Clips/ Feature Article

ID takes a brief look at how three Canadian distributors do business

A GLOBAL ECONOMY AND NAFTA HAVE caused many U.S.-based businesses to focus on North America as a single unit. As industry becomes more and more global in scope, distribution has also widened its horizons.

Many distributors in the states have set their sights on business in Canada. This presents a challenge to the distributors based in Canada, but they are ready to battle on their home turf.

Positioned across the border from Detroit, Mich., Windsor Factor Supply Ltd., of Windsor, Ontario, is very aware of the pressures of international business.

"The border is just a speed bump these days, so we are seeing increased competition from abroad," says president Wes Delnea. "At the same time, many customers want North American pricing -- in U.S. dollars -- which puts us at a disadvantage."

Windsor Factory Supply maintains a location in Detroit, primarily to import goods from U.S. vendors. It concentrates on the industries between Windsor and Toronto, which is the heart of the auto industry in Canada. The company became ISO certified seven years ago in order to meet the requirements of its auto industry customers as well as to compete with companies that operate on an international level.

"A large part of the value we bring to the customer is documented cost savings, which we justify in our monthly reports, and assisting companies with their own continual improvement programs," says Delnea. "We carry more than 40,000 SKUs and we have a great deal of inventory on consignment for our customers."

According to Delnea, Windsor Factory Supply has set itself as the strongest commodity player in Ontario. It also reaches customers throughout Canada with its catalog program.

"I know how to turn inventory," he says. "That is the expertise we bring to the customer. With our abilities in commodity and inventory management, customers can reduce their inventory levels and manage inventory more effectively."

Industry demands just-in-time inventory and continually adjusts its production levels. Delnea says leaner manufacturing has helped Canadian industry react quickly to the economic slowdown so that Canada has not been hit hard like it was in the last recession.

"It is like turning a tap on and off -- there is no reservoir. They require same-day service in many cases' he says. "For example, at Chrysler's minivan plant, here in Windsor, there is less than seven days' inventory on site."

Regional focus

Windsor Factory Supply posted $70.4 million U.S. dollars in sales last year. Rather than being concerned with the threat of larger competitors, the employee-owned independent looks to its strengths and the home court advantage.

Even though the cultures seem similar, Delnea points out that for an American firm doing business in Canada, it can be as complicated as any other foreign country.

"We are experts on Canadian business and have the personal relationships, on a local level, with our customers to know what they really need' adds Delnea. "No large warehouse based in the U.s. can do that."

To compete with the larger firms on price, Delnea credits his membership in Affiliated Distributors and its e-business initiative, supplyFORCE. The company was the first Canadian distributor online with Covisint, the major automakers' supplier exchange.

Cleveland-based manufacturer Osborn International understands the value Windsor brings to the table. Ron Novak, vice president of sales, N.A., says the relationship with such a strong local distributor has been important to Canadian sales.

"They can get a truck out of Detroit and across the border quicker than normal exporting, which is important in getting our product to the customer," he adds. "They also make the extra effort to cooperate effectively with vendors and customers."

Novak says business in Canada through the first two quarters has increased, despite the slowdown. He credits Windsor for much of this success.

Community pride

Another strong regional player is Burlington, Ontario-based S.B. Simpson Group Inc. With the recent acquisition of Olympia Supply Ltd. in Ajax, Ontario, the company expects to surpass its sales figures of $30 million for year 2000, despite the economic slowdown.

"This is a different kind of slowdown from the last recession," says vice president Scott Simpson. "For us, the downturn has stung, but it isn't as severe as it is in the U.S."

He says there are strong sectors of the economy, but the auto industry and high-tech sectors, the majority of Ontario's industry, have been the hardest hit. In slow economic times, many customers look to their distributor to increase efficiency and cut costs, so S.B. Simpson sees the current state of the economy as an opportunity to strengthen its relationships with customers.

The company welcomes opportunities to grow. Founded in 1960, the independent distributor is making the transition from a "mom-and-pop" family business to a modern, high-tech firm specializing in supply chain and inventory management.

Simpson proudly proclaims that the company remains 100 percent privately and Canadian owned. He says this may not be important for the larger corporations and U.S.-based companies, but away from the metropolitan areas, it matters.

"In the smaller communities, local pride is much stronger than many people realize," says Simpson. "That is one of the reasons maintaining local branches is important to successfully serving these communities."
The local presence also allows S.B. Simpson to understand the unique needs of each community. For example, the community of Stratford has automobile parts manufacturers in the town center, while the outlying area is primarily farmland.

"We get our share of business from the farms as well," adds Simpson. "We diversify our customer base as much as possible and try not to be dominated by large accounts, which has reduced the impact of the slowdown for us.

Local spirit

One company that appreciates the local presence of S.B. Simpson is Consumers Glass of Etobicoke, Ontario. Senior buyer Kubra Rustam points out that while the company is small enough to cater to Consumer Glass' needs and demands, it is large enough to provide integrated supply to the company's three locations.

"One salesman services all our locations," says Rustam. "He is familiar with our whole operation and can bring solutions which are effective in one location to our entire organization."

The owners are very accessible, as one would expect from a local distributor, Rustam adds, but the company's growing size and professionalism makes it competitive with national companies.

To compete with the price and inventory management services of larger competitors, Simpson credits their technology infrastructure, ISO certification and membership in Independent Distributors Inc., the leading distributor consortium in Canada.

S.B. Simpson president Craig Simpson has served two terms as president of IDI and the company has been a longtime member of the group.

Tank car producer Procor Ltd., based in Oakville, Ontario, participates in vendor managed inventory with S.B. Simpson. Buyer Judy Goeree says Procor has felt the effects of the weak economy, but being a part of a VMI program has allowed them to reduce inventory, which is critical when order levels are down.

She says it is important that S.B. Simpson is a regional player. Because the company is local, it means they are there when Procor needs them.

"With a national company, we would be just a number' she says. "S.B. Simpson tailors the program to our specific requirements and they are willing to obtain and stock special items for us."

Nor' Easter

Stocking the right items and understanding the customers' needs becomes ever more critical in the far North and in more rural country. These problems are compounded when the company is based on an island.

Murray Industrial, based in St. Johns, Newfoundland, faces this challenge year-round, says president David Crosbie. Newfoundland's economy is based on the export of raw materials like lumber and oil as well as its primary product, seafood. There is little industry located on the island, so nearly all manufactured goods must be imported.

This makes inventory management critical. Items that must be flown in come at a much higher cost. Newfoundland's harsh weather can also delay air transportation, making next-day delivery nearly impossible in some cases.

"Competitors from the mainland just cannot appreciate these concerns," says Crosbie. "We always put in the extra effort to ensure shipments arrive on time."

The importance of helping customers forecast their needs is made clear in the case of one customer based in the small town of Come By Chance. A requested rush order for 55,000 pieces needed to be delivered in 48 hours, when machines would be taken offline for a planned refit, relates Crosbie. The order weighed 28,000 pounds and had to be delivered by air. It arrived on time, but at a cost much higher than necessary.

"We are innovators as far as technology. We have to be ahead of the curve to make it out here," he says. "We need great people, which we have, but we also need systems and technology to reduce costs and to effectively communicate with our six locations across Newfoundland and in Halifax."

Murray was the first member of IDI to become ISO certified, says Crosbie. With $16 million in annual sales, the company is smaller than some mainland competitors. Membership in IDI is a part of reducing costs and competing, he says.

"We operate like other good regionals -- we come through," says Crosbie. "But there are different challenges here. It is impossible to be all things to all people, but up here we must try."

It is necessary to work harder at service and form closer bonds with the customer, he says. The company must act as a jack-of-all-trades and anticipate customer needs. He points out that downtime can be very expensive, so inventory levels in Newfoundland must be higher than on the mainland.

Beyond the horizon

One Murray customer that is critically aware of the cost of special deliveries is the Hibernia oil platform, whose operating partner is ExxonMobil. It now lies 315 km. off the coast. A helicopter flight costs thousands of dollars per trip, yet with production at 150,000 barrels per day, downtime is unacceptable. It is critical to make the most of each trip and niinimize the need for rush deliveries.

Murray is also supplying the construction of the Terra Nova, a 292.2-meter long and 45.5-meter wide, 960,000 barrel Floating, Production, Storage and Offloading vessel, essentially a tanker, which will serve as an oil platform. The operating partner of the FPSO is Petro-Canada.

The ship will be tethered to the off-shore well for years without ever entering port. It will be serviced by smaller tankers which will shuttle the oil to shore facilities.

The builders incorporated many innovations learned from the Hibernia into this ship. One lesson was to store inventory more efficiently to avoid rush deliveries. One problem, however, was that the company that manufactured the basic hull left storage areas poorly designed and constructed.

Murray stepped in with the assistance of a manufacturer's rep and presented solutions that made vast improvements to the ship's overall efficiency and utility.

"I was contracted to supply some storage cabinets in one area, stock units with battens added for ocean conditions," says Gerry Poirier, president of St-Eustache, Quebec-based Man-U-Store. "Before long I was consulted to design customized storage throughout the ship."

A small purchase turned into a complete system, which developed over the course of a year. Murray was able to identify locations throughout the vessel where extra storage units could be installed, he says. The distributor answered all of the customer's needs for efficiently outfitting the ship.

"There were several rooms that, in their current state, had little useful value," Poirier says. "Murray brought me on board and we created solutions."

Man-U-Store modified stock units where it was feasible, but in some cases, more expensive custom units were required. Considering the unique challenges of inventory management in this application, Murray was able to convince the customer of the value represented by innovative storage.

"[The customer] didn't expect so much end result," says Poirier. "I don't know who else could have done what we accomplished because we are specialists -- at storage design, in my case, and with Murray, it's thorough knowledge of their customer."

COPYRIGHT 2001 Cahners Business Information in association with The Gale Group and LookSmart.