The last time anything like this occurred was 1970. That's when the industry's two national plumbing wholesaler organizations, the Central Supply Association and American Institute, merged to form the American Supply Association. Now it's time to congratulate the HVACR distribution industry for reaching the same conclusion that one plus one equals ONE.
A new association, the Heating, Airconditioning & Refrigeration Distributors International (HARDI), has been formed to take the place of two HVACR wholesaler associations that have been serving the industry ever since a/c started to get commercialized in a big way. In early October, the Northamerican Heating, Refrigerating & Airconditioning Wholesalers Association (NHRAW) and Air-conditioning & Refrigeration Wholesalers International (ARWI) agreed to become one, effective at the turn of 2003.
(We trust that happened. Publishing deadlines being what they are, we had to write this article and send it to the printer before members of NHRAW and ARWI finished ratifying a consolidation proposal that was unanimously approved by both boards of directors. Leaders of both groups assured us there was little if any opposition in their ranks, and they would be astounded if the alliance were voted down.)
How It HappenedNHRAW, formed in 1947, and ARWI, dating to 1935, had discussed consolidating at various times in the past without anything coming of it. Consolidation talks heated up again in the summer of 2001, then proceeded with remarkable speed. Gary Burke, an NHRAW trustee and head of wholesaler Burke Engineering Co., was one of numerous wholesalers belonging to both trade associations. He had just been elected to the ARWI board, and from that unique perspective on the board of both groups suggested to then NHRAW president Scott Nicholson that the time might be right to reopen consolidation talks with his ARWI counterpart Paul Goulet.
Both NHRAW and ARWI then engaged the services of consultant Michael Marks to conduct member surveys about the need for a single association and act as moderator for initial negotiations.
Just as things got underway, Gary Burke met with an untimely death.
Well-liked by all, his passing may have been the spark needed to strengthen the commitment of friends in both associations to carry through his project.
The ball was picked up in late 2001 by the successor presidents Jim Truesdell of NHRAW and Johnnie Drury of ARWI. Working with Nicholson and Goulet, they put together a special consolidation task force, which produced a report and recommendation to the two organizations that led to the formation of HARDI.
As might be expected, there were major differences in the two associations that had to be resolved and compromises were reached. The officers of ARWI and NHRAW and the task force persevered to hammer out a proposal that was approved unanimously by both boards last August. Then it was presented by mail to both memberships for a vote with a deadline of Oct. 3. Results of that vote are to be presented at the ARWI convention in San Antonio beginning Oct. 12, which is the day this magazine is scheduled to arrive there. If the vote isn't affirmative, Supply House Times will live in infamy like the Chicago Tribune, whose famous 1948 headline announced, "Dewey Defeats Truman." Our understanding, though, is that it's more likely for the sun to rise in the west.
What Next?HARDI now goes forward under a transitional board headed by co-presidents Truesdell and Drury. On January 3, 2003, the first full-term board, headed by incoming President Doug Young of the Behler-Young Co., will take office and NHRAW and ARWI will become part of industry history.
Prior to the consolidation, the two groups had a combined 467 wholesaler members and 604 associate members, based on 2001 data. About 11% of the collective membership belonged to both groups, so HARDI projects membership of around 950. A dues structure has been formulated to provide ample revenues for HARDI to operate effectively, yet not impose an inordinate burden on any members or group of members. Some companies will end up paying a little more, some a little less.
The new organization should realize economies by removing duplication of services and redundant costs. Meantime, the combined resources of the two groups will allow for enhanced services, programs and benefits for the members, along with combining complementary strengths and core competencies.
Truesdell and Drury praised the efforts of the 14 individuals who served on the consolidation task force for their hard work and ability to put partisanship aside.
"Both NHRAW and ARWI have strong traditions of adapting to changes in the industry," said Truesdell. "This is one more example of that tradition as both organizations realized it was time to take this logical step for the benefit of the members and the HVACR industry."
An Interview With Truesdell & DrurySupply House Times interviewed NHRAW president Jim Truesdell and ARWI's Johnnie Drury to discuss this historic alliance. Here's what they had to say:
Supply House Times: Was there any significant difference in the constituencies served by NHRAW and ARWI?
Truesdell: There's no significant difference, as evidenced by the number of joint members. Each association's members have a similar range of business sizes, number of branches, geographical markets and in many cases handle similar products.
Drury: Speaking from my 43 years of experience in the business, I can say that in the past NHRAW catered predominantly to air distribution and equipment, while ARWI catered to parts and pieces. However, in the last 25 years or so, there's been a crossover on both sides. More equipment distributors got into parts, and more parts wholesalers into equipment, and that's probably why this consolidation needed to happen before now.
Supply House Times: Why didn't it?
Drury: Politics and ego. We finally got people together to whom politics and ego meant nothing, and that's why we have been able to accomplish what we have in such a short time.
Supply House Times: What was the hardest part about pulling off this consolidation?
Truesdell: Each organization has a very strong constituency with many years of memories and strong traditions. It's always difficult to let go of something you love in the form you have known it. Nevertheless, both organizations exhibited the strength to adapt to changes and respond to member needs. The officers, boards and the consolidation team felt a strong obligation to act in the interest of the industry.
This commitment enabled us to deal with thorny issues such as staffing plans, differences in regional structures and any perceived "cultural differences." We realized we were all similar wholesalers, and that our associate members had similar interests, and were confident that any differences would soon fade once the new organization became a reality.
Supply House Times: Both of you will serve as co-presidents during the transition period until January 3. Does this mean each presidential decision has to be discussed and decided by both of you, or have you divvied up responsibilities in some manner?
Drury: Jim and I have worked very closely together. If something comes up, we communicate. We haven't run across any problems or difficulties we haven't been able to resolve between us, and even if we should reach that stage, we have the transition board to resolve it.
Truesdell: Johnnie and I have been able to work through any conflicts between our two organizations in the spirit of the new organization being created. We're confident we'll act in concert on decisions during the transition.
We are honored by this opportunity to shepherd HARDI through this initial period, and intend to set the standard for cooperation that our successors can follow.
Supply House Times: The consolidation proposal calls for NHRAW's headquarters in Columbus, Ohio, to serve as HARDI's headquarters, with the current executive vice president of NHRAW serving as staff director. It also says that "ARWI's existing arrangement with Magellan Management Co. will be assumed by HARDI," with the HARDI board working with the two groups to draw up a long-range management plan by June 30 next year. Do you anticipate one of these management entities being negotiated out of existence?
Truesdell: The consolidation task force members recognize that each management group brings unique strengths to HARDI. With the increased revenue and membership, and our intent to expand member services, we expect the new HARDI board will be able to adopt a long-range management plan using resources of both staffing groups. The goal is to reduce total overhead while improving service levels.
Drury: Right now there are divided responsibilities based on what they are good at. By next April the staffs will present a plan stating what they will do and what they will charge.
Negotiated out? That's always a possibility, but Jim and I like to think we'll be able to have the best of both worlds and hopefully be able to retain both of them in some manner.
Supply House Times: Consolidation aside, what are some of the most compelling issues facing HVACR wholesalers that HARDI will try to address?
Drury: What bugs everybody at every meeting I go to is the economy in general, and what we can do to strengthen our businesses now that the mass merchandisers are getting into our industry. We'll be seeing what we can do working with our manufacturers to help our members become more of a force in the marketplace.
Truesdell: The supply channel is changing. We're obviously facing new kinds of competitors who threaten to usurp the functions we as distributors have always performed so well.
Our association must make the case for the effectiveness of locally sited, independent distribution. The stocking distributor brings a tremendous number of strengths to the table. With our knowledge of local markets, delivery capabilities, credit services, and broad product expertise, we should be able to outperform other kinds of competitors.
We'll be challenged, however, to utilize new technology and to operate more efficiently than other types of channel players. This is where HARDI can play an important role. Not only does the association highlight and promote the role of distribution, but we can challenge our members to expand their competencies through a broad range of educational offerings and convention and meeting programs.
We have energetically promoted the concept of "Market Center Distribution" over the past two years as a means of drawing together the ideas presented through our association meetings. (See Supply House Times, "What Is Market Center Distribution?" July 2001). We've targeted systematically eliminating redundant costs in the supply channel. In fact, the consolidation of NHRAW and ARWI is evidence of that strategy. I'm pleased that both consolidating organizations have embraced the MCD concept and will go forward with it under the HARDI banner. Considerable written material about MCD is available through the HARDI offices free of charge.
A major challenge we're addressing is the need to move toward more efficient supplier-assisted inventory. This requires a coordination of software between industry service providers, manufacturers and distributors.
This has begun with surveys, joint meetings, and inventories of software in use by various members. This effort needs to be accelerated and some of the best minds in the industry are already dedicated to moving the process along.
Issues will confront us in years to come that we haven't dreamed of yet. We are in a period of tumultuous change. Distributors have done a good job of responding to this change - at least those who have survived and are part of HARDI today. We're confident we'll meet the challenges of the 21st century and that HARDI will be at the forefront.
Supply House Times: Is there anything I haven't addressed you'd like to say?
Truesdell: With a single HVACR distribution organization now in place, we believe that every wholesaler, manufacturer and related company should be part of the new association. When we have our first annual HARDI convention in San Francisco in early December 2003, we expect the industry will be there in unprecedented numbers for a world class meeting that will set the standard for what is to come.
Drury: I have never seen people work harder together to get something accomplished as the 14 members and advisors on the Joint Consolidation Task Force.