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By Richard Trombly | Industrial Distribution: February 2003 Though businesses need to grow and expand, it must be at the right pace When INDUSTRIAL DISTRIBUTION visited Acme Construction
Supply Co., Inc. in August 2002, the discussion focused on the company's
efforts to increase efficiency through its centralized corporate model.
Acme was looking to cut costs through economies of scale in purchasing
and by increasing efficiency through a centralized billing and accounts
receivable department. Part of this larger, more corporate model was reflected
in the company's expansion into Denver, Colo., and Salt Lake City, Utah,
during the late 1990s, giving it a total of six locations. Acme was investing
considerable marketing energy to bolster its Salt Lake City branch. The centralized strategy was part of Acme's overall
effort to grow and expand into these new markets. The mid-sized distributor
was taking on a corporate management structure more common to its larger
competitors than to local or regional players. Acme vice president of the Northwest Region Jordan
Bader points out that advances in information technology systems have
made powerful corporate systems available and scalable for small- to mid-market
distributors like Acme. It naturally follows that a company would try
to reap all of the value from such information resources and try to cut
expenses and increase efficiency throughout the organization. "Even though we are making dynamic changes
to address the declining economy, we need to still do more to increase
our efficiency," says Jordan. "As we grow, we must continually
examine ourselves and reinvent ourselves so we don't become a big dinosaur
like some of our larger competitors." The company's Prophet 21 system offers to improve
customer service and maximize return on investment through features including
order and inventory management, purchasing, pricing and promotion, supply
chain optimization, financial management, customer relationship management,
business reporting and analysis, e-business, and warehouse automation.
Acme also adopted Pathguide Technologies, Inc.'s Latitude WMS radio frequency
system to increase warehouse efficiency. These centralized efficiencies of scale weren't,
however, making it to the bottom line. Instead, the company experienced
problems with dead inventory on the purchasing side and a high number
of days sales outstanding on the NR side, says Rocky Mountain Region vice
president Jason Bader. The company decided it was time to make some tough
choices. Despite an intense marketing effort to reach the
Salt Lake City construction market, including "out-of-the-box"
ideas like open house exhibitions and radio promotions on site, the company
realized that it wasn't finding the success it had hoped for. "The construction supply market there is declining
and the predicted post-Olympics boom never materialized," says Jason.
"We were a smaller player in the region of strong competition. We
decided to face facts and stop losing money." "It turned out to be a difficult road and
it burned us," says Jason. Acme recently closed its Salt Lake City location. Jason says he's redoubling his efforts to keep the Denver location profitable and growing on track. But that isn't the only change the company made. Reinforcing the branches The e-commerce business models developed in the late
1990s offer companies a way to cut costs through high-tech, low-touch
methods of delivering products. Reducing the costs associated with the
human element and increasing IT efficiency and automation has become an
essential part of delivering commodities at the lowest cost. The Baders realized that by pursuing these corporate
efficiencies and rapid growth, they were weakening the relationships that
are the very foundation of small distributors. It was the low-tech, high-touch
philosophy of distribution that fostered the development of these relationships
in the first place. "Sometimes more efficient is less effective. A central
model works on paper," says Jason. "But there's a disconnect
in the real world. We made some decisions which made sense from the corporate
side, but were out of touch on the street level." The actual gains in efficiency of the central model were
lost through diminished communication and perspective. There was little
connection between central purchasing and the customers' actual needs
in Acme's varied regions, which introduced inventory inefficiencies. The
lack of personal relationship between the A/R department and customers
also led to greater costs through inefficiency. "We returned greater authority to regional managers,"
says Jason. "Often local people are able to see the bigger picture." When management isn't on-site, it is hard for them to
understand unique needs of the region. A regional manager can capture
the local flavor as well as work to form a tighter, more effective sales
team. Local purchasing agents are more in touch with the requirements
of their own regions, so Acme returned that to the branches. Bader says
he thinks a local A/R department will be more effective as well. Local A/R personnel have the opportunity to meet face-to-face
with customers, build relationships and, therefore, have stronger leverage
when it comes time to ask for payments, says Bader. "Local knowledge can also give a basis for extending
credit to gain profitable sales" says Jason. President Dick Bader is Jordan and Jason's father. He
acquired Acme in 1971. Though distribution has been his passion, and he
has been in the business for more than 40 years, he is loosening the reins
and giving his children a chance to grow into the role as he prepares
for their succession. "You have to do a job for several years before you
master it," says Jordan. "That is part of succession. It requires
an open dialogue and we all have to see each other's point of view, which
isn't always easy." Jason and Jordan Bader both started working at Acme when
they were in their teens. They have a history of dividing responsibilities
and approaching the business from different perspectives. Jason stayed with the company straight out of school and has filled many roles, including human resources, IT and operations and logistics management. Jordan went to college and obtained an MBA. Both brothers have taken advantage of educational and
networking opportunities offered through the Specialty Tools and Fasteners
Distributors Assn. and the Evergreen Marketing Group. They have been active
in both of these organizations. "By sharing experience and knowledge with other
distributors, we can raise the standards and improve our industry, to
everyone's benefit," says Jordan. Jason says such forums are essential to promote the free
flow of ideas. His level of interest and involvement led to his election
as STAFDA president at the association's convention in November 2002. Working on fertile ground Acme's growing pains and some internal problems didn't
affect the high level of service the distributor's customers have come
to expect. Stirrett & Johnsen in Seattle, Wash., can attest to that. "Acme is the only distributor I like to use,"
says Gerald Carollo. "They carry a great supply of the tools, nuts
and hangar brackets we use as well as a lot of other miscellaneous construction
items. More than that though, it's the people and the excellent service." Carollo is lead foreman for Stirrett & Johnsen, a
mechanical contractor firm. He says whenever he has a new job, Acme gets
together all the supplies he needs and gets them to the work site. "That means a lot when you're working on a fast
track project," says Carollo. "A recent project was the construction
of a dry powder mill in Idaho. Even outside Acme's normal territory, we
were able to rely on their service." Having a long-term relationship with Acme is important
to his business, says Jeff Harrod, the purchasing manager for Electrical
Construction Co. in Portland, Ore. "Acme offers a good price, though it is often not
the lowest," says Harrod. "That is made up for by the fact that
we work in many places and couldn't keep developing new distributor relationships
in each location -- let alone expect a decent price." He says he can rely on Acme to always get what the electrical
contractor needs. That can be important to distant job sites like a recent
contract in California -- quite a distance from the nearest Acme location,
according to Harrod. "Their Night Owl and Tool Runner services are a
godsend," he says. With Night Owl service, Acme delivers supplies overnight
so that the job site can begin work first thing in the morning. Tool Runner service utilizes the same delivery structure
to pick up tools for repair and deliver rental or repaired tools right
from the Job site. Fruits of their labor While Acme learned that in some areas of the business
it is best to retain small business style, it also learned how to market
like the big competitors. That is something the distributor won't be changing. The company puts out regular flyers as well as targeted
marketing campaigns. Neil Schilling says Acme provides aggressive and
proactive marketing resources for its. vendors. Schilling is the area manager of the Pacific Northwest
Region for DeWalt Industrial Tool Co. "Unlike many distributors that look for what vendors can offer, Acme looks to partner with its vendors," says Schilling. "They utilize our resources and they invest in their own company to grow the business." COMPANY SNAPSHOT
COPYRIGHT 2003 Reed Business Information in association with The Gale Group and LookSmart.
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© Copyright Richard Trombly 2005
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