Don't be fooled by their rural setting. The Kelly family presides over a thoroughly modern company.



There's a time and a place for everything. So when a company marks 100 years in business under the same family ownership, it's a time to indulge in large doses of nostalgia. No surprise, then, to find quite a bit of that when I visited Kelly Supply Co. last July for its 100th Anniversary celebration at its home base in Grand Island, Neb.

The bigger story, though, is what I didn't expect to find in this heart of the nation's heartland. That was a wholesaler with a ravenous appetite for modern computer technology and its e-business applications. A rural wholesaler at that, one whose business heart and soul derives from the agriculture that dominates the economy for hundreds of miles in any direction. This is a company that, quite literally, brought the Internet to farm country.

Kelly Supply Today

Kelly Supply's main business remains as a distributor of PHCP and various other supplies. "We have to be all things to our customers," is the way President and CEO Jeff Kelly describes the business. There's no place for specialists in a trading area stretching almost a thousand miles east and west, yet whose total population could fit comfortably within the boundaries of Manhattan.

Kelly's $25-million business is broken up into 13 locations spread throughout the wide open spaces of Nebraska (seven branches), Iowa (four) and eastern Colorado (two). While its roots are in plumbing, it also distributes industrial PVF (its largest volume sector) along with other industrial MRO goods, plus cements, hand tools, fertilizer, irrigation and well supplies, along with hydronic heating and electrical goods in some branches. Customers include the trade, farmers, factories, railroads, utilities, municipalities and anyone else in need of its diverse offerings.

Each location carries a different mix of product depending on its local markets. A "fulfillment center" exists in the town of Hastings, about 20 miles south of Grand Island headquarters, to serve Nebraska locations. However, the Iowa and Colorado branches are too far flung for central distribution to make sense. "There's a little crossover, but mainly each state feeds itself," says Jeff's younger brother and co-owner Kent Kelly, better known to everyone as K.C.

K.C. lives some 425 miles away in Cedar Rapids, where he oversees the company's four Iowa branches, as well as purchasing for the entire company. Remote management is made possible thanks to sophisticated telecommunications. Another key employee, controller Tami Hein, lives twice as far away in Indianapolis. She visits the company a few times a year but otherwise is able to handle her duties electronically.

Technology is a fancy tool but not the company's driving force. At the customer interface level, Kelly's executives count employee longevity and loyalty as their biggest asset. People just don't leave this company -- and even when they do leave, such as Ms. Hein when her husband changed jobs and relocated, they still don't leave! "We don't have to train anybody, and that's a big competitive edge," notes Jeff. "In the last 20 years we've replaced one branch manager -- and that was with a guy who had 30 years of experience."

Of 109 total employees, 60 have been with Kelly for at least 10 years. Seventeen have been around for a quarter-century or longer. Marilyn McHugh from the purchasing department has been with the company 37 years.

Combine that expertise with Internet savvy and you have a team able to locate virtually anything, anywhere. Their broad product array requires purchasing from some 700 different manufacturers, and about 35% of Kelly's business comes from non-stock items. "That means we have to go the extra step to research and find whatever a customer needs," says Jeff. "Most wholesalers run from that. We thrive on it."

K.C. adds, "Ask people around here about our reputation in the market, and most will tell you we're not the cheapest around, but we sure can get it!"

Kelly Supply Yesteryear

The company began as a plumbing contractor and remained so up to World War II. Records dug out for the anniversary celebration included a ledger noting the first company transaction. It was collected by co-founder William ("Bill") Kelly for the grand total of $5.35, dated July 9, 1903.

The company was founded as Kelly-Porter Plumbing Co., reflecting a partnership between a local physician and Bill Kelly, great uncle of Jeff and K.C. The plumber purchased Porter's interest in 1905, and shortly afterward brought three brothers into the trade, Robert, Thomas and Martin Kelly. Martin was Jeff's and K.C.'s grandfather. The brothers prospered and opened plumbing businesses in other Nebraska towns. In 1917, they expanded into the well drilling business, and four years later purchased another plumbing contractor and became known as the Sanitary Plumbing Co.

They first tiptoed into the wholesale arena by becoming a Rigid Tool distributor in 1923. Four years later, they organized as Kelly Supply Co. when they added petroleum handling equipment and plumbing supplies. Nonetheless, according to Jeff, most of their business continued to come from plumbing and well drilling work. For several decades Kelly Supply Co. was mainly a captive supply house to assure supplies for its contracting activities. They didn't really blossom as full-fledged wholesalers until after World War II.

Martin Kelly was the last survivor of the founding generation. He had three sons who would take over the business. Martin Jr. was the first, coming aboard in 1937. After the war, he was joined by brothers Howard, father to Jeff and K.C., and their uncle, Ralph Kelly. The three men shared the task of running the company although, according to K.C., Martin's wife Elva was the real key to the business during this era.

"Grandpa Martin was the typical plumber, a great mechanic, but didn't know anything about running a business. Grandma was real sharp, though. She had offices both at home and at work, and was always running a calculator or doing something else related to business. It seemed she worked 24 hours a day. She was a neat woman," recalls grandson K.C.

Martin Jr. was plagued by chronic arthritis, and moved to Phoenix, Ariz., to open a branch, thinking the change in climate offered some relief from his ailment. He died in 1965, within a year of arriving there. It was the company's only attempt to expand beyond its vast but contiguous trading area. Surviving brothers Howard and Ralph took the reins until they retired in the 1980s.

Uncle Ralph is the last second-generation survivor and the keeper of family lore. Ralph says it was his father's decision to cast the family solely into the wholesaling side of the business.

"My father told us that the home builder gets 10% of the money and the plumber 5%, but a wholesaler gets 25% -- so that's why we became a wholesaler!"

Howard's sons Jeff and K.C. came onboard in 1975 and 1978, respectively. Ralph's son, Mike Kelly, came to work for the company in 1976 and, until retiring a couple of years ago, shared third-generation leadership duties with his cousins.

It's Family, And It's Business

Kelly Supply's longevity puts it in rarefied company among family businesses. The vast majority last only a generation or two before infighting tears them apart. The Kelly clan has relied on strong family values to negotiate the delicate balance between business and family relationships. It's interesting that in separate conversations, K.C., Jeff and Mike Kelly offered the same assessment:

K.C.: "My dad and Uncle Ralph were very different people who didn't always agree, but when the chips were down they never forgot they were brothers."

Jeff: "K.C. and I sometimes disagree, but we never argue."

Mike: "Three generations have hung together through thick and thin. That's what's allowed us to stay in business for 100 years."

Mike serves as a good example of how the Kellys balance family and business interests. Until two years ago, he shared senior management duties with cousin Jeff. They were the same age and had similar business experience, but the family members had the foresight to decide it wouldn't be good for two senior stockholders to retire at the same time. So for the sake of succession planning and with agreement all around, Mike took an early retirement.

Jeff cites another factor to explain the company's longevity. It's something most family business consultants recommend. "One of the stipulations of our father was that before we could join the family business, we had to have a minimum of five years experience working on the outside," notes Jeff. K.C. worked for a supply company in the state capital of Lincoln. Jeff has a degree in journalism and business, which he parlayed into a seven-year stint with the Kansas City Chamber of Commerce prior to coming to work for Kelly Supply.

Jeff's sons, Luke and John, are now aboard as the fourth generation of Kelly leadership. Not only are they sustaining the legacy, they are propelling it at warp speed in an entirely different direction.