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By Richard Trombly | Industrial Distribution: May 2002 Michigan-based Mahar Tool Supply is expanding its horizons while focusing on its core business Ahar Tool Supply has quietly become one of the
largest distributors in the U.S. In 2001, it was number 70 in the Industrial
Distribution Top 100 survey with $79 million in 2000 sales. The company attained this size while operating
from five locations within the Michigan borders. Now the company has expanded
in two new locations and is leaving those borders behind. James H. Mahar founded the company in Saginaw,
Mich., in 1947. It is the classic story of the distributor business started
from the trunk of a car. It soon became a flourishing family business. James Wells Mahar followed his father in the business
and u his leadership in 1947, the company expanded to open its first branch
in Flint, Mich, Branches in Lansing. Cadillac and Detroit soon followed and business
has steadily grown. Last year, the company held a two-day planning
meeting to explore how it would service a major new contract and decided
to take the next big step. Mahar decided to leave behind the fences of
its youth and step out into uncharted territory, by opening a branch in
Muncie, Ind. "Indiana is a major industrial state and we
see many opportunities for growth," says CEO Barbara Mahar Lincoln.
"We will probably open more branches because we cannot service the
entire state from one location." Lincoln says another opportunity for considerable
growth is Mahar's new Kenosha, Wis., branch. It was created to serve a
major auto industry contract with one of the Big Three automakers but
its location makes it a great foundation for future growth, she says.
Kenosha is located within striking distance of both Milwaukee and Chicago. "It will take some time to develop our business
[in Kenosha,]" says Lincoln. "So we won't reach out to these
cities right away, but we will surely grow to service these strong metalworking
markets." Even in a down economy, Mahar was able to maintain
stable sales in 2001, says president Michael D. Kane. He sees 2002 as
a growth year. "We see future growth simply because of these
new territories," says Kane. "If the economy picks up, especially
in the auto industry, then we expect considerable growth." Kane says the downturn bottomed out and business
has slowly begun to pick up. Mahar is well positioned to increase its
market share during the economic recovery, he says. Cutting-edge supply Mahar specializes in metal removal products from
cutting tools to abrasives and fluids. This does not differentiate the
company from any number of highly qualified metal removal specialists
that service the region Mahar supplies. What sets the company apart is
its concentration in commodity management. Commodity management is not integrated supply,
Lincoln emphasizes. She says integrated supply distributors attempt to
be the one point of contact for all of their customers' industrial supplies
and must spread their efforts over all the product areas. "We do not want to be an integrator," says Lincoln. "We focus on our commodity and strive to use that expertise to reduce cost per piece for our customer." However, some of the large national distributors and
integrators subcontract with Mahar as a technical resource working under
the integrator's umbrella, says Lincoln. Removing costs both from the customer processes and from
the supply chain is the driving force behind commodity management, says
Kane. One part of that effort is investing in information technology,
says Lincoln. One investment is the NxTrend system that the company recently
purchased. "We worked closely with NxTrend to make a customized
and proprietary commodity management module," says Lincoln. "The
system is imminently capable and totally expandable to accommodate our
evolving needs." Currently each branch operates as an independent profit
center. Each has its own purchasing, warehousing, and operations although
it does adjust inventory between branches on a regular basis. The company
went live with the new system in December 2001 and has already realized
significant benefits in purchasing and inventory functions, says Kane. Kane admits the company is currently only utilizing a
fraction of its IT capabilities. Mahar plans to utilize it to centralize
purchasing, manage the warehouse, and gain many other efficiencies. Although IT offers many avenues of cost savings to the
customer, Mahar doesn't report soft cost savings. That is the minimum
offering, not added value in commodity management, says Lincoln. The company's
value proposition is in bottom line dollars, she says. "Many companies offer documented cost savings, but
these don't necessarily reach the bottom line," she says. "Cost
per production piece is the yardstick." Kane says many companies' documented savings are actually
only documented opportunities. In some cases, even when engineering tests
show that a certain tool can speed a process or cut more pieces before
being replaced, the full cost savings aren't necessarily realized in practice. "We measure our savings in the amount of tools used
and the cost to produce the part," says Kane. "Sometimes there is a management issue, like if
machinists don't flip over an insert before replacing it with a new one
and therefore only receive part of its total value. You can lead them
to water but you can't make them drink." Many companies say their strength is in their people,
but because of the technical focus of the company, this is definitely
the case for Mahar, says Kane. That is the reason the company did not
have any layoffs despite the difficult economy, though there was some
reduction in staff due to attrition, he adds. "To drive out cost, we have maximized our strength
in engineering and application of metal removal products," says Kane.
"We have a tech team made up of eight metal removal experts which
are dispatched to customer sites on a monthly schedule." He says this continually exposes the techs to all of
the customer applications across the wide array of businesses Mahar serves. "This allows us to really understand our customers' needs and processes," says Kane. "We can establish best practices and cross-pollinate ideas." Of course, the techs are always available for customers
who need assistance when problems arise, adds Lincoln. "We work at solving issues of scrap, quality and
throughput," says Lincoln. "When you solve that sort of problem,
the customer loves you." The company has little need for a traditional salesforce,
adds Kane "We retain technical application specialists,"
says Kane. "Of course, our technical people must have sales and communication
savvy. Lincoln says the goal is also to have multi-task individuals
who can master technical issues while excelling in sales, operations and
procurement. "We need to be able to work at all levels across
the board," says Lincoln. "This means connecting with people
on the manufacturing floor, engineers, procurement staff, management,
and executives." The employees also receive extensive training in computer
systems as well as product areas. This occurs both in-house and at various
learning institutions, says Lincoln. Some of the training programs were
partially funded through a government grant, but Mahar invests heavily
in developing its people, adds Lincoln. Honing in on value Lincoln says the company's relationship with a broad
range of world-class vendors is another part of the value Mahar brings
its customers. The company works with vendors to bring value to the supplier-distributor
relationship as well, she adds. "[Mahar] is strong in commodity management and has
done a very good lob as a sales and marketing partner," says Milacron
manager of distribution sales Ron Holbrook. "Mahar has more than
lust a sales force because its people are well trained in application." He says Mahar has quietly been growing and doing a good
job for its partners. Customers are looking for distributors with services
that can improve their processes, adds Holbrook. 3M serves the industrial markets through distribution.
Scott Evans, business director for 3M Industrial Markets says distributors
like Mahar that extend his company's own emphasis on (productivity) and
service to customers are valuable to 3M. "Some distributors, because of their focus on the
marketplace, and willingness to support product growth become a stronger
link in the supply chain," says Evans. "We enjoy the opportunity
to be associated with a quality distributor like Mahar." Valenite vice president of sales and marketing Chuck
Lendvoyi says Mahar provides an important link in bringing marketing information
back up the supply chain. "We value their ability to evaluate and address
customer requirements," says Lendvoyi. "They are also a leader
in commodity management, which is an important and growing channel for
Valenite." He says commodity managers reach large end-users who
want to take cost out of their processes. Mahar has developed an important
role with automakers and other big end-users, he adds. "Commodity management is simply more focused than integrated supply and is a better solution for some customers," says Lendvoyi. "Mahar is also a progressive organization that has shown the ability to take initiative, be flexible, and exploit new opportunities." COMPANY SNAPSHOT
COPYRIGHT 2002 Reed Business Information in association with The Gale Group and LookSmart.
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© Copyright Richard Trombly 2003
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