. Well trained and knowledgeable associates are a key service that adds

value to what we do at DSG.

An ability to work independently, but in a team environment is very important at DSG. The people at

DSG make the difference! Listen, identify needs, then work together with the customer to find the

right solution whether it's a product, a person, or a training program. Be resourceful.

Quotations

Quotations associates serve an integral role for our customers by providing timely project

quotations or information on products and services. They work with manufacturers and provide

saleable features, quote prices and credit terms to customers.

Quotations personnel provide valuable services including the procurement and submittal of plans,

quoting and ordering of materials, tracking and following up on orders placed, developing vendor

relationships, tracking win/loss data, and using manufacturer resources to identify appropriate

products and establish technical expertise.

A quotations person is also responsible for managing vendor and customer contact lists,

understanding freight terms, using quote management software, communicating trends, and

making use of internal resources.

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Outside Sales

The role of the outside sales associate is to provide solutions to our customers, and help them to be

profitable. The ability to identify with the customer and their business enables the outside sales

associate to build a strong DSG partnership.

Responsibilities of the outside sales associate includes, but not limited to: planned, in-person calls

to each customer on a regular basis (weekly, bi-weekly, etc.); product sampling; product solutions;

maintaining profitable pricing levels; request and maintain customer SPA’s (Special Pricing

Agreements with the manufacturer); sales calls with manufacturer’s reps; working as a team with

the inside sales/quotations on key projects and bids; DSG Services (web commerce, customer

trainings, etc.); and activities with the customer to grow sales and strengthen the DSG relationship.

As with the inside sales associate, outside associates need to possess excellent communication skills

and product knowledge. The customer’s sense of value in what DSG offers is based on what services

we can offer to increase their profitability, or reduce cost. Participation in product trainings, trade

shows, sales skills programs, and personal development are ongoing and part of the outside sales

curriculum.

Travel within your sales territory is expected and may require overnight stays. These evenings can

be an opportunity to engage the customer is a social function, away from the office, to get to know

the customer better and further strengthen the relationship.

The customer is the most important part of our business and well planned sales calls are a key to

developing that customer to their fullest potential.

Sales Manager (Branch Manager)

The Branch Manager at DSG typically also performs the duties of the local sales manager. These

duties include assigning customer accounts to the outside sales reps and managing the entire sales

process. A typical sales management checklist of duties includes:

Sales Management Checklist:

1. Require sales people to analyze their accounts to determine sales potential 2. Require sales people to analyze their accounts to determine what isn’t selling 3. Analyze the accounts yourself to establish the branch level commitment objectives 4. Require sales people to develop commitment objectives for each account 5. Plan joint sales calls with Mfg. Reps to assist in conversions 6. Weekly “Plan the Call” Reports – Commitment objective for all assigned accounts 7. Weekly “Replay the Call” Report - Follow-up on weekly objectives 8. Analyze the plans and reports to determine what accounts are actually being seen 9. Spontaneous travel and planned travel – join your sales person on calls 10. Manage sales expense budget 11. Measure success and report it

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Outside Sales Processes Action Selling

The sales process used by DSG is based on Action Selling. All outside sales associates and branch

managers are required to attend the action selling training program. The basic process steps used in the

action selling process are shown below:

As part of the action selling process, call planning and replay the call reports are used as part of the sales

process to improve sales productivity. These forms can be found on the DSG Groupnet.

Monthly Sales Reporting

All outside sales are required to provide an electronic monthly report of sales activity using the Pronto

Forms application on their iPAD. A detailed tutorial of how to setup and use pronto forms for sales

reporting is found the DSG Groupnet.

Territory Sales Budgeting Process - Annual

All outside sales are required to provide yearly sales and gross profit budgets for their entire territory.

This is a combination for all accounts assigned plus new account development planned for the year. A

detailed tutorial of how to setup a territory sales budget can be found the DSG Groupnet.

Account Planning - Annual

All outside sales are required to develop account sales plans for all assigned accounts that compose 80%

of the GP dollars from last year plus an additional 1 to 3 target accounts with the highest real potential

for growth. These forms are part of the pronto forms application set on the outside sales iPAD. A

detailed tutorial of how to setup and use pronto forms for sales reporting is found the DSG Groupnet.

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Inside Sales/Quotations/Counter - Processes

These processes are very specific to Mincron and are described in detail on the DSG Groupnet under the

Mincron tutorials. All sales associates involved with these processes should become familiar with these

training modules which include:

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SECTION 5 – BRANCH OPERATIONAL PROCESSES

Branch Operational Processes (Key Franchise Builders)

Successful DSG branches manage and continually improve several key processes that run throughout the

entire operation. The processes most valued by our customers and the ones that create the DSG

franchise brand promise include:

1) 100% Order Accuracy – From order entry through order delivery

2) Top Stock Guarantee - Having inventory on the shelf most often requested by customers

3) Stock Return Guarantee – Issuing customer credits in 2 business days for re-sellable stock

These three processes form the foundation of the DSG customer service guarantee. The process steps

and measurement tools used to continually improve these three branch processes listed below.

100% Order Accuracy Process

DSG is committed to providing 100% Order Accuracy to our customers. Therefore, DSG guarantees that

the items and quantities ordered will match what you receive. If we do not deliver on this promise, you

will receive a $25 Customer Service Guarantee Certificate. The process steps that must be followed

within the branch to achieve this 100% level of accuracy are:

PROCESS STEP 1: Inventory Receiving and Storage

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PROCESS STEP 2: Order Entry

PROCESS STEP 3: Order Picking

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PROCESS STEP 4: Double-Checking Picked Orders

PROCESS STEP 5: Shipping … via Deliveries with Our Trucks

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PROCESS STEP 5: Shipping … via Will Call (Staging Process)

PROCESS STEP 5: Shipping … via Third Party Carriers (UPS, Spee-Dee, etc.)

… (Customer Arrives For Pick-up at City Desk)

*Ensure customer signature is captured at time of pickup

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PROCESS STEP 5: Shipping … “Ship Complete Reserves” and “Reserved Orders”

PROCESS STEP 6: Returns and Credits

Order Accuracy is a measurable, controllable, and manageable process. The tools used to measure this

process are contained on the DSG Group net. Every branch assigns a key associate “branch champion”

to watch over these measures and help the branch continually improve until 100% order accuracy is

achieved.

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Top Stock Guarantee Process – The right inventory on the shelf at the right time

DSG is committed to having our Top 200 stock products on hand most requested by our customers. If

we do not deliver on this promise, our customers will receive a $25 Customer Service Guarantee

Certificate.

The purchasing department drives this process with help from the local branches. The purchasing team

identifies the top 200 items to stock across the company (some regional variations will exist on brands

but the items are basically identical).

Purchasing adjusts the safety stock, lead time and EOQ in Mincron on these items to ensure a 100%

service level is maintained in all branch locations. Once established, continued monitoring of service

level & stock out performance of top stock items is managed by the individual purchasers for those line

buys.

At the branch level it is important to track lost sales and make sure lost sales are entered by associates

in Mincron. An easy-to-follow tutorial is available on Groupnet for entering lost sales. Also sales staff

should be trained on not taking all items from stock if the contractor can’t install them all at one time...

(Ask if you can give them the rest of the material at a later date when it is needed). Finally, the sales

staff must notify purchasing department immediately when stock-outs and shortages occur.

This branch process is a subset of the larger inventory management and control process discussed in

detail in the Branch Inventory Process section of the operations manual.

DSG’s Stock Credit Returns Guarantee Process

We will post saleable stock item returns to customer accounts within two business days from the CSG

date on the credit or RMA form. If we do not deliver on this promise, our customers will receive a $25

Customer Service Guarantee Certificate. To ensure this occurs:

1. Returns need to be processed within 2 business days of returned material arriving back at the

branch.

2. Ensure that salespeople are using the correct reason codes for each item being returned

3. If returns of stocked items are not completed with 2 business days of receipt of goods, we will

be issuing a $25 gift certificate so it is critical to pay attention to the timeline.

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Stock Items Credit Guarantee Process Steps:

Emphasis is on making sure that salespeople are entering returns using return authorizations or a

“pending return”. When return authorizations are entered, it is critical that salespeople use the

“promised ship date” as the ETA date of the material arriving in your branch for return.

Again the branch champion has a critical role to work with the branch manager to monitor and control

this process utilizing the tools available on the DSG Groupnet.

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SECTION 6 – CUSTOMER PRICING PROCESSES

Mincron’s pricing is a systematic process consisting of ten components that determine a specific

customer’s price on a specific, in stock, product. Pricing components include: item master, price sheet

matrix, discount profiles, contracts, promotional price sheets, and manual price overrides all shown in

the following pricing hierarchy:

Figure 6.01 – Mincron Pricing Hierarchy

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6.1 Pricing System Basics

For the pricing system to work effectively, the bare minimum that needs to be established are item

masters, price sheets, price sheet matrices and discount profiles. Different “base codes” may be

referred to in this section, accompanying screen shots and tutorials. Base codes are used in most of the

pricing system components with discounts and multipliers to determine customer prices. Here is a

description of each Mincron code used in pricing:

M or ML…………. Manufacturers List L or OL……………. Our List

T or TR…………….Trade Price, DSG’s 4th best price C or MC ………….. Market Cost (or C can also refer to “current” for price sheet status) R or RC…………….Replacement Cost 1 or P1…………….Column 1 Price, DSG’s 3rd best price 2 or P2…………….Column 2 Price, DSG’s 2nd best price 3 or P3…………….Column 3 Price, DSG’s “best” price A……………………..Appropriate Column (pricing based on qualifiers like quantity or weight) Words a person may here frequently in pricing are matrix or matrices which refer to a vendor price sheet’s combination of P3, P2, P1 and TR. Example of a cost plus matrix is shown in figure 6.02 and a discount off our list matrix example in 6.03.

Figure 6.02 – Price Sheet Cost Plus Matrix Vendor price sheets are the foundation for all other levels of pricing within Mincron. Items are first loaded into Mincron by DSG’s purchasing department, assigned a section-group-category and placed on a vendor price sheet.

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Figure 6.03 – Price Sheet Discount Matrix

Any specific vendor can have multiple price sheets while any particular item can only be located on one specific vendor’s normal price sheet and/or several regional price sheets. Normal price sheets cover all of DSG’s branches while regionals allow for specific branches or groups of branches to have unique pricing structures if necessary.

Vendor price sheets allow for the definition of six prices: manufacturer’s list, our list, trade, column 1, column 2, and column 3. Mincron does not require that each category contain a value (but we are doing ourselves a disservice by not doing so). The prices that fall under each one of these columns in a vendor price sheet are not directly assigned to a customer (i.e. customer ABC is on vendor XYZ’s column 2.) Instead, specific customer pricing is established through the use of discounts, profiles, and contracts which collect their information from, or make reference to, the numerous vendor price sheets.

Therefore, it is crucial that group managers, purchasing and pricing personnel work together to set appropriate price levels when a vendor, or new product, are first created/loaded in Mincron in addition to setting the products appropriate section-group-category. By doing so, pricing down-stream is more congruent and manageable.

The DSG Groupnet contains a more in-depth pricing document and should be referenced for more detailed guidelines for managing customer pricing profiles.

SPA Contracts and Rebate Process Overview

In wholesaling, SPA is an acronym for “special pricing authorization” or “special pricing agreement.” An SPA is an agreement between a manufacturer and distributor in which a discounted cost, below an established day-to-day distributor stock purchase price (DSG’s replacement cost) is granted to meet a competitive situation.

DSG SPA contract and rebate processes training tutorials can be found on the DSG Groupnet under

“Pricing>Vendor Rebate Process.”

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SECTION 7 – BRANCH INVENTORY PROCESSES

Inventory at a local branch is stocked to meet the local or regional needs of customers assigned to each

respective branch. DSG’s segment managers determine the manufacturers or vendors DSG works with

while branch managers, with input from segment managers, determine what product to stock at their

branches respectively. Branch managers, segment managers and the chief segment office collaborate

on whether to stock products of a specific segment or not as not all branches will carry products from

each of the segments DSG conducts business in. Some of the specific processes and tools regarding

inventory management and control are discussed below.

A. Adding Items at a Branch

Items added to inventory will be approved by the Branch Manager, before forwarding to Purchasing.

The Rules of Engagement (Appendix 1.1) define what vendors/items can be added to inventory. A new

item request form (Appendix 5.1), must be filled out in the process and given to the purchasing

department for item setup in Mincron.

B. Inventory Performance - ABC Inventory Listing Report

The ABC rank of an item is an indication of its relative importance to a DSG Branch. DSG uses margin as

the primary way to rank items. It is the margin based ABC rank that appears on most reports and

inquiries. For each criterion, Mincron assigns a letter grade A through M (not including D) based on the

rank of the item. The letter grades are assigned by DSG as follows:

A= the top 7.5% of items

B=the next top 7.5% of items

C= the next 10% of items

E= the next 8% of items

F= the next 8% of items

G= the next 8% of items

H=the next 8% of items

I= the next 8% of items

J= the next 8% of items

K= the next 8% of items

L= the next 8% of items

M= the last 8% or portion of items

It is important to remember that the ranks are divided by the number of items. As an example, if a

branch stocked 1,000 items, the 75 (7.5% of 1,000) that generate the most gross margin would be

classified as “A”, the next 75 would be “B”, etc.

A very significant observation is that historically “A” items, while being only7.5% of our items, generate

roughly 65% of our gross margin. This number can change over time, and is also dependent on the

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Makeup of a branch’s inventory as well as the gross margin DSG is able to earn on these items. There

are branches where the gross margin contribution of “A” items is actually much greater.

Using historical data, the corporate average gross margin contribution of A, B, and C items together is

approximately 88%, even though they account for only 25% of the items stocked. In other words, 75%

of the items DSG stocks only contribute in total only 12% of our total gross margin on average – Pareto’s

80/20 rule. This reflects the importance of the ABC rank as a tool to help both inventory and sales

efforts at a branch.

The “D” code is reserved for items that have had no sales in 12 months. This list consists of items that

are non-returnable as well as items that even though are classified as “D” we stock for customer service.

A general guideline to use when reviewing and maintaining this list is that the “D” item total be no more

than 3% of total inventory dollars. For those items that are non-returnable, other avenues are used to

divest the inventory including, but not limited to, Industry Clearing Houses, donating to trade schools for

in class training, reducing sell, etc.

C. Inventory Item Performance Inquiry

To view, within Mincron, item level performance and its turn and earn index (T&E) at a branch, use fast

path “IMI”, option 2 “Branch item master”, enter a branch number and product number, and <F20>

“Performance” from the “Branch Item Inquiry (Header)”. The first page a person will see is the branch

item inquiry header screen, figure 5.1, with general information regarding the item for the specific

branch such as quantity on hand, weighted average cost, and sales information.

Figure 5.1 Branch Item Inquiry Header

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From the branch item inquiry header screen, using <F18> “Performance” will provide a person with

more inventory related performance information such as its ABC rank at the branch, turns, service level,

and the item/branch specific turn and earn index, see figure 5.2 for an example.

Figure 5.2 Branch Item Inquiry Performance Status

To view the entire performance of a line or vendor use fast path “IMI”, option 3 “Branch/buyer/line

performance”, select a branch (overview of branch performance given here), use <F14> “Buyers”, select

a buyer, use <F14> “Line buys” to view the performance of specific lines at a branch.

For more information and explanations of financial terms see appendices A.7 for terminology, financial

formulas, and turn and earn examples.

D. Cycle Counting - Daily

Inventory is counted daily, a report of items counted in the warehouse for that cycle (day) identifying

inventory discrepancies. Warehouse Manager (whomever is in charge of the count) will follow up on

discrepancies to determine the cause (picking error, receiving error, etc.). A report is forwarded to

Branch Manager to review and follow up on overages and shortages.

Each item in the warehouse must be counted a minimum 4 times throughout the year. By counting

daily, any discrepancies in inventory are caught and resolved sooner then would be if only done once a

year. It also negates the need for an annual count.

See Appendix A.5 for details on how to set up cycle counting in the branch. The Mincron tutorial on

Cycle Counting can be found on the DSG Groupnet.

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D. Negative On-hand Inventory Report – Review Weekly

Procedure for checking items with Negative On-hand values must be done weekly. We should never have items with negative on-hand quantities. When an item does show a negative, it means one of two things happened: either we sold an item we did not show on inventory or we wrote up a ticket for the wrong item. In either case, we need to check out what happened and fix the negative. These should be checked on and corrected once a week. Following are the procedures to be used to check items with negative on-hand counts.

1. Go to fast path IVI (Inventory Control inquiry). 2. Select option 5 (Branch negative on hand). 3. Put your branch number in the proper field and hit enter. The computer may go to a blank screen for a minute or two while it searches for items. Do not hit any other keys. Your negative items should appear shortly. 4. From this screen you can inquire to one of two screens by placing the appropriate letter in the select field:

S will take you to a stock status screen L will take you to the item ledger

These screens may be helpful to you to figure out how the item went to a negative. 5. If you can’t figure out what happened by looking at the sales and receiving history, you must do a physical count of the item. It may be helpful to do a screen print of all negative items so you only need to go to the warehouse once. 6. To correct the inventory, you may need to do a customer credit (if the wrong item was charged on a ticket) or do a physical inventory adjustment. If you do a physical adjustment, be sure to account for the negative amount as well as any material you have in stock.

D. Backordered with Stock on hand Report – Review Weekly

Items that have backordered quantities while we show stock on hand occur occasionally. When this happens, it usually means one of two things. First, it could be that an order was put to backorder because the person pulling the order could not find the inventory we show in the computer. Second, and more rarely, an order is put to backorder the same day new stock arrives from the factory. Either way, we generally don’t want to backorder material if we have sufficient stock to fill it. Each branch needs to check for these weekly. Following are procedures to be used to check for backorders with stock on hand.

1. Go to fast path POM (Purchase Order Maintenance).

2. Select option 21 (Fillable Backorders by Branch).

3. Put your branch number in the field and hit Enter.

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4. From this screen, you only have two options.

F will release the backorder ticket to print so the warehouse can fill the order.

I will take you to the order inquiry screen.

*** Any other values in this field will cause a system error. There are no prompts telling

you what you can use, so please keep this in mind. ***

5. You may want to look at the individual items before releasing all backorders. For instance, a

ticket may have been backordered on purpose because we are not delivering it for a few weeks.

You may need to check with the order-taker to see if there are any conditions. You may also be

able to tell this from order inquiry under the special instructions field.

6. If an item was backordered because we did not have stock to fill it and the inventory count

has not been adjusted, you must do so.

7. If you find sufficient stock and see no reason why the order is at backorder, release the order

and ship as usual.

Inventory is DSG’s largest asset. It is critical to the success of our business and when done properly,

provides customers with the products when and where they need them. It needs to be managed daily

and controlled properly to ensure our ESOP is getting maximum return for this investment.

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SECTION 8 - BRANCH WAREHOUSE PROCESSES

At DSG our cash is the same as inventory. Inventory is where we have our single largest investment.

A bank stores its cash in the vault. DSG’s vault is our warehouse and should be managed the same

way as a bank vault. We should know exactly how much we have, where it is stored, how to keep

track of it, and how to keep it safe … don’t let unauthorized people wonder through your vault.

Warehouse Layout

The layout of the warehouse is done in a manner to create the most efficient use of space for product

and equipment, as well as shorten picking and travel time. Items that are not picked often, or due to

physical size/ volume, are stocked on higher shelf locations. The items picked most frequently are in

easy to access, lower locations. All Rows and shelves are clearly labeled to facilitate timely and accurate

picking. Seasonal items are rotated appropriately based, of course, on season.

Once the warehouse is setup, it must be kept clean and clutter free. In a clean and clutter free

environment inventory (our cash) is easier to control and keep safe. This simple process of keeping the

warehouse clean should be top of mind and a priority for all our warehouse associates.

Warehouse Procedures

Inventory is one of the largest assets of a branch. Proper receiving, picking, checking and shipping of

items is vital to successfully manage the inventory. These processes ensure that our customers receive

the correct material, in good condition and in a timely manner. As well as providing efficiencies in the

warehouse to cut cost and increase branch profitability.

The following warehouse procedures and best practices are defined in detail on the DSG Groupnet.

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The related on-line Mincron training is available via the DSG Groupnet and includes:

DSG Warehouse RF Bar Code Scanning – Mincron Warehouse Assistant

Warehouse Assistant is DSGs wireless automation of general warehouse activities with enhanced RF

capabilities. All DSG branches utilize RF Bar Code scanners in the warehouse process of receiving

purchase orders and transfers, put-away, picking and shipping. The system allows verification of

locations and items, RF updating of the vendor UPC codes, bin cycle counts and item profile

maintenance via RF. The system is completely integrated into Mincron and improves both accuracy and

efficiency of the warehouse operations.

The DSG MIS department is responsible for implementing the technology and conducting the training of

our wireless bar code scanning capabilities. An on-line tutorial is also available via the DSG Groupnet.

Cycle Counting

Cycle Counting is performed on a daily basis. Each item in the warehouse must be counted a minimum 4

times throughout the year. By counting daily, any discrepancies in inventory are caught and resolved

sooner then would be if only done once a year. It also negates the need for an annual count. Tutorials

on these procedures can be found on DSG’s Group Net.

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DSG Truck Delivery Routes

Efficient truck routes provide the customer with timely deliveries. The branch manager works with the

warehouse supervisor/lead, or delivery driver, to identify routes that are customer service driven, yet

are within the guidelines of the DOT hours not to be exceeded by a driver in one day. The delivery

routes for each branch can be found on the DSG Groupnet.

Third Party Shipping and Delivery Services

Delivery services and freight carriers DSG uses for delivering orders to our customers can be thought of

as an extension of DSG’s service. While considering economical choices, DSG prefers to work with

reputable carriers to ensure product is delivered in a timely and professional manner with little to no

breakage.

DSG utilizes both local and national shipping carriers for receipt and delivery of product. Logistic

Planning Services (LPS) is a third party logistics company that allows us instant access to shipping rates

and control over our inbound and outbound shipments.

The LPS process tutorials and forms are found on the DSG Groupnet and include:

Mail Services

Intercompany mail bags are used to transfer documents between branches/corporate and are delivered

through the USPS.

Equipment Purchases

Major equipment purchases such as, fork lifts, delivery trucks, wire handling equipment, etc. are

forecasted and included in the Branch budget. Smaller equipment including office printers, or

warehouse tools, can break down without any prior indication and are replaced as needed.

Building additions and major improvements are part of capital improvements and are forecasted and

budgeted for during the budget process.

Unexpected major purchases will occur. The COO and CFO should be kept abreast of the purchase to

help facilitate with any leasing, or buying decisions.

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Considerations in Purchasing Equipment

It is recommended best practice to purchase these items from a local supplier if possible, to ensure

service, replenishment and repair or maintenance. Some items of larger dollar value, such as fork lifts,

copiers, etc. will require a lease agreement and the Chief Financial Officer should be consulted prior to

purchase so as to arrange, or review, the lease agreement.

Routine Maintenance and Remodels

When faced with maintenance or remodels of the branch it can be difficult to identify a

contractor/customer to do the work - concern in choosing one contractor customer over another and

the repercussions that can come with that. In large project situations such as building additions or major

remodels the project will, in all likelihood, be bid which takes the selection process out of the picture.

For general maintenance it is best judgment on the part of the branch manager on who to hire.

Branch Delivery Vehicles

Most, but not all, branches will have a vehicle for city deliveries and one for longer haul, route

deliveries. Different vehicles may be required at different branches depending on the market segment(s)

the branch conducts business in. Following is a general process of acquiring and maintaining trucks:

1. Contact your nearest dealer for a quote on the type of delivery vehicle required. A dealer will

also be able to assist with the box and/or trailer. Work with DSG’s CFO to arrange leasing of the

vehicle. Licensing and insurance must be in order before operating the vehicle. The human

resource manager and CFO will assist with the purchase and ensure the proper paperwork has

been completed.

2. Contact the marketing coordinator to arrange for graphics to be applied to the vehicle. As well,

any DOT licensing numbers will be done at this time and be displayed on the side of the vehicle.

3. Depending on the type of product stocked at the branch, most branches utilize an enclosed

trailer or flatbed. Systems are available where the box and flatbed are interchangeable on the

chassis, allowing for greater flexibility in the product that is carried. Trucks over 26,000# gross

weight require a commercial driver’s license (CDL). All trucks over 12,000# gross weight require

the driver to have a medical card.

4. Normal maintenance of DSG delivery vehicles is usually performed at the dealership where

purchased, this includes a yearly DOT inspection. When identifying where to purchase your new

delivery truck, consider hours of operation and service guarantees. These are important to

ensure that down time of the vehicle is kept to a minimum, when repairs or general

maintenance is needed.

5. Branch managers or warehouse supervisors can set up a charge account for delivery truck fuel at

one of the service stations in your community and/or delivery area. Request a credit application

and forward on to the accounts payable department to complete and set up the account. Once

the account is established, the service station will forward a fuel card. All fuel receipts are kept

by the driver and turned in to office personnel so they can be reconciled against the statement.

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SECTION 9 – BRANCH FINANCIAL PROCESSES

Branch managers are ultimately responsible for the financial performance of their respective branches.

However, cooperation between segment managers, purchasing agents, pricing manager and sales

associates ultimately contribute and determines the overall branch performance. Monthly income

statements and budget reports are emailed to each branch manager roughly one month after the close

of a financial month.

A. Branch Financial Meetings

Quarterly, if not monthly, financial meetings will be held at all branch locations, by the respective

branch manager, to discuss recent sales and financial related information with all branch associates.

DSG allows associates to see most financial data as the health of DSG’s ESOP is everyone’s concern and

in their best interest. Some of the key financial ratios and calculations used in measuring both company

and branch performance can be found in the appendix.

B. General Ledger Accounts and Inquiry

Branch and segment managers can review expenses by using Mincron’s general ledger inquiry, accessed

by using Mincron fast path “GLI”, option 1 “general ledger accounts”. Figure 4.04 shows the account

prompt screen from GLI.

Figure 4.04 – General Ledger Account Prompt

At the account prompt screen enter the branch and/or department and then a specific general ledger

account to review. If a person wants to see all general ledger accounts then leave the account prompt

empty. Finally select the month and year to review.

General ledger inquiry is an excellent tool for reviewing all expenses and sales adjustments related to a

branch or segment.

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C. Sales Analysis Inquiry

Another useful financial tool in Mincron is sales analysis inquiry, accessed with fast path “SAI”. The

options available can be seen in figure 4.05. With this tool a person can review sales at the company

level, branch level, segment level, by sales person, or a combination of branch and segment for example.

Daily, monthly and yearly data is available along with month-to-month or year-to-year comparisons.

Figure 4.05 – Sales Analysis Inquiry Menu

D. Accounts Receivables (AR) Processes

Branch Managers work daily with the Credit Department in setting up new accounts, managing accounts

with outstanding balances, defining accounts for sales territories, and maintaining the process set forth

by the Credit Department on proper credit procedures.

Detailed accounts receivable processes and forms can be found the DSG Groupnet and include:

Billing Misc. Labor/Expense/Material

Charging Tax to Customers

Credit Card Guidelines

Finding Customer Names

Forms

Fraud Control Basics - Card Not Present

Fraud Prevention Tips - Courtesy of the NOVA Loss Prevention Team

Maintenance Form

Market Class/Codes

Month-End cut-offs 2013 & Mincron AR aged screens

Tips to avoid credit card fraud

Who to call (DSG A/R team)

A/R Manual (view pdf or download)

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E. Accounts Payable (AP) Processes

A clerical associate in each location is responsible for entering vendor invoices onto the A/P system. A

calendar has been set up by the A/P Manager informing all clerical associates of cut off dates for

entering invoices prior to the check run.

Date and entry accuracy are vital to ensure we are taking advantage of the cash discounts as provided

from the manufacturer. Missed cash discounts cost your branch and the company money. It is the

Branch Managers responsibility to understand which vendor cash discounts are available, when they

occur and to provide the local A/P process oversight needed to ensure they are processed.

The detailed steps are posted on DSG’s GroupNet under Accounts Payable and include:

1. System Overview 2. Accounts Payable Documents 3. Accounts Payable Inquiries 4. AP Decision Support Queries 5. Entering an Invoice 6. Petty Cash 7. Discount Terminology 8. General Ledger Coding 9. Vendor Returns 10. Rebates 11. Reports to Work 12. Appendix 13. On-line Forms

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SECTION 10 – BRANCH HUMAN RESOURCES

A wealth of information already exists regarding human resources and it is not the intent of the

operations manual to duplicate the effort of these existing resources. Instead, mention of common

procedures will be done here while reference to the other resources will be made and what a person

can find within each.

Equal Employment Opportunity (EEO)/Affirmative Action (AA)

Dakota Supply Group is committed to providing Equal Employment Opportunity (EEO) to all employees

and applicants for employment, in accordance with all applicable Equal Employment

Opportunity/Affirmative Action (EEO/AA) laws, directives, and regulations of federal, state, and local

governing bodies or agencies.

Employment decisions at Dakota Supply Group will be based on merit, qualifications, and abilities.

Dakota Supply Group does not discriminate in employment opportunities or practices on the basis of

race, color, religion, sex, national origin, age, disability, or any other characteristic protected by law.

Reasonable accommodations will be made for qualified individuals with known disabilities unless doing

so would result in an undue hardship. This policy governs all aspects of employment, including

selection, job assignment, compensation, discipline, terminations, and access to benefits and training.

Any employee with questions or concerns about any type of discrimination in the workplace is

encouraged to bring these issues to the attention of their immediate supervisor or the Human

Resources Department. Employees can raise concerns and make reports without fear of reprisal.

Anyone found to be engaging in any type of unlawful discrimination will be subject to disciplinary action,

up to and including termination of employment.

Hiring Process

Hiring employees is a process that occurs frequently at DSG by those in managerial and supervisory

roles. DSG’s standardized process can be found under the HR portion of DSG’s Group Net and the

password protected link “Manager Forms and Information”.

An overview of information included in this section is shown below:

1) Preparation – Getting ready to post a job opening by supplying information on the title, location, job duties,

skills and education requirements and so forth so that HR can advertise the job.

2) Recruiting/Application Process – Includes a pre-employment test all applicants not currently working at DSG

must take, and employment application, and internal job posting application.

3) Interviewing – Provides sample interview questions as well as profiles and assessments used (Caliper,

Winslow) to help select qualified candidates.

4) Selection of Finalists

5) Offering the Position – Understanding DSG’s drug policy, drug testing for DOT and non-DOT job offers, and

driver qualifications.

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6) Critical First Days on the Job – New employee instruction, information, and orientation packets and programs.

7) Training – Available curriculums, Sales READI and Next Step READI programs.

8) Career Path

9) Coaching/Feedback

The DSG Human Resource Department updates and enhances the contents of this site regularly. Those

who have access to this secure site are encouraged to visit this site each time you are performing the

“Hiring Process”.

Exempt or Non Exempt Employee Status

Employees whose jobs are governed by the FLSA are either "exempt" or "nonexempt." Nonexempt

employees are entitled to overtime pay. Exempt employees are not. Most employees covered by the

FLSA are nonexempt. Some are not.

Some jobs are classified as exempt by definition. For example, "outside sales" employees are exempt and others such as "inside sales" employees are nonexempt. Questions relative to employee exempt or nonexempt status should be directed to the DSG HR Department.

Performance Reviews

DSG Associates will receive an employee focus form, to be completed by them in preparation for a

formal performance review with their branch manager. Typically that form will be mailed from DSG HR

department during the associate’s anniversary month. It is expected that the associate will complete

their focus form within two weeks of receipt. It is then up to the associate to set up a time with their

branch manager for the formal review.

Your manager will have a Performance Review Form which will be partially completed by him/her prior

to your formal meeting. After a thorough review of your Focus Form, he/she and you will complete the

remaining portions of the Performance Review Form during the review meeting. You will have a chance

to review the completed Performance Review Form and will have the opportunity of offer your final

comments.

Once the Performance Review Form is signed by all parties, your Employee Focus Form will be attached

to the Performance Review Form and will be kept in your personnel file in the HR Department.

Please be reminded that the Performance Review process is separate from any Wage/Salary Review

process. While performance factors are indicators used during wage/salary reviews, the two activities

are separate in terms of timing.

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The performance review process is very important to your success at DSG. Please take the necessary

time to complete the various forms accurately and candidly. Realize also that this is a time to offer

comments/suggestions to your manager so he/she can better perform their duties and responsibilities.

Conflict Resolution

DSG is committed to providing the best possible working conditions for its employees. Part of this

commitment is encouraging an open and frank atmosphere in which any problem, complaint,

suggestion, or question receives a timely response from DSG supervisors and management. Supervisors,

managers, and employees are expected to treat each other with mutual respect. Employees are

encouraged to offer positive and constructive feedback.

If an employee disagrees with established rules of conduct, policies, or practices, they can express their

concern through the problem resolution procedure. No employee will be penalized, formally or

informally, for voicing a complaint in a reasonable, professional manner, or for using the problem

resolution procedure.

If a situation occurs when employees believe that a condition of employment or a decision affecting

them is unjust or inequitable, then are encouraged to make use of the following steps. The employee

may discontinue the procedure at any step.

1) Employee presents problem to immediate supervisor after incident occurs. If supervisor is

unavailable or employee believes it would be inappropriate to contact that person, employee

may present problem to the Human Resources Department or any other member of

management.

2) Supervisor responds to problem during discussion or after consulting with appropriate

management, when necessary. Supervisor documents discussion.

3) Employee presents problem to Human Resources Department if problem is unresolved.

4) Human Resources Department counsels and advises employee, assists in putting problem in

writing, visits with employee’s manager(s), if necessary, and directs employee to management

for review of problem.

5) Employee presents problem to management in writing.

6) Management reviews and considers problem. Management informs employee of decision and

forwards copy of written response to the Human Resources Department for the employee’s file.

The Management has full authority to make any adjustment deemed appropriate to resolve the

problem.

Not every problem can be resolved to everyone’s total satisfaction, but only through understanding and

discussion of mutual problems can employees and management develop confidence in each other. This

confidence is important to the operation of an efficient and harmonious work environment, and helps to

ensure productivity with the company.

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Compensation of Travel Time – Non Exempt Employees

A. Home to Work Travel

An employee who travels from home before the regular workday and returns to his/her home at the

end of the workday is engaged in ordinary home to work travel, which is not work time and will not be

compensated by DSG.

B. Home to Work on a Special One Day Assignment in another City

An employee who regularly works at a fixed location in one city is given a special one day assignment in

another city and returns home the same day. The time spent in driving to and driving from the other city

is work time, except that DSG may deduct/not count that time the employee would normally spend

commuting to the regular worksite.

C. Travel that is All in the Day’s Work

Time spent by an employee in travel as part of his/her principal activity, such as travel from job site to

job site during the workday, is work time and must be counted as hours worked.

D. Travel Away from Home Community

Travel that keeps an employee away from home overnight is travel away from home. Travel away from

home is considered work time when it cuts across the employee's workday. The time is not only hours

worked on regular working days during normal working hours but also during corresponding hours on

nonworking days (typically Saturday and Sunday).

E. Travel Away from Home Outside of Regular Working Hours

For travel away from home outside of regular working hours:

1) DSG will consider as time worked time spent as a driver of an automobile.

2) DSG will not consider as time worked time spent as a passenger on an airplane, train, boat, bus,

or automobile.

DSG Associates will not be compensated for days away from home as a result of more economical airline

fares, i.e. traveling on a Saturday and staying over Sunday for a Monday meeting. Naturally, room and

board for all travel days will be paid or reimbursed by DSG.

DSG Employee Benefits

Benefits within any company can be the differentiator when it comes to recruiting and retaining

associates. The Human Resource Department is constantly updating and reviewing our various benefit

options here at DSG.

As stated previously, the DSG “Group” net has general benefit information readily available to hiring

managers/supervisors for review with job applicants at the time of interview.

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This same information is available to all associates on the DSG Intranet under Human

Resources/Forms/Benefit Forms/Benefit Information.

The general benefit information shown on this form includes:

a) Blue Cross Blue Shield Health and Dental Insurance

b) Standard Insurance Life and Disability Insurance

c) Standard Insurance Supplemental Life Insurance

d) Discovery Flex Benefit Plan

e) 401(K) Plan

f) ESOP Plan

More detailed benefit information for new hires is sent out approximately six weeks after their hire

date. This information can be requested from the HR Department at any time after hire.

Detailed benefit information including various benefit forms are available on the DSG Benefits Portal,

discussed further in section 5.7.

This site can be accessed via the DSG Intranet by going to Human Resources/Benefits. The User Name

and Password for accessing this portal is shown.

Associates with questions or concerns about their DSG Benefits should contact their supervisor and/or

the DSG HR Department.

Existing HR Resources

A. Employee Handbook

The employee handbook contains summary and detailed information regarding a person’s employment

with DSG and should be a person’s first reference with questions regarding: time off including leaves of

absence; employment status and personal records; time keeping and payroll; benefits; and general

employment information such as conflicts of interest, business ethics, conduct, and disciplinary action.

B. Benefits Portal

As previously mentioned, DSG’s Benefits Portal provides employees one location for access to detailed

information and forms regarding medical insurance, dental insurance, life insurance, disability, ESOP,

retirement planning, health and wellness, flexible spending accounts and education assistance. The

home page for the benefits portal can be seen in figure 5.01.

A person can see the different insurance plan options available, associated costs, deductible

information, and how some of the different programs work as well. Under the financial section help with

understanding mutual funds, bonds, and general financial planning can be found.

The health and wellness center of the benefits portal includes resources for researching health related

issues, newsletters, health assessments, and healthcare guides.

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Finally, the benefits portal contains a fairly comprehensive glossary of terms related to all of the above

topics.

Figure 5.01 – DSG’s Benefits Portal Home Page

C. Intranet / DSG’s “Group” Net

Although the links for both the benefit portal and employee handbook are on the DSG’s “Group” net, so

is a lot of other useful information. Topics within the HR main menu include:

a) 401(k) – fund change notices, investing information, etc.

b) Announcements – associate change notices

c) Internal Job Postings

d) Directory Assistance – conference bridges, corporate and branch contacts, e-mail lists

e) ESOP – bylaws, ESOP committee info, publications, and more

f) Flexible Benefit Plan – plan summary and sponsor certification

g) Holiday Schedule

h) Manager Forms and Information – password protected area for access to training

curriculums, READI Programs, forms, payroll changes, manager specific training, employee

survey results, and more.

i) DSG Newsletters

j) Notice of Privacy Practices – privacy disclosure regarding medical information

k) Payroll ESS – password protected, personalized employee payroll information

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l) Suggestion Box – Have a good idea? Submit it and possibly be rewarded for it.

m) Safety – various safety policies regarding vehicles, equipment and machines

n) Training – various training programs available

o) HR Forms – education assistance, direct deposit, W-4, beneficiary designations, and many

more related to employment at DSG

With regards to forms, generally these can be printed, completed, then either mailed to HR-Aberdeen or

scanned and emailed to the HR Department in Aberdeen. Other forms or information relating to the

various forms can be requested by calling your HR Department in Aberdeen.

Training

A knowledgeable associate who has been trained properly can spot a customer’s needs, than effectively

service that customer accordingly. Word of great service spreads resulting in loyal customers referring

other potential customers. Training is an ongoing process for all within the company, be it through

internal or external programs. Some of the training opportunities include:

1) NAED (National Association of Electrical Distributors) – EDGE, EPEC, Warehouse Pro,

Counter Pro, Advanced Inside Sales Skills, CEP.

2) ASA (American Supply Association) HVAC and Plumbing - College of Sales and Sales

Management, College of Warehouse Management, and Essentials of Profitable Counter

Sales

3) Action Selling – Sales Program designed to develop and reinforce the selling skills of the

Account Manager.

4) DOU (Dinner-On-Us) – an internal training focusing on safety in the work place.

5) Vendor specific web based and instructor lead product and industry training.

Branch managers work with segment managers to ensure all sales associates receive adequate sales and

product related training. To access training options on the Groupnet go to Human Resources>Training.

Additionally, DSG’s training coordinator can develop a training program tailored to meet the needs of all

associates.

Safety and Compliance

DSG has a Safety and Compliance manager, Mike Place who is responsible for overseeing the

government related OSHA and/or the DOT requirements at DSG. Mike also manages GHS/SDS

Compliance plan. More information on these policy and procedures can be found on the DSG GroupNet

or by calling Mike Place at our Bismarck branch location for further information.

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SECTION 11 – BRANCH INFORMATION TECHNOLOGY

The corporate MIS department is responsible for establishing the information technology platforms at

all branch locations. They also provide on-going technical support and training needed to properly

operate these systems. Most of the systems below have on-line training modules located on the DSG

Groupnet.

DSG Branch Hardware Platforms

PCs, Printers, Projectors, Mobile Devices (Phones, iPADs), Fax Machines, RF Scanners, PODs (Proof of

Delivery/Signature Capture), CISCO IP/Telephony Phone Systems, Servers, Routers, Wireless Modems

The DSG Branch Software

MINICRON, Lotus Notes, Lotus Smart Suite, Microsoft Office Suite, CISCO Jabber, DSG “Group” net, DSG

Website, DSG Ecommerce website, Truck Routing Software, Shipping Software, Pronto Forms, Remote

Access Software.

Other Software Programs Supported:

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SECTION 12 – MARKETING

DSG Branches all benefit from the corporate level marketing activities. This team creates professional

communications, sales tools and programs that highlight the DSG brand promise to our customers,

vendor partners and associates. Below is a sample of the materials produced by the corporate

marketing team. A complete listing of all DSG marketing programs can be found on the DSG Groupnet.

Publications

DSG sends out two main publications throughout the year. These are important marketing pieces that

we use to communicate with our customers, vendors and employee owners.

Connections Magazine

Connections magazine is a biannual publication that is designed to showcase the products, people and

places of DSG to our current business partners and prospective customers. It provides them with helpful

business tips, as well as the opportunity to learn more about what DSG can do for them and their

business through interesting real-life customer stories, newsworthy manufacturer advertorials, engaging

employee-owner features and educational industry articles.

Spotlight

Spotlight is a direct mail, newsletter-type publication produced to promote new and existing products

and brands available from DSG. This colorful and easy-to-read publication clearly illustrates the features

and benefits of specifically selected products, providing DSG customers with a valuable resource for

product information each month. In addition, Spotlight is used as an avenue to remind readers about

current regulations and codes, notify them of upcoming training developed to improve their business,

inform them of company current events and familiarize them with DSG employee owners and locations.

Finally, Spotlight offers readers some fun too, with its Fast Facts, Pop Quiz Trivia, Outdoors photo of the

month and the Super Code contest.

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Postcards

Direct mail postcards are an important marketing tool and offer many benefits. Postcards are targeted,

personal, flexible, tangible, measurable and easy to use. Here are a few examples of postcards.

Signs & Point-Of-Sale Items (POS)

At DSG, we use signs to communicate with our current and prospective customers everywhere from the

city desk (point of sale) to the product aisle, from outside at an event to inside at a business partner’s

facility. Contact DSG’s Marketing Manager Arne Briekjern at (651) 602-3802 to obtain these items.

DSG Holiday Card

Every year, DSG distributes a custom holiday card to our customers, wishing them a happy holiday

season and profitable new year. The cards are created from Kids Club holiday-themed drawings, created

by children of customers and employee owners.

Vehicle Signage

Customized vehicles are a type of outdoor marketing that can play an important role in building DSG’s

brand. They effectively promote our brand, our products and our services on highways, city streets and

parking lots.

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Trade Show Displays DSG employee owners often attend and participate in trade shows throughout the year. These are an

important way to get in front of industry professionals, current customers and potential prospects. A

trade show display/presentation, if done correctly, can make a big impression on trade show attendees,

often acting as the tipping point for a new business contact.

DSG Portal

The DSG Portal is an exciting set of web-based business tools that DSG launched in 2012. It is free and

private, and it’s designed to greatly help our customers and build new relationships for DSG employee

owners. There are two parts to the portal – a customer portal for DSG customers and a sales portal for

DSG employee owners. Here are a few ways in which the DSG Portal will benefit our customers:

• The easy-to-use online calendar keeps everyone on schedule

• The handy time card system improves productivity and minimizes lost hours

• Photo galleries, top manufacturer catalogs and informative links put valuable resources at

everyone’s fingertips

To provide an overview of the contractor portal we created an introduction video. We also created

tutorial videos for both the customer portal and the sales portal. These are all available to view online at

www.dakotasupplygroup.com/resources/marketing-toolkit/

DSG Feedback Connection Program Feedback is a key part of healthy communication in any business, which is why we created the DSG

Feedback Connection program. This program is designed to provide DSG customers with a valuable tool

that will enable them to encourage important feedback from their own customers.

The DSG Feedback Connection program involves pre-designed postcards that include a brief customer

service survey. Contractors and other businesses can then send these out to their own customers. End

customers are asked to either mail back the postcards or complete a survey online, after which DSG’s

customers can access those results online. These postcards are available in two designs, both of which

include the same survey and information.

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Full program instructions can be downloaded at www.dakotasupplygroup.com/resources/marketing-

toolkit/. Here you and your customers can also watch a Flash tutorial on how to use the program,

Let A Pro Do It Every day it seems like there is another home improvement television show or big box store around the

corner, inspiring homeowners to take on big-time projects themselves (rather than calling DSG

customers for help). The Let A Pro Do It program from DSG is designed to show homeowners just how

risky and problematic that do-it-yourself work can be. Ultimately, the campaign encourages

homeowners to hire a professional for important home improvement projects.

This program features a web site at www.letaprodoit.org, which provides statistics, tips and an easy way

to find a local professional. It also includes clever comics that illustrate what can happen when you don’t

hire a pro. Letaprodoit.org features 12 pages, including a Find A Pro page that navigates users to the

DSG Business Partners Directory, where they can search for a local contractor.

In addition to the web site, DSG has also created brochures that our customers can hand out to

potential do-it-yourselfers. These brochures even include a spot for a contractor’s business card. Finally,

DSG promotes this program with life-sized cutouts of the Let A Pro Do It cartoon characters that are

displayed at DSG locations and used to distribute the brochures.

Interactive Marketing DAKOTASUPPLYGROUP.COM The award winning DSG website has a wealth of information and interactive services that benefit our

customers including:

DSG Outdoors – WWW.DAKOTASUPPLYGROUP.COM/WHAT-WE-DO/DSG-OUTDOORS/ DSG customers love the outdoors, which is why we created a page for DSG customers (and DSG

employee owners) to share photos and short captions about fishing adventures, hunting trips

and anything else related to the outdoors. On the Outdoors page, visitors can also find a

multitude of links where they can boost their outdoor knowledge and skills, get some help

planning a trip, check out tournament schedules, and learn about regulations and more.

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University Of DSG – WWW.DAKOTASUPPYGROUP.COM/UNIVERSITY-OF-DSG/ We have an entire page dedicated to training opportunities available for DSG customers and

employee owners. The University of DSG page includes information about our popular Power

Tools workshops, P4 Learning Labs and more, all designed to develop superior growth for those

who participate. To read more about the University of DSG, please see the University of DSG

section in this guide

Business Partners Directory – WWW.DAKOTASUPPLYGROUP.COM/RESOURCES/BUSINESS-PARTNERS-DIRECTORY/ DSG customers can promote their services on our web site. Web site visitors can then search by specific expertise (i.e. electrical, engineering, plumbing, etc.) and company type (residential, commercial, etc.) to find DSG business partners in their area.

Email Marketing The ever-growing popularity and functionality of the Internet has opened many doors for marketing,

and we are now able to communicate our marketing messages through email in what we call “email

blasts.” Email marketing is similar to direct mail marketing in that it allows us to target specific groups of

people more effectively and efficiently. It also provides us the opportunity to personalize our messages

to each recipient. Furthermore, email marketing helps to make it easier to connect with DSG. After all,

recipients are often only a click away from the content they want. At DSG, we use email blasts to

communicate with our current and potential customers, as well as internally with our fellow employee

owners. We use email blasts to notify recipients of our latest publications (Spotlight and Connections),

notify them of upcoming training opportunities and request important information from them in

surveys.

Facebook Facebook is a marketing tool that DSG is using to communicate and interact with our customers. Not

only can we learn about our customers, we can learn from them. Facebook is also a way to keep DSG

customers aware of what’s happening at DSG. Every time DSG posts a message to its Timeline, it appears

on the News Feed of every person that “Likes” DSG’s page. Not only that, but a Facebook page is one of

the most inexpensive marketing tools around. You and your customers can visit DSG’s Facebook page at

www.facebook.com/dakotasupplygroup.

The DSG Corporate marketing team assists the branches with all these branded items, local promotional

materials and coordinates a timetable for marketing activities. The rules of engagement defining the

roles and responsibilities between branch and corporate marketing can be found in the appendix.

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I. INVENTORY & VENDOR MANAGEMENT1. Adding a new Vendor

A. The Segment manager will make the final decision for vendors in their segment.

B. Branch manager and salesmen will contact the segment manager prior to any discussion or agreements are made with a rep or a manufacturer on adding a new vendor to a branch.

C. Purchasing will not add a new vendor to a branch without prior authorization by the segment manager.

D. A Segment manager cannot add a new vendor to a branch without prior discussion with the branch manager.

E. If a branch manager wants to add a vendor to their branch that another branch currently stocks, they will need to contact the segment manager prior to adding the vendor.

F. There will be a 90 day review of any new vendors added to inventory.

2. Adding new Products

A. A branch manager can add any products to stock from an existing stocking vendor within that branch.

B. Any requests to add a new product to an existing vendor by anyone other than the branch manager, will need prior authorization from the branch manager.

C. A segment manger cannot add product to an existing vendor within a branch without prior discussion with the branch manager.

D. There will be a 90 day review of new products added to inventory

3. All vendor agreements will be signed by the segment manager.

4. All rebates will go to the segment manager and it is their responsibility to disperse the funds equitably based on "Cost of Goods Sold".

5. All Customer managed inventory programs must be pre-approved by the segment manager.

II. PEOPLE 1. Hiring General Rules

A. Post all new positions internally to all associates.

B. No reaching around - BM/SM must work through current manager when soliciting associates for new positions.

C. WINSLOW assessments are required for candidates applying for outside sales, regional sales, ops. managers and other key positions.

2. Hiring Outside Sales Reps Who Decides Responsibility Communicate With When (Within)

A. Replacement Hire of Outside Sales Rep - In Budget BM BM/HR SM 30 days Prior to Hire

B. New Hire of Outside Sales Rep - In Budget BM BM/HR SM,PRES 30 days Prior to Hire

C. New Hire of Outside Sales Rep - Not in Budget BM + (CSO/COO/PRES)BM/SM/HR CEO 30 to 60 days Prior to Hire

3. Hiring Regional Sales Specialists

A. Replacement Hire Regional Specialist - In Budget SM+BM(s) SM/BM(s)/HR PRES, CSO Prior to Hire

B. New Hire Regional Specialist - In Budget SM+BM(S) SM/BM(s)/HR CSO, PRES Prior to Hire

C. New Hire Regional Specialist - Not in Budget SM+(CSO/COO/PRES) SM/BM(s)/HR CEO 30 to 60 days Prior to Hire

4. Training Associates

A. Product knowledge SM BM/SM/HR CSO/COO Quarterly

B. Job function knowledge BM BM/HR CSO/COO/PRES Quarterly

C. DSG new employee orientation HR BM/HR CEO/PRES/CSO/COO Quarterly

III. COMMUNICATIONS 1. Between Branch Managers Method Response Time Message

A. Urgent Phone Call ASAP Message should be specific with required deadline for response

B. Not Urgent Email Within reason Message should be specific with requested deadline for response

2. Between Branch and Segment Managers

A. Urgent Phone Call ASAP Message should be specific with required deadline for response

B. Not Urgent Email Within reason Message should be specific with requested deadline for response

3. Between Branch or Segment Managers and Corporate

A. Urgent Phone Call ASAP Message should be specific with required deadline for response

B. Not Urgent Email Within reason Message should be specific with requested deadline for response

DSG RULES OF ENGAGEMENT BETWEEN BRANCH AND SEGEMENT MANAGERS (revision 3/10/2013)

Appendix A.1

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IV. MARKETING

Activity Who Decides Responsibility Communicate With When (Within)

A. Branch Counter Day (Customer Recognition) BM BM MK*, SM 60-90 days

B. Segment Counter Day SM BM, SM PR, MK*, BM 60-90 days

C. Branch Promo BM, SM BM, SM PR, MK*, BM 60-90 days

D. Segment (Company Wide) Promo SM SM PR, MK*, BM 60-90 days

E. Branch Customer Training Event BM BM SM, MK* 60-90 days

F. Segment Customer Training Event SM SM BM, MK* 60-90 days

G. Sales Portal SM MK* SM As Needed

H. Customer Portal BM BM MK* As Needed

I. Branch Advertising BM BM MK* As Needed

J. Segment Advertising (Industry/Regional Publications)SM SM MK* 60-90 days

K. Spotlight Topics SM SM MK*, BM, PR 30 days

L. Connections Topics SM SM MK*, BM 60-90 days

M. Corporate Trips (Sports/Factory) SM SM MK*, BM 60-90 days

N. Signage/Labels BM BM MK* As Needed

O. Public Website MK MK* MK*, ALL As Needed

P. GroupNet MK MK* MK*, ALL As Needed

Q. New/Changes in Employee Status BM BM MK* As Needed

R. Segment Level Marketing Calendar SM SM BM, MK* Prior to Start of Year (Updates as Needed)

S. Vendor Coop Programs and Promotions SM SM BM, MK* Prior to Start of Year (Updates as Needed)

BM = Branch Manager

SM = Segment Manager

PR = Pricing

PU = Purchasing

MK* = Marketing Initial contact as determined by the "Red/Blue Team" Chart

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Appendix A.2