The Phenomenal Rise Of Red Man Pipe & Supply
Thirty years ago, Red Man Pipe & Supply Co. didn’t exist. The oilfield and industrial PVF distributor started operating in March of 1977 with little more than a $50,000 loan and a charismatic founder’s vision to make a difference in the oilfield supply business.
Last year they reached $1 billion in sales, and will top it again this year. That’s with a “b.”
What’s more, they do it with a grand total of only some 1,086 employees.
Their ascent to that rarefied highland hasn’t been altogether smooth. Red Man’s core markets consist of energy producers, downstream refineries and industrial plants. All have undergone busts as big as their booms over the last three decades. The company got lashed by Hurricanes Katrina and Rita in 2005. The nasty ladies destroyed and permanently closed two southern Louisiana stores (Red Man’s term for supply house branches), and temporarily disrupted various other Gulf Coast operations.
They’ve had to maneuver around economic sinkholes in every one of the four numbered decades in which they’ve been in business. Consider that when Red Man was formed in the 1970s, there were around 4,500 gas and oil drilling rigs operating in this country. The count as of this writing was 1,739.
Red Man’s march through this obstacle course brings to mind the famous statement attributed to the philosopher Friedrich Nietzsche: “That which does not kill me makes me stronger.” Despite ups and downs, Red Man’s growth has been more consistent than that of the markets that provide its lifeblood. This reflects increased market share via both acquisitions and organic growth. The last couple of years have been exceptionally strong, as they’ve benefited from a boisterous industrial PVF economy and rising energy prices.
Driving For Improvement“We’ve been blessed,” said President Craig Ketchum in assessing Red Man’s recent performance. The soft-spoken son of the late founder reveals a modesty not often found in business leaders of his stature.
In fact, the entire corporate culture of Red Man is decidedly un-corporate. The Tulsa headquarters is in a functional office building. The facilities are clean and comfortable but not plush. Interior décor showcases Native American art and artifacts, both in the reception area and throughout the inside offices, along with emblems of the company’s extensive charitable and community service endeavors. The dress code is business casual, and a friendly camaraderie permeates every department. You can tell people like working here. In terms of atmosphere, there’s no discernible difference between this $1 billion company and a mom-and-pop operation one-hundredth their size.
However, once you penetrate the “aw shucks” shell of this corporate personality, you discover a core of considerable business savvy.
Busy as they are keeping up with an onslaught of orders from red hot markets, Red Man’s management is on a parallel track trying to immunize against the next downturn. They have embraced the Japanese “Kaizan” concept of continuous improvement. Simultaneously, they are implementing a wide-ranging quality management process covering both products and processes. (See box on page 38.) It’s all part of Red Man’s “Supplier of Choice” initiative to lock in customers in good times or bad. (See box on page 40.)
“When’s the best time to improve? When you’re winning,” said Jeff Lang, senior vice president of operations and stores, whose job is to implement the five-point program of operational improvements. He also pointed to a new leadership program in place for store managers.
“Red Man’s hardworking, loyal and experienced employees are key to our success. It’s a challenge taking time to train people when you’re extremely busy, but we find when we have good leaders in place, the business blossoms,” said Lang.
Lang is a newcomer to Red Man’s senior management, joining the company last March after 20-plus years in distribution operations with Ingersoll Rand. That makes for a unique perspective, so I asked Lang to compare Red Man’s business with his other distribution experience.
“One of the neat things about Red Man is its culture of thrift,” he observed. “They embraced ‘lean’ business processes early on, before it was cool in corporate America. Great people founded this company, and they had humble roots. This has led to a very humble, economical business model. Being in a commodity business, we must have an exceptional cost model if we’re to eat in the short and long term,” said Lang.
I expressed a bit of surprise at seeing safety ranked among Red Man’s five focus areas. Every distributor is interested in operating a safe workplace, but I can’t recall many identifying it as a top concern.
“We have hundreds of vehicles traveling about nine million miles a year delivering goods to customers, who always want things faster rather than slower,” Lang explained. “And we have millions of dollars worth of inventory to get in and out, stage, load and strap down. That’s a lot of opportunity to make mistakes. Our goal is make sure nobody gets hurt.”
People And TechnologyI asked Ketchum to identify the company’s main competitive edge. “We have a can-do spirit around here,” he replied. “So, first, I would say our people give us an edge.
“Beyond that, I think it’s our computer system that really sets us apart. Everything you read says to outsource whatever’s not part of your core business, but we’ve found our Information Services (IS) Group to be core to us. We have our own people writing code, and that gives us a lot of flexibility to tailor the system to exactly what we want to do for our customers. We feel our system is about as good as any for integration with customer systems,” said Ketchum.
The system he described is Web-based. It doesn’t really have a catchy name. Inside Red Man it’s referred to simply as “WebApps,” short for Web applications. According to Ketchum, the system evolved as a virtue growing out of necessity. The company’s early days coincided with the heyday of central computerization in the distribution industry. The tiny upstart couldn’t afford the giant CPUs that powered these systems, so they turned to PCs. Computer consultants turned their noses skyward at these devices back then, but they eventually overran the business world as a platform for innovation and versatility. “We had PCs when PCs weren’t cool,” said Ketchum.
Red Man’s IS Group is overseen by CFO Dee Paige, a 25-year company veteran, and Brian Collins, IS manager. Programmers now work in three segments - networking, hardware and customer support. They constantly customize ways to drive down the cost of distribution activities and better interact with Red Man’s customers, vendors and internal network. About 30% of company invoicing is now handled electronically, along with an estimated 90% of company purchase orders.
Red Man has an online catalog that allows customers with the right technological capabilities to make purchases online. Just as with Amazon and other e-commerce retailers, customers can build a shopping cart that will include their current pricing. The online catalog is especially useful for customers based on offshore platforms and other remote locations.
Recent developments include an in-house imaging system to allow Red Man faster access to printed information, such as proof of delivery, vendor invoices and information packets. Integrated with other in-house systems, Red Man gives customers immediate online access to this type of documentation and information.
“I think we have the best-in-class IT system out there, though the only way anyone knows it is if they’re a customer of ours,” said Randy Adams, vice president of sales and marketing. Access to the system is limited to Red Man customers only.
Even the public IT face of Red Man at www.red-man.com is a site to behold. This reporter spends more time hanging around PVF Web sites than is good for my social life. Red Man’s is by far the best around of any PVF distributor.
Jeff Lang also noted the indispensable role played by Red Man’s IS Group in managing the company’s large amount of inventory. “The name of the game is making sure the high movers are in stock, because that’s what’s needed to keep customers satisfied. Operationally speaking, you can only do that by zooming in on the non-performing and low-turning items. Our inventory planning team works with regional managers to devise sophisticated inventory management metrics, and the IS Group puts together the programs that help us manage it,” said Lang.
The system’s inventory management capabilities include “global browse,” which enables every store to see what’s in one another’s inventory, in real time.
Business OverviewAs of this writing, the company operated in 22 states with over 60 facilities. They are slated to open five more stores by year’s end, whose locations will bring them a presence in 25 states. The company also majority-owns a sizable Canadian subsidiary, Midfield Supply, purchased in 2005. Midfield operates in excess of 50 service locations.
Red Man’s business falls into four broad market categories - oilfield, industrial, utilities (mainly natural gas) and international.
Fabrication also is part of Red Man’s business mix. Its Wesco Equipment subsidiary conducts valve automation. Red Man Measurement Co. produces natural gas measurement devices and custom fabrication products. The company’s Canadian Midfield Supply subsidiary also fabricates oilfield equipment.
Their market segments share a fair amount of common ground with relation to PVF products, but each of the niches has its own peculiarities. Oilfield customers, for example, tend to be located in remote areas where drilling rigs operate and tend to get serviced via small local stores. Industrial PVF stores tend to be larger, ranging to more than 100,000 sq. ft. The International division is located in Galena Park, TX, in close proximity to freight forwarders, packers and port facilities. The facility sits on 37 acres, with a 120,000-sq.-ft. warehouse and large pipe yard.
The company operates via a hub-and-spoke concept rather than central distribution per se. Each store is expected to be a profit center, and the bigger ones supply others in a region as well.
An experienced staff of inside and outside salespeople, product managers and marketing managers work in concert with a corporate development team to develop new business in various market sectors. One area currently under review is nuclear power generation. That’s been a dead market for many years but one showing signs of resuscitation for the future.
AlliancesPartnering is a buzzword that has bounced around the industry for as long as anyone can remember. It basically refers to locking in customers by offering so many valued services it’s unthinkable to buy from someone else. Red Man uses the term “alliances” to describe partnering relationships with both customers and vendors, and they have brought the concept to fruition about as well as anyone ever has.
“Alliances go beyond just pricing programs,” said Adams. “It’s a matter of looking at value-added services and identifying cost drivers that a customer might have, then helping to eliminate them.”
At the corporate level, Red Man has a steering committee that offers top-down direction and shares best practices from one region to the others. These disseminate through “Field Improvement Teams” based in Red Man stores, who meet quarterly with customers to share these ideas.
Services rendered via Red Man’s alliance program include vendor managed inventory, consigned inventory, Red Man “Kiosk,” and onsite trailers.
A parallel alliance program governs Red Man’s relationship with core vendors. According to Dennis Niver, vice president of purchasing and alliances, “It basically amounts to a different level of communication and absolute openness with each other in terms of what you’re doing and how you’re impacting each other.”
Vendor relations have taken on more importance than ever in an era of skyrocketing commodity prices, especially for stainless and copper. Niver is at the forefront of an ongoing effort to work with alliance vendors to minimize the impact on Red Man and its customers. “Electronic transactions, lead times, pricing structures and all kinds of interfaces come into the metrics of an alliance,” he said.
Bullish OutlookRed Man’s aforementioned “culture of thrift” prevents them from getting too giddy over the present good times. Craig Ketchum sees an economic future filled both with promise and potential pitfalls. On one hand, he’s bullish about energy markets now that huge countries like China and India are consuming more of a proportional share.
On the other hand, the production capacities of those countries can be scary to U.S. industrial markets. “It’s going to be interesting to see what happens after the 2008 Olympics in China,” Ketchum observed. “They have a lot of capacity there that is being used right now to put on a good face for the Olympics. Afterward …” he trailed off inconclusively.
As for Red Man, Ketchum subscribes to Peter Drucker’s famous dictum: “Grow or die.” He joined his father’s company in 1979 after graduating from college, and recalls that in the early days “we missed out on some business because we did not have coverage in certain areas, and we didn’t have buying power.”
Geographic expansion is something always being looked at. Earlier this year, the company filled an Eastern gap with the purchase of Bear Tubular. Red Man now has stores in half of the United States, which means their cup is only half full.
“We’re not growing just to grow,” said Ketchum. “It’s got to make business sense. Our growth really goes back to the customer side. For example, these new stores we’re opening late in the year are in response to places our customers are going to drill.
“We’ll continue to look for opportunities, both in acquisitions and organic growth,” said Ketchum, “but we think it’s important to listen to our customers. Where they’re going and what their needs might be, that’s where you’ll find us going.”
The Founder's Imprint Lives On At Red ManThe name of this company stands as a symbol of pride both in heritage and bootstrap achievement.
Founder Lew Ketchum was a Native American and former chief of the Delaware tribe for a dozen years. According to his son and current Red Man President Craig Ketchum, one of his father’s proudest achievements was regaining federal recognition of the Delaware as a sovereign tribe at that time apart from the Cherokee nation, with which it had been lumped. Lew Ketchum chose to name his company Red Man Pipe & Supply Co. out of pride in heritage, and nobody in the company talks of changing it.
The company qualifies as a Minority Business Enterprise, and in 1987 the founder was honored with a White House presentation by President Ronald Reagan as Minority Entrepreneur of the Year. MBE status has provided opportunities and support over the years, but the founder believed in seeking (and offering) a hand up, not a hand-out.
Lew Ketchum passed away of a heart attack at age 60 in 1995. The company was already well on its way to its current stature with some $300 million in revenues that year. Those who knew him say the company still reflects his vision and values.
One of those who knew him best is Dennis Niver, vice president of purchasing and alliances. He was the company’s first employee besides the founder and widow, Betty, who started out keeping the books and still serves as corporate secretary. Niver had worked with Ketchum at Bethlehem Supply (part of Bethelehem Steel), where Ketchum had put in 19 years before resigning to take the risky entrepreneurial leap. Niver remembers that Red Man started in business on March 1, 1977, and he joined the company on March 25.
Right from the beginning it was apparent that this enterprise was something special. According to Niver, Ketchum had come up with a three-year business plan to satisfy the bankers who provided him with $50,000 of seed money to start the company. By October 1977, half a year after starting, they had already achieved their sales goal for the third year.
“Lew was a visionary,” Niver continued. “Even in its infancy he had plans for this company to grow and where he wanted to take it. He wanted to add value to every transaction he was a participant in. In those days, we didn’t even publicize that we were a minority company, so that had nothing to do with it. Lew believed in earning peoples’ business.”
Since the founder’s passing, the company has deviated not a bit from those basic principles. As a result, growth has continued at a phenomenal pace, and they keep finding more ways to add value to their transactions.
The Ketchum family continues as majority owners of the company. Besides Craig and Betty, three more of the founder’s sons work in the business. Kent Ketchum is vice president of upstream (OCTG) sales, based in Houston. Brother Kevin works in Tulsa and looks after the company’s fleet and other administrative areas, while Brian Ketchum manages Red Man Measurement Co., a subsidiary that fabricates natural gas meter tubes and other measuring devices.
As it has done since its inception, Red Man donates extensively to charity. This includes annual scholarship awards to help finance minority college students. Red Man also offers an educational assistance program to its employees.
Red Man's Historical Milestone
- 1977 - Founded with first oilfield supply store in Ardmore, OK, and sales offices in Houston and Dallas. Distributorships started with U.S. Steel and Lone Star Steel.
- 1978 - Second store opens in Morgan City, LA.
- Early 1980s - Opened Red Man Measurement Co. in Tulsa. Sales reach $80 million.
- 1981 - Accepted first Supplier of the Year award ever given to a Native American firm by the National Minority Supplier Council.
- 1982 - Corporate headquarters moves into a new building in Tulsa. Field store opens in Bakersfield, CA.
- 1983 - Field store opens in Andrews, TX, Red Man’s first West Texas presence. Lew Ketchum elected chief of the Delaware Tribe of Indians, serving for 12 years.
- 1986 - World oil prices plummet to $10 a barrel, but Red Man pulls through.
- 1988 - Acquires two supply stores from American Energy Tubular.
- 1989 - Acquires equipment and inventory from Oklahoma’s Arrow Pump & Supply.
- 1990 - Acquires equipment and inventory from Ketchum’s former employer, Bethlehem Supply Co.
- 1992 - Lew Ketchum awarded Minority Business Leader award by National Minority Supplier Development Council.
- 1994 - Moves into new Tulsa headquarters.
- 1995 - Acquires PVF division of Vinson Supply Co., marking entry into the industrial PVF marketplace, as well as oilfield supplies.
- September 20, 1995 - Lew Ketchum dies of a heart attack at age 60. He is succeeded as president and CEO shortly thereafter by son Craig Ketchum.
- 1999 - Acquires R. J. Gallagher Co. Introduces valve automation division. Ranked No. 1 Minority Business by Minority Business News.
- 2000 - Receives U.S. Dept. of Commerce Minority Business Development Agency Award for “Outstanding Commitment to Excellence.”
- 2001 - Acquires American Stainless Co. in Tennessee, and Tulsa-based Mylon Jacobs Supply Co.
- 2002 - Acquires Wesco Equipment Co., entering the valve automation market.
- 2005 - Acquires controlling interest in Canada’s Midfield Group of Companies.
- 2006 - Acquires Bear Tubular with locations in Philadelphia and Portland, ME. Named Supply House Times “Wholesaler of the Year.”
Quality Assurance Is A High PriorityPVF distribution is a deadly serious business when you’re providing materials to refineries, natural gas installations and other uses where complex systems blend volatile substances with high pressures and temperatures. Fast-growing sales in these markets bring big rewards, but also the potential for ruin, especially in this globalization era when products are made throughout the world.
Red Man has taken elaborate steps to protect itself and its customers from catastrophe. The company has always paid attention to quality assurance, but has dialed it up a notch this year with a quality management process (QMP) designed and managed by Quality Manager Steven John, a certified ISO quality auditor. He works closely with purchasing head Dennis Niver to make sure customers get exactly the materials ordered, that those materials are what they purport to be, and that paperwork documents the chain of custody and other particulars at every stage.
Red Man owns two expensive 1625 Metalscan units - portable optical emission spectrometers for positive identification and analyses of metals. They also conduct rigorous supplier evaluations that begin with a 15-page self-assessment explaining how a vendor’s products are made, handled, delivered, etc. This may be followed by an onsite audit. Niver visited China earlier this year to conduct a couple of these audits. He described them as “turning rocks over and looking underneath.”
Each onsite audit takes two to three days. “We look at the processes, documentation, how the shop floor flows, where raw materials are coming from, efficiency, and whether they have traceability all the way from the raw material phase to the finished product we put on our shelves,” said Niver.
“It’s a challenge,” he added, “but in today’s global market you will find quality ranging from A to Z. That’s why we take a proactive approach.”
Red Man’s QMP goes beyond the liability aspect. They also examine vendor processes with an eye toward operational efficiencies and on-time delivery. The goal is to improve all processes in order to wring costs out of the supply chain - leading to more economical purchases for both Red Man and its customers.
Integrated Supply - From Bathtubs To BoatsRed Man’s procurement and sales teams take an expansive view of what it takes to become their customers’ “Supplier of Choice.” Oilfield customers in particular mostly are based in remote locations with sketchy supply lines for both business and consumer goods. This has led Red Man to leap enthusiastically into the void to deliver a wide variety of goods that have nothing to do with PVF.
According to Sales and Marketing VP Randy Adams, “When a customer calls in an order for 5,000 fittings and wants us also to provide green widgets or whatever, we don’t say, ‘No, we only do pipe, valves and fittings.’ We become a sourcing agent for them. We’ll find the best pricing and deliver the additional items, along with the pipe, valves and fittings.”
Most of this service falls under the category of convenience buys, but when orders become large and repetitive, Red Man will take it a step further and negotiate bulk pricing.
Requests come in for all manner of unusual items. Adams reported selling everything from bathtubs to work boats (needed by an overseas customer to cross rivers in remote drilling locations).
Probably the most unusual request came from a customer that asked for assistance in renting the WWII aircraft carrier USS Lexington, harbored in Corpus Christi, TX, for a party to celebrate the commissioning of a deep-water rig. Red Man personnel dipped their toes into the event-planning field and managed to line it up, although the ship caught fire the day before the party and the event had to be switched to a hotel. They managed that last-minute switch of venue as well.
“With our resources, we often can supply products more efficiently at a lower cost and with faster processes for our customers, so that’s what we’ll do,” said Adams. “It’s all about finding solutions.”
Red Man's “Supplier of Choice” InitiativeWe’ve seen programs like this before, but usually in failing companies desperate to stay alive. Amid some of the most profitable years in its history, Red Man Pipe & Supply has embarked on a wide-ranging program of process improvement and cost containment. This initiative has identified five core areas of focus:
People. The program’s stated commitment is toward continual development and training, instilling recognition and pride, treating people respectfully and ethically, and being the No. 1 place to work.
Customers. The aims are to exceed customer expectations while meeting Red Man’s performance goals, establish best-in-class responsiveness, retaining customers while cultivating new ones and building customer loyalty.
Lean operational excellence. These goals cover continuous process improvement; accepting change and being progressive; removing waste and zero rework; reinventing internal processes and standards; striving for efficiency, simplification and momentum; improving the company’s cost structure; achieving inventory optimization and high turns; and improving order entry through invoicing improvement.
Safety. Ensuring the safety of its people by investing in training, certification and compliance; implementing safety ideas that will improve performance; measuring and monitoring safety performance; and recognition of notable safety achievements.
“Supplier of Choice.” The company has adopted this slogan as the culmination of all these efforts. They recognize the need to look for new opportunities from existing customers, to adapt and grow with them, to grow their core business both domestic and international, to build “best-in-class” customer loyalty, and partner with world-class suppliers.
Supply House Times Wholesalers of the Year1959 - Robertson Supply
1960 - Noland Co.
1961 - EMCO Ltd.
1962 - Raub Supply
1963 - Atlas Supply Co.
1964 - A.Y. McDonald
1965 - Horne-Wilson
1966 - Taylor Cos.
1967 - Palmer Supply
1968 - J. Levitt
1969 - Kiefaber Co.
1970 - None
1971 - None
1972 - None
1973 - Hajoca
1974 - Ferguson Enterprises
1975 - Standard Plumbing Supply
1976 - CSC Inc.
1977 - Trumbull Supply
1978 - Harry Cooper Co.
1979 - F.W. Webb
1980 - Slakey Bros.
1981 - RAL Corp.
1982 - Familian NW
1983 - Moore Supply
1984 - Apex Supply
1985 - Noland Co.
1986 - Familian Corp.
1987 - Hughes Supply
1988 - Davis & Warshow
1989 - LaCrosse Plumbing Supply
1990 - A.Y. McDonald
1991 - RAL Corp.
1992 - Columbia Pipe & Supply
1993 - LCR Corp.
1994 - Ferguson Enterprises
1995 - Hughes Supply
1996 - Familian NW
1997 - F.W. Webb
1998 - Apex Supply
1999 - Torrington Supply
2000 - Wolff Bros.
2001 - Lehman Pipe & Supply
2002 - Todd Pipe & Supply
2003 - Davis & Warshow
2004 - WinWholesale
2005 - Castle Supply
2006 - Red Man Pipe & Supply Co.