Janis Hubschman explains how Industrial Distribution Group, Inc., has become a leader in a highly competitive market by taking an individualized approach to its customers’ needs.
Industrial Distribution Group, Inc. (IDG), was formed in February 1997 with the merger of nine industrial distribution companies, and a strategy to become a leading national supplier of maintenance, repair, operating and production (MROP) products and services. The Atlanta-based company completed its initial public offering of common stock in September 1997, raising $65 million, which it used to purchase 18 additional companies.
Over the next three and a half years, IDG successfully combined the people, market strengths, cultures and strategies of the 27 entrepreneurial businesses to become one cohesive entity with a single brand, 1,500 employees and 59 operating locations (totaling 1,185,151 square feet), including one in China.
IDG’s more than 45,000 customers include a broad range of MROP product users, from one-person machine shops to such industry giants as Ford, Boeing, General Electric, Stanley Tools, Tyco, Borg Warner Automotive, Goodyear, Pitney Bowes and Volvo. With sales in excess of $500 million in sales for 1999, IDG is ranked as the 19th largest distributor of MROP products in the United States.
The Flexible Experts
“We differentiate ourselves with superior product knowledge, dedication to exceptional customer service and flexibility in providing solutions for our customers,” says IDG’s president and chief executive officer, Patrick O’Keefe. IDG takes pride in its product expertise. The company’s product and application specialists help identify the best product for a customer’s specific need in order to lower the customer’s total MROP costs. A comprehensive product line — specializing in abrasives, cutting tools, hand and power tools, coolants, lubricants and adhesives — supports the company’s commitment to deliver the most appropriate products to its customers. In addition to maintaining more than 400,000 stock-keeping units, as well as special items in stock for regular customers, IDG can provide any MROP product, including special-order items.
Providing superior quality and a comprehensive range of MROP services is a company hallmark. Quality assurance is emphasized in all phases of the company’s operations. The 251 inside sales and service employees receive ongoing training in total-quality management. Further, IDG is ISO 9002-compliant throughout the organization. According to Jack Healey, senior vice president and chief financial officer, IDG has not only some of the best documentation processes in the industry, but also devotes significant resources to measuring those processes and IDG’s performance, with the goal of continuous improvement and customer satisfaction.
IDG has achieved a leadership position in the fiercely competitive MROP market by virtue of its unique ability to design and implement customized flexible procurement solutions for acquiring, possessing and applying MROP products. The company offers a broad spectrum of services to satisfy each customer’s needs and to achieve the customer’s cost-reduction objectives.
For the more traditional customers that are looking for a wide breadth of MROP products, but are not prepared to outsource their entire procurement and management functions, IDG provides a range of options that may include one or more of the following: consolidated billing for MROP products as well as computerized management reports on purchases and inventory levels; electronic data interchange systems so customers can order products from their own locations; and bar-coding products in customers’ tool cribs to control inventory and to track consumption by product, employee or cost center.
For customers that want total procurement solutions designed and implemented through a single distributor, IDG offers its fully integrated supply programs, which are subsets of the company’s flexible procurement solutions. By forming a strategic alliance with the customer, IDG will procure, manage and determine the appropriate application for MROP products at the customer’s site.
“Our expertise in this area is the driving force that makes IDG a leader,” says O’Keefe. “We lead the industry in the integrated-supply and flexible-procurement-solutions concepts. Our ability to identify and implement cost savings for our customers helps us to develop long-lasting relationships.” The company’s fully integrated supply relationships, which vary from customer to customer, usually include: licensing its management software programs to the customer; gaining access to plant floors to re-engineer procurement and production processes and to standardize MROP products; coordinating the purchase of multiple MROP product lines; providing consolidated invoices and customized management reports via a direct network link to customers; and managing and staffing tool cribs.
With the company’s fully integrated supply program, customers are guaranteed cost reductions, since an ongoing analysis and re-engineering of production processes helps reduce the variety and number of MROP products the customer uses. In addition, savings are often realized through the reduction of certain back-office expenses such as purchasing costs, tool crib staffing expenses, the reduction in shrinkage and obsolete stock due to better inventory controls, and the elimination of certain inventory holding costs.
“There are tremendous efficiencies in working together,” says O’Keefe. “IDG focuses on having a three-way partnership. We work with suppliers and the end user to drive productivity improvements to assure our customers a competitive advantage.”
The Heart of the Matter
At the heart of all IDG flexible procurement solutions are its state-of-the-art software systems. “Our software solutions are very scalable,” says Dick Decker, director of flexible procurement systems. “Our solutions can be implemented at multiplant sites or at small to midsize plants.” IDG assists its customers in selecting the flexible-procurement-solutions program or group of programs that fit their unique requirements. For customers requiring a fully integrated supply solution, IDG’s proprietary software, Storeroom Management SystemsSM, handles procurement, receipt, management and issuance of MROP materials. This software not only eliminates purchase orders; it also drastically reduces operating expenses, improves cash flow and overall control. “This software, which was developed over the last seven years at IDG, is state-of-the-art in its industrial distribution storeroom management approach,” says Decker. “It is installed in over 40 sites throughout the country. The model continues to be the growth leader in the market and within IDG.”
Another valuable management tool is Innosource™. “This software gives our customers the ability to manage different commodities with separate suppliers and streamline accounting and reporting functions under one easy-to-use platform,” says Decker. Innosource™ eliminates purchase orders, acknowledgements, pricing discrepancies and the need for expediting, all while reducing total transaction costs. Other available IDG software can help customers manage or analyze tool-room inventory, and replenish inventory through bar coding.
IDG initiated its strategic growth supplier program to expand the scope of its product offering. IDG works closely with its supply partners — who include such market leaders as 3M, Cooper Tools, Sandvik and Castrol — to add value and to reduce transaction costs for their mutual customers. “We make a commitment to certain key suppliers,” says O’Keefe. “We’ll focus on featuring their product lines by developing marketing and sales programs to support them. In turn, our strategic growth suppliers make a commitment to provide technical capabilities to the customer, and to also provide process productivity improvements that will allow the customer to achieve significant cost savings. The suppliers devote specific individuals to support our account. What suppliers get in return is additional volume as we convert our customers to their product lines, and long relationships with our key accounts.”
As a relative newcomer, Industrial Distribution Group, Inc., has made great strides in the last three and a half years. As the company continues to mature and develop, it adds to its foundation of strength. In addition to efforts to expand its broad geographic footprint, IDG will also seek to expand awareness of its flexible procurement solutions. “We see ourselves as a leader, and as being dominant in the integrated supply area,” says Healey. “We’ve put in place all the pieces necessary to grow and dominate the integrated-supply segment of the industrial distribution marketplace.”