A-D in PVF: great expectations
Started with 11 charter members, the PVF division now includes 47 companies with a combined total of 680 branches and more than $2 billion in sales. The electrical and industrial-mill divisions represent another 228 firms with more than 1,600 locations.
The King of Prussia, Pa.-based group's annual growth rate has averaged 20% since its founding in 1981; business with its PVF suppliers is up 25% this year. So it appears that A-D's plans for the future are based on a strong track record.
That certainly is the view of A-D's PVF affiliates. Already successful distributors, albeit on local or regional levels, Jim Irwin and Gary Stratiner have no regrets about signing on with A-D.
Was it love at first sight? Hardly. As independents, Irwin and Stratiner already had been beaten up by the changes in wholesaling. Consolidation and the expansion of the largest players in PVF distribution - not to mention ongoing pressure from customers to reduce costs - are still tightening the thumbscrews on independents. So each approached his first A-D meeting with some skepticism.
As president of Ohio Pipe & Supply (Cleveland), Irwin was looking for a way to bid on national contracts that were just out of his reach.
"Then we went to A-D's annual meeting in Dallas," he recalls. "I sat at a table with several electrical distributors and manufacturers. The fact that the vendors were so enthusiastic is what really got me excited."
Indeed, strengthening the relationships between distributors and vendors is a primary focus of A-D. "In the past, it sometimes was hard to connect with top management at our vendors," Irwin explains. "At conventions we might get to see them for a few minutes. But at the A-D national meeting, we can sit down with our vendors for a concentrated period of time and really talk."
Puget Sound Pipe & Supply (Kent, Wash.) shared the same motive for joining A-D. As its president, Stratiner was frustrated by losing a longtime customer to a competitor offering a national contract. "Joining A-D was a defensive stance," he says.
Another attraction A-D held was the strength of its electrical division, especially considering how large a part electrical plays in MRO.
"A PVF distributor has a better chance of getting a foot in the door if it goes in with electrical," he says. "Our biggest competitors are at a disadvantage there; they can't put together the complete integrated package that A-D can."
All for oneIronically, the strength of the electrical division was also the source of Stratiner's main concern about joining A-D. "We were worried that the industrial-PVF division was going to just be the weak sister of the electrical division. Was A-D going to use us just to solidify their electrical contracts?"
Those fears have long since dissipated, however. In fact, Stratiner says, his main frustration as an A-D affiliate today is the difficulty in spreading the word of how effective the group is and how much it can help the customer.
"When we tell people that A-D is a $13-billion organization, you should see their jaws drop," Stratiner adds. "They just don't understand the breadth of the entire mix of companies that are part of A-D. We're bigger than anyone in industrial distribution, including W.W. Grainger."
However, the size of the group is a potential liability, especially as presented by competitors. "They tell customers, 'How can A-D ever get 300 companies working together to take care of your problems?'"
Irwin understands that point of view but stresses that A-D is working to dispel that perception. "Right now, we have a bunch of disparate, privately owned businesses with different ways of doing business," he says. "But we're making great progress toward offering a uniform, high-quality level of service."
Stratiner is betting that this problem will be resolved quickly. "The fact that we already work together so well is to the credit of A-D President Bill Weisberg and his management team. Once problems come up, they don't stay problems for very long."
To buy or not to buyAt the outset of his company's relationship with A-D, Stratiner feared that A-D was just another buying group. However, he quickly decided that this was not the case.
Part of that communication is the opportunity to discuss problems with other PVF wholesalers as well as distributors from the electrical and industrial-mill divisions.
Yeah, but let's get to the bottom line. How much business - and profit - has the A-D affiliation actually brought to Puget Sound Pipe and Ohio Pipe? Neither company has exactly been inundated with additional orders, but on the other hand, they have had new opportunities that would not have been available without A-D. Irwin says that Ohio Pipe has gotten "a couple of pretty good contracts" through A-D in the pharmaceutical and paper industries.
Stratiner acknowledges that, while he hasn't seen as much national work as he would like, he certainly doesn't blame A-D. Furthermore, he sees an increase in the number of full integrated-supply agreements overall.
"A-D never told us they would guarantee that we'd get the business, but they did say we'd have the opportunity to get our foot in the door and tell our story. Then, if we told it well enough, things would tend to work out to our advantage. And they have."
Eye on the futureThe growth hasn't just been within the individual companies, either. For instance, Stratiner is working with North Coast Electric and other A-D distributors in the Pacific Northwest to form what he calls Affiliated Distributors Northwest. It is patterned after Affiliated Distributors Northeast, a closely knit alliance across several disciplines in that geographic area.
He expects more collaborations of that type in the near future. For example, some A-D affiliates might form a corporation within A-D to further eliminate redundant costs in the marketplace by sharing accounts payable and receivable. "Those are things the customer never sees, so why shouldn't we share those costs?"
Irwin and Stratiner believe their companies have a better chance of staying independent with A-D than by trying to tough it out individually.
"A-D might have been a defensive move at first, but we soon realized that it was a concept that we all could build on," Stratiner says. "It's been a great growth factor for all of us. A-D allows us to remain independent."
And that, both men agree, is the real bottom line.