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By Richard Trombly | Industrial Distribution: May 2003 The growth of Ireland's largest MRO distributor reflects the country's own development The headquarters of Caulfield Industrial Ltd. overlooks
Oranmore, a village on the inner tip of Galway Bay. From this location,
you can see the lavender-colored hills of County Clare to the south, but
the skyline of Galway city can be seen to the west on the northern shore
of the bay. Caulfield Industrial was founded in Galway city 28 years
ago to service the fledgling growth of industry in the Republic of Ireland.
The Oranmore facility was built in 1999 to accommodate Caulfield Industrial's
growth, which mirrored that of the country. Ireland evolved from a largely
agricultural economy in 1970 into a world-class industrial nation in 25
years. Galway is the third largest city in Ireland, with about
60,000 inhabitants. It's but a few hours' drive from the country's larger
cities — Cork, with a population of more than 250,000, and the greater
Dublin area, where nearly 1.5 million people reside. This accounts for
nearly half of the nation's 3.9 million residents and most of the industry,
beyond agriculture and residential construction. Eddie Caulfield, the company's managing director, started
his career in an agricultural cooperative. But as industry started to
form in Ireland, he moved into the consumer hardware, do-it-yourself supply
business. It was there that he was introduced to the industrial distribution
model, and developed his vision for a distributorship that would meet
the needs of the country's growing industrial economy. "There developed a real need for industrial supply
in Ireland," says Caulfield. "Most other European suppliers
are resellers, but we decided to inventory a wide range of products."
Caulfield saw how the industrial distribution model could
support the industries that were growing in Ireland. Many were American
firms encouraged to set up shop in Ireland because the country had one
of the lowest tax rates in Europe. "As large American electronics and telecommunications
firms developed in Ireland, many of their sub-suppliers followed,"
says Caulfield. "These businesses brought with them their brand preferences
and service expectations." To meet those needs, Caulfield combined the supply model
of the large national U.S. distributors with the high value-added, personal
service customary to smaller, regional distributors. The model works because,
with annual sales totaling about $20 million, Caulfield Industrial is
more the size of a regional distributor, and Ireland is only slightly
larger than West Virginia. The rise of the tiger When Ireland joined the European
Union in 1973, it attracted high-tech firms such as the former Digital
Equipment Corp. At the same time, tariffs led to the end of automotive
manufacturing in Ireland. This meant the country skipped the era of steel
and smoke and went straight to high technology. Today, India, China and
other developing nations look to the evolution of the "Celtic Tiger"
as a model for their own economic growth. One of the factors that made high-tech growth possible
was the Irish Industrial Development Authority, which attracted high-tech
electronics and telecommunications manufacturing firms with the low tax
rates and the availability of a low-cost, highly educated workforce. Electronic
and electrical sub-assembly for the Big Three automakers found a niche
in Ireland, as well. While heavy industry still makes up a large part of the
average American distributor's business, Caulfield Industrial's expertise
requires a greater knowledge of the high-tech industry, electronic parts
assembly workstations and cleanroom protocols. But the company also must maintain its expertise in all
of the major segments of MRO and industrial supply, says Caulfield. The
distributor offers more than 75,000 SKUs and provides in-depth training
to its sales associates. Customers cover a wide range of industries, from heavy
manufacturers like Thermo King of Minneapolis, a manufacturer of climate
control products for global transportation industries, to small contractors
taking advantage of the boom in residential and commercial construction. "The housing boom, in combination with the near
completion of the Big Dig in Boston, has meant that many Irish construction
workers have returned to Ireland," says Caulfield, referring to Boston's
multi-billion dollar highway construction project. "They brought
their American tools and tool brand loyalty back with them." Caulfield Industrial has taken on a considerable amount
of work selling and repairing these professional-grade power tools. A large part of Caulfield's business is catalog sales,
and the distributor keeps an extensive catalog of its most popular items.
The catalog and periodic flyers are produced in-house as a major part
of the company's marketing efforts. "We import the best American brands and premium
quality products from across the European Union," says Caulfield.
"As a result, our mix of products is unique." Caulfield Industrial sells a wide range of products that
are large or easily damaged, from capital equipment to electronics assembly
workstations. While the company ships many items to customers through
package couriers, it maintains a small delivery fleet to accommodate these
bulky or special care items or provide rapid delivery in MRO emergencies.
The distributor is on call 24/7 to keep its customers'
operations up and running and keeps essential inventory in several sites
across the country so the needed parts will be there quickly. Growing pains When Caulfield Industrial opened its doors in 1975, there
was little industry in Galway. As industry developed, it grew up around
the distributor's location and today there are three industrial parks
within easy reach of the company's downtown Galway branch, its former
headquarters. The company faced a problem as business grew, however.
It needed more room and also needed to create a new central distribution
facility that could take advantage of the latest distribution and warehousing
technology. "There was no land available for new development
in the neighborhood," says company director Kevin Nee. "Nor
were there warehouses that could hold our business temporarily while we
demolished and rebuilt on the same site." Closing the Galway location and rebuilding onsite also
was not an option because the distributor does a large amount of retail
business that would surely be lost to competitors. The company chose nearby
Oranmore to build a modern facility that would fit its needs. "It meets all of our needs," says Nee. "The
unfortunate aspect is the location." The new building is too close to the Galway location
to merit its own showroom, but too far from the Galway industrial parks
to close the downtown location. "We're faced with the overhead of each location,"
says Nee. "Therefore, we are maximizing the impact of our Galway
branch." Eddie Caulfield's son, Eamonn, is supervising the current
remodeling of the Galway location. Eamonn has the savvy gained from a
business and marketing degree and serves as marketing manager of the company's
retail division. "We are trying to match the products at the retail
shops, while offering more on a service and expertise level and higher
quality," says Eamonn. "We also are increasing our marketing
efforts and direct mail campaigns to bring in more retail business." The wide-open space of the Galway location allows for
many in-store demonstrations of products and application techniques. "Of course, we can't always meet the pure wholesalers
on price," says Nee. "We are a full-service distributor with
round-the-clock service support from 10 service engineers and we offer
many other value-added services." On the leading edge As business became more global, Caulfield opened locations
in the Czech Republic and Hungary to service Eastern Europe. The company
also underwent ISO certification as part of its commitment to meet the
needs of Ireland's global business environment. "While some companies only pay lip service to the
ISO process, we faced it as an opportunity to benchmark and improve our
service," says Nee. "We hired a consultant to assist us with
the certification process and retain the consultant for continual improvement
of our processes." Now the company is implementing a top-end radio frequency
warehouse management system as part of its warehouse management package,
which allows it to run a paperless warehouse. The distributor is reaping
the benefits of its newfound efficiencies in the weak economy. Ireland
has seen many of its jobs go to cheaper labor in Hungary, Romania and
the Czech Republic, where Caulfield is prepared to service its customers. "The Celtic Tiger has become a pussycat of late,"
says Caulfield. "Business is down for most companies, but we continue
to provide services and cost savings for the businesses that remain." One global high-tech firm that appreciates Caulfield's
world-class service is 3Com Corp. The Santa Clara, Calif., PC and telecommunications
hardware company maintains an Ireland facility. Director of manufacturing
Eamonn McGlinn says Caulfield Industrial provides the service that helped
grow the facility from start-up to the point where it operates round-the-clock.
"Caulfield Industrial has the expertise and inventory
to keep our manufacturing line up and running," says McGlinn. "We
can't allow business to stop. We can trust Caulfield to be there." Caulfield Industrial also stores requested supplies in
lockers for customers on-site and provides vendor-managed inventory services.
The distributor helps to increase efficiency, streamline inventory levels
and reduce costs, which is especially important in a down market, says
McGlinn. "Caulfield moves with the times," adds McGlinn.
"We have grown with Caulfield's support and they have grown along
with us." Importance of importing "Almost 95 percent of the products we sell are
imported into Ireland," says Eddie Caulfield. "Much of it comes
from the United States. Therefore, we have to carry higher inventory levels
than a distributor in the States." The ability to import and inventory products efficiently
is important to American manufacturers, especially those with large or
difficult-to-ship items. Kennedy Manufacturing in Van Wert, Ohio, manufactures
industrial tool chests, which are part of Caulfield Industrial's product
line. "Caulfield has helped to grow our brand with some
of the premier tech companies in Ireland," says vice president of
marketing John Aycock. "Traditional European distributors are not
in tune with the global model, but Caulfield has exploited the model and
has energetically marketed the products. As a result, Ireland is their
exclusive territory." Due to the realities of up to eight weeks for a crossing
by ocean freight, inventory management and creative logistics are key.
Caulfield Industrial buys by the full container cargo load when possible
to reduce costs but utilizes airfreight when quicker shipments are necessary. Maintaining a full line of inventory is especially important
in global supply relations where delivery of products can take many weeks.
"Most other European outlets are just resellers,"
says Gerry Matthews, vice president for international business with Justrite
Manufacturing Co., LLC in Matoon, Ill. "Caulfield has seen the light
as far as the distribution model." "Caulfield is a full-service distributor that can
provide knowledgeable application expertise from a highly trained sales
force," says Matthews. "They communicate closely with us to
cooperate on forwarding our brand message." Chip Burnett is sales manager for England and Ireland
for Contec Inc., in Spartanburg, S.C. He says Caulfield makes business
easier by purchasing full container loads and representing their full
line of products throughout Ireland in a nearly exclusive agreement. The distributor's sales representatives also have the
expertise and training to access customer needs and recommend the right
solution, Burnett says. Contec manufactures cleanroom supplies, including
sterile and non-sterile wipes and pre-saturated cleaning materials. Representing Contec's products requires more technical
skill than one might imagine, says Burnett. He says it's important that
Caulfield has a long-standing sales force and trains its staff well. "Caulfield represents our brand with loyalty and
expert service," says Burnett. "They also know our capabilities
well enough that they have helped us manufacture custom solutions for
customers with unique needs." These manufacturers agree that a full-service distributor
such as Caulfield Industrial, which aggressively represents and supports
their products, is especially important in international sales. Eddie
Caulfield credits his involvement in the Industrial Distribution Assn.
with part of his success in providing added value to those partners across
the supply chain. He says the association also offers a great opportunity
to develop an understanding of how American distributors operate and to
meet with I.D.A-affiliated suppliers. Whether in a strong or weak economy, it's clear that
Caulfield Industrial will continue to move with the times and provide
for the needs of Ireland's developing economy. COMPANY SNAPSHOT
COPYRIGHT 2003 Reed Business Information in association with The Gale Group and LookSmart.
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© Copyright Richard Trombly 2003
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