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By Richard Trombly | Industrial Distribution: June 2002 A new management team is the force behind J&L Industrial Supply Unlike cars that line up behind an engine and provide
increased momentum, a series of ill-timed acquisitions threw J&L Industrial
Supply off track, says vice president of marketing and supply chain management
Chuck Moyer. At the company's core is its metal removal expertise
which made it a great fit for Kennametal, Inc. The cutting tool manufacturer
acquired J&L in 1990 to complement its integrated supply program,
Full Service Supply. The initial track of J&L's development was laid down
in 1970 when two entrepreneurs began selling tools from the trunks of
their cars. Within a year, they had developed sufficient momentum to their
sales efforts to build a headquarters in Redford, Mich. In 1972, J&L introduced its first catalog, the success
of which soon led to the opening of a Chicago-area distribution center
in 1978. Soon after Kennametal's purchase, J&L opened its
fifth U.S. distribution center and could boast next-day delivery nationwide.
J&L and Full Service Supply combined to form JLK
Direct Distribution, Inc. in 1997 and went public on the New York Stock
Exchange. Eight acquisitions followed, beginning with Mill & Abrasive
Supply in 1997 and ending with ATS Industrial Supply and Strong Tool Co.
in 1998. "The acquisitions were too expensive and were made
at the wrong time," Moyer explains. He says J&L simply wasn't prepared to integrate the
companies or continue to grow. The stock dropped and the company imploded. Sidetracked "The company lost focus of its core business —
its strength," says Moyer. "What exactly it was trying to do
became unclear." The company went through several management teams and
prepared to be sold. The sale, however, never took place. "Inconsistent customer service caused the company
to lose 60,000 customers and left suppliers disenchanted," says Moyer.
"Four years of declining sales and increasing costs took their toll.
Kennametal simply couldn't get sufficient value for the company." In November of 2000, Kennametal purchased all of the
outstanding common shares of JLK Direct. The company split off JLK and
Full Service Supply to concentrate on integrated supply while J&L
returned to its core expertise in metalworking products and catalog sales.
The company also divested the ATS and Strong Tool acquisitions. These
companies had never been successfully assimilated. "Our people deeply understand metalworking products
and processes and speak our customers' language; we knew that was an advantage
over most of our competitors, who are not specialized," says Moyer.
"The next step was to build a management team that would bring long-term
goals to fruition." All aboard COO Michael Wessner was appointed in January of 2001
and heads up the new team at the Livonia, Mich. headquarters. Other members
include Moyers, vice president of U.S. sales Kevin Guy, vice president
of finance Nick Darin, vice president of human resources Chad Spawr, call
center director Kim Shacklett and Mark Schiller, vice president of distribution
services. The management team is experienced in rapid growth and
has turn-around expertise. The new directions at J&L are not experiments
— it's all based on solid experience, says Wessner. "The company had been confused but now the efforts
are focused," he says. Wessner says he essentially started from scratch in restructuring
the company, with some important advantages. J&L has a strong relationship
with Kennametal and, even after losing so many of its customers, the company
still has the advantage of scale, he adds. "The biggest challenge in a turnaround is people,"
says Moyer. "You need to start with the best people. If you can place
them well, the rest falls into place." Wessner says the company was in a delicate state when
he come on board. Employees were disenchanted with the constant changes
and lack of success the company was experiencing. "When building a team, it is necessary to have a
single sense of purpose across the entire organization," he says. To accomplish this it was necessary to open lines of
communication with the company's associates, both to communicate goals
and to hear and understand issues, says Wessner. "We started by opening a dialog with the employees,"
says Wessner. "It was most important that we actually did what we
said we would." Management also conducted a company-wide survey. The
results were humbling. "Prior communication from management had been all
talk and no action; all of the basics were not in place to allow the employees
to do their jobs and carry through for their customers," says Wessner.
"Morale had degraded severely." What was surprising, he says, is that when he asked for
a chance for the new management to prove themselves, the employees were
more willing than they could have hoped. "The results are that the team is working together
and we are expecting mid-single digit growth in the current challenging
environment," says Wessner. "Once this down cycle ends we expect
to double the growth rate of the market." Training One of the keys to J&L's success is intensive training,
says Moyer. "Training is institutionalized throughout the organization,"
says Shacklett. "We approach it from many angles." There are three levels of training. First, new employees
learn to simply identify the various products. The next step is a year-long
process with 12 lesson units, each covering a product group in depth.
Soon employees will receive a five-week training in the company's own
machine shop. One feature that helps associates understand customers'
businesses is a diagram placed near every phone showing the layout of
a common machine shop. This allows even the most novice salesperson to
envision how the products fit into their customer's operation and helps
experienced salespeople upsell appropriately and offer complementary products,
says Shacklett. "We train in both product and sales proficiency,"
adds Shacklett. "These lead to understanding and anticipating the
customers' needs and brings effective upselling that is helpful to the
customer." When there are questions that are very technical in nature,
J&L has a dedicated technical support team which has an average of
27 years of experience. Success on the line J&L owes part of its new success to technology enhancements,
says Shacklett. Minneapolis-based Net Perceptions provides a customer
relationship management solution that mirrors J&L's philosophy by
providing a balance of customer and product knowledge to better close
the deal or upsell. A new phone switch has also allowed improvements by routing
incoming calls to the proper associates in J&L's nationwide call center.
The phone system matches customer and customer service representative
qualifications to give the best service and the rep that knows them best.
For instance, there is a seven-person team that focuses
on key accounts and gives direct attention to the calls from these accounts.
She says these reps work closely with outside sales staff. The call center has become so efficient that on top of
taking 100 calls per day, customer service reps make outbound sales calls,
adds Shacklett. Each rep makes up to 10 telemarketing calls daily. "Core to J&L's strategy is aggressive salesmanship
combined with J&L's metalworking focus and service capabilities,"
says Moyer. "We have developed our business model specifically to
eat market share and we're certain we are outperforming our market."
J&L focuses on identifying the business it wants and taking it, says Moyer. To this end, the company uses tools like NetPerceptions and Industrial Market Information which are designed to help identify attractive business. Currently J&L has a field sales force of 80 combined
with a rapidly growing telesales team and call centers that crank out
hundreds of campaign calls on a daily basis. The company turned to Manugistics, Inc. to reduce costs
and increase revenue through increased supply chain management efficiency,
says director of global consulting services Larry Myers. Manugistics is
a Rockville, Md., provider of logistics and supply chain management solutions
and consultation. "Through a combination of solutions, J&L reduced
its inventory while increasing service levels and capacity utilization,"
says Myers. "It also implemented logistics solutions to find the
best routing and pricing." "Fill rates decreased and that caused increased
challenges [for J&L]," says Jerry Behar of Manugistics strategic
consulting services. "Inadequate inventory forecasting data often
required making more expensive spot buys with increased shipping charges." He says J&L saw how Kennametal was using the solutions
and decided to work with Manugistics. "J&L knew what they could be and were motivated
to get there," says Behar. "Hard work on the part of J&L
kept the aggressive three-month rollout project on time and on budget." Myers says the company had aggressive yet concrete and
realistic goals and Manugistics worked with them to determine how software
could help achieve those goals. "Three months later, the company had reduced costs
by $4 million," says Myers. "Inventory is reduced, the right
product is in the right place, and fill rates and customer service levels
have increased considerably." First class service There have been benefits for the companies that didn't
give up on J&L, says purchasing manager Larry Hugo of Grand Prairie,
Texas-based API Katema. Located within a few miles of a J&L branch,
API Katema made few purchases from the distributor. "Suddenly, they took an interest in what I needed,
when I needed it," says Hugo. "I could call into their tech
center, but there is a technical advisor who calls on us." He says an outside salesman visited and brought all the
company's metalworking needs under one umbrella. The company helped him
convert all his orders to J&L. "Now we are getting volume discounts by consolidating
purchases to one distributor," says Hugo. "It is also simpler
to get all the supplies from one buyer through one account." Drip Irrigation Systems of San Diego, Calif., is a relatively
new customer, says engineer Eran Eckstein. He purchased a milling machine
and accessories through the catalog in response to a sale flyer. Customer service levels have dropped with some of his
other suppliers, says Eckstein. J&L was helpful with the machine tool
purchase and in immediately fixing a shipping problem associated with
a later order. "I was surprised to find out what a good channel
partner we have developed in J&L," says Kennametal, Inc.'s Barry
Schillings. "It is not because it is our sister company. We are happy
with any partner that performs so well." Schillings, the director of distributor marketing and
development for Kennametal Metalworking Systems Division, points out that
J&L is one of the company's most important partners. He says both
companies still need to earn their place. "We are encouraged by their go-to-market focus,
winning strategy and drive," says Schillings. "Looking forward,
they are a major part of our strategy." Stanley-Proto vice president of sales, Tom Hudak echoed
that sentiment. "They have added some great people and have more
talent than ever," says Hudak. "They are focused strategically,
know where they are going and will get there." He says that J&L's aggressive marketing has resulted
in a great first quarter for Stanley-Proto. He says the phone center and J&L's Chicago distribution
center are state-of-the-art and among the best he's seen. Wessner says J&L is planning to stay on track by
being aggressive and focusing on its core metalworking business.
COPYRIGHT 2002 Reed Business Information in association with The Gale Group and LookSmart.
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© Copyright Richard Trombly 2005
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