The business model devised for Your Other Warehouse in 1987 by retired founder Tom Bromley has to rank as one of the plumbing industry’s all-time great brainstorms. Nor are you likely to find a company name that better matches its mission, in this case of providing distributors with rapid access to a mother lode of products without the expense of stocking oddballs and slow movers.

Brilliant strategy is only as good as its execution, and there, too, YOW for many years stood as the paradigm of master distribution. It dazzled customers with a top-notch call center, rapid and accurate order fulfillment and transparent marketing services that helped it live up to its name.

Then came its stunning purchase by Home Depot in 2001. Big Orange didn’t exactly wreck YOW, but perception’s sting can be as painful as reality. YOW’s sales and marketing team concedes there was an initial drop-off of distributor business as plumbing wholesalers came to view their erstwhile ally as defecting to the enemy. They claim it was all recouped within six to eight months as distributors followed their own best interests in obtaining needed products. Even so, something was lost, like former lovers professing to still be friends.

Enlarge this picture Note the bracing between shipping boxes, used to reduce breakage.

After the purchase, YOW was absorbed for a brief time into its HD Supply distribution unit but soon afterward moved into the Home Depot Direct division, which provides various services to Home Depot’s retail empire. Even with diminished distributor business, YOW continued to grow as a feeder to the parent company’s big box and Expo stores. It also benefited from mushrooming sales of plumbing products over the Internet, a market tailor-made for the services provided by YOW.

Some things did change for the worse, however. As with the mother ship, YOW’s culture of customer service came in for shock therapy under former Home Depot CEO Robert Nardelli. And it’s hard to deny that Home Depot’s interest in YOW stemmed in large measure to service its own retail domain. Who could blame plumbing wholesalers for feeling like they played second fiddle to Big Orange?

Other master distributors arose to fill the real or perceived void in the plumbing industry. As competition heated up, the feeling spread within YOW ranks that the business needed to re-energize its ties with plumbing distributors.

A New Direction

Enlarge this picture YOW’s management team includes, from left: Tippy Thomassie, Ed Jimenez, Scott Watts and P.J. O’Neill.

That is now underway. YOW refers to its refocus as a “B2B” initiative, and we’ll pick up on that shorthand. YOW now has a separate P&L and leadership team from Home Depot Direct (HDD), and no longer services any Home Depot businesses. B2B target markets include plumbing wholesalers, kitchen/bath dealers, e-tailers and retailers. HDD remains as a separate unit to service the stores and their Internet outlet. Purchasing and inventory overlap, but YOW has a separate sales and marketing organization dedicated to servicing its B2B audience exclusively.

YOW’s B2B management team is comprised of youthful managers such as Director of Marketing Scott Watts; National Sales Manager Ed Jimenez; and Sales Manager Tippy Thomassie. (Shortly before we covered this story, the overall B2B director, Bryan Triche, left the company to take a position with Hansgrohe. His replacement had not been announced as of press time.)

“The thing that pushed us in this direction was our customers asking for it,” offered Jimenez. “We got tired of hearing that things were not the same as they used to be.”

There are three main strategic elements to the B2B thrust:

1. An Extranet Web platform nearing completion that will allow B2B customers to buy online and access YOW’s renowned “DoDads” catalogs. Customers have access to real-time inventory status of all products in YOW’s three warehouse locations (Baton Rouge headquarters, Las Vegas and Hagerstown, MD).

2. A fashion plumbing-dedicated call center, aimed at restoring YOW’s past reputation for excellence in product knowledge and customer relationships.

3. Greater leveraging of YOW’s private label brands. In addition to its “Elizabethan Classics” and “Belle Forêt” plumbing labels, YOW offers “World Imports” high-end showroom lighting, and will soon be coming out with a fourth private label, the “Schön” line of bath and kitchen products.

Flowers On The Desk

Enlarge this picture Small inventory items are stored in bins, with the rows folding outward for easy retrieval.

Probably no aspect of this “back to the roots” initiative holds more meaning for plumbing wholesalers than the revamped call center. YOW’s reputation for customer service was legendary within the industry before Home Depot took over. “Prior to 2001, you would regularly see flowers on the desks of our CSRs,” recalled Watts. “They were from customers showing appreciation for bailing them out of a jam or who knew that it was someone’s birthday or anniversary. That speaks volumes about the kind of personal relationships our CSRs developed with customers, but you don’t see that much of it anymore.”

Under Nardelli’s leadership, educational requirements, training and pay structures were changed for YOW’s customer service reps, and as a result turnover increased dramatically.

“Home Depot stores have a wide range of general customer service needs and do not necessarily need plumbing experts,” said Thomassie. “This is not the case in the B2B environment, and the competition has gotten much tougher. Our plan is to get back to the old ways, with a lot of vendor involvement in training and more of an account management focus.”

This isn’t to say YOW’s vaunted call center completely deteriorated. The 200-person operation continued throughout to exhibit a high degree of professionalism in many ways. CSRs are trained to answer calls quickly and cheerfully; orders get fulfilled with an astounding 99.75% accuracy rate. Quality assurance metrics are continuously monitored and CSR teams compete against one another for prizes. It’s just that word came down from on high to redirect those metrics toward call handling volume and order taking. That, coupled with lower pay and reduced employment criteria, made it hard to build the same customer relationships as before.

Enlarge this picture Note the track marks for automated forklift pickers.

The B2B team hopes to focus about half of its CSRs for YOW’s fashion plumbing needs, step up their product training and establish new metrics geared to customer satisfaction and longer term results. “We want to have commercial plumbing experts, whirlpool experts, custom shower experts and so on,” said Watts. “The way we see it, the Home Depot Direct call center will continue to focus on the general customer service needs of Home Depot, while the wholesale call center will require more fashion plumbing expertise.

“As we used to say in the ’90s, we aim to ‘hire friendly and teach them plumbing, because you can’t teach friendly,’” added Watts.

Besides reinvigorating the call center, the B2B team intends to introduce a number of other value-added services. Showroom-related business is increasing, for instance, and YOW has started to facilitate displays in conjunction with various vendors, as well as provide its own lighting and decorative hardware private label products. It also plans to begin partnering with vendors to create promotions for customers, something never done by YOW before. “Our goal is to take market share away from competitors,” said Thomassie, “so we have to continue adding value-added services to build relationships with customers.”

Product Galore

Enlarge this picture Part of YOW’s call center.

While refreshingly candid about life with their corporate parent, the B2B team is quick to point out the benefits of Home Depot affiliation, especially the purchasing and shipping economies that get passed along to customers. YOW has benefited as well from Home Depot’s supply chain management and operational sophistication.

Besides, Home Depot is not as much an ogre as it used to be in the eyes of many plumbing distributors. Some of them have found out that opening a showroom right down the street from a Big Orange box can be a smart strategic move resulting in increased traffic. Others regard Home Depot as the lesser of evils, considering that some rival master distributors are offshoots of competing wholesalers.

Product offerings have exploded during the past six years, requiring a recent expansion of the Las Vegas distribution facility. The company’s original warehouse in Baton Rouge was inherited from LCR, and although sizable, is less than a third the size of the facility at its Hagerstown location. At the same time, it is a marvel of automated warehouse management technology. Everything gets picked by forklift trucks that are directed via computer to the most efficient picking routes. Scanners aboard the vehicles will not work if the product selected does not match what’s on the order. Elaborate packaging techniques are employed to prevent breakage. Three shifts work 24 hours a day picking and packing, loading and unloading.

Enlarge this picture Forklift equipped with gear that automatically directs operators to the most efficient picking routes.

P.J. O’Neill, another longtime veteran going all the way back to the LCR days, serves as manager of procurement and inventory for YOW. “Inventory is always a moving target,” he said, showing me various computer screens that provide a dazzling array of data. His job not only requires buying the right products in the right quantities, but determining how many to apportion to each distribution center based on regional demand.

One of the screens demonstrated by O’Neill showed a complex series of data related to YOW buyer evaluations. Buyers get judged by measures of inventory, sales and turns. “Our buyers have to manage production issues with vendors as well,” commented O’Neill. Order fulfillment rates are calculated on a tough scale that counts complete fulfillment as 100% and anything less as nothing. The more experienced the buyers, the more skus they will handle. Keeping track of it all is a warehouse management system that originated with Mincron years ago but has since been customized to the nth degree.

Which begged a question — with so much riding on electronic data, how vulnerable is YOW to natural disasters? The question turned out to be not at all theoretical in August 2005, when Hurricane Katrina laid waste to New Orleans merely 65 miles down the road.

Although Katrina largely spared Baton Rouge, YOW unexpectedly lost Internet connections because all of its T1 lines and backups were going through New Orleans. YOW got knocked out of service for a single day before it was able to install satellite connections to get back online.

Looking Ahead

Enlarge this picture This machine extrudes packing material to reduce breakage.

YOW’s B2B team is largely untroubled by the industry consolidation that vexes so many plumbing distributors. They see plenty of growth for the plumbing master distribution business in years to come.

“Manufacturers are creating a mind-boggling assortment of goods, finishes and skus, and most wholesalers just don’t have the room in their warehouses and showrooms to maintain this new assortment,” said Jimenez. “That’s why we see a bright future for the wholesaler channel.”

Added Watts, “A very small percentage of decorative faucets are being sold online now, but that percentage is bound to go up, and we are perfectly positioned to support our e-tail customers.”

One trend that does concern them is an emerging practice by some vendors to sell to e-tailers directly. So far it’s a trickle rather than a flood, but it creates difficulties for YOW that go beyond lost sales. “We’ve been handling customer service for some orders we didn’t sell, and that’s challenging,” Thomassie pointed out. On the other hand, she was quick to add, “We also see a lot of manufacturers reaching out to us, because they only want to do large order fulfillments.”

[SIDE BAR] YOW Was Not Part Of HD Supply

Home Depot’s sale of HD Supply last June to three private equity groups should end a bit of confusion that existed in parts of the industry about that unit’s relationship with Your Other Warehouse. After its purchase by Home Depot in 2001, YOW briefly was attached to HD Supply, which then consisted only of the former Apex Supply branches. Shortly afterward it was separated, as HD Supply became a $12 billion distribution conglomerate cobbled together from acquisitions that included this industry’s Apex and Hughes Supply chains along with many other disparate construction supply companies.

YOW was until recently a brand within a business unit known as Home Depot Direct, which provides services to Home Depot stores and related businesses. As the main article describes, YOW has since broken off into a separate entity focused on servicing plumbing wholesalers and other external B2B customers. HD Supply, or whatever name its new owners might give it, was and presumably still is a customer of YOW like any other plumbing distributor.

HD Supply was a pet project of former CEO Robert Nardelli, and since his departure last January activist shareholders leaned on successor Frank Blake to divest the distribution business and refocus on Home Depot’s core retail operations. As we reported last month, the divestiture finally took place in June.

This story coverage took place while HD Supply was being shopped, and the YOW spokespersons told me they had received assurances that YOW would not be part of any sale. As we went to press, that appears to be the case.