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COVER PAGE |
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IBT |
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ISG |
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IMT |
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PT |
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FLUID POWER |
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GENERAL INDUSTRIAL |
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IBT MEDIA |
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LEAN SIX SIGMA |
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ELECTRICAL |
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RUBBER |
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ENGINEERING |
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RECRUITING |
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SAFETY |
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LUBE |
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The Integrated Services Model
Is a Force, Not a Fad
By
Mike Nemechek
President, IBT, Inc.
IBT's Mike Nemechek recently had a signed column in
Industrial Distribution magazine.
We have reprinted it in this issue of Prime Mover.
Over the last decade, continued advances in communications and computer technologies, including the growth of the Internet, have revolutionized business procedures and practices—and forever altered the industrial distribution marketplace.
These technologies provide corporate purchasing executives with more information on plant operations and the means to exert greater control over purchasing and maintenance management at the plant level.
The result has been increased emphasis on, and enforcement of, national contract agreements. These agreements put intense competitive pressure on industrial distributors to provide services across state and regional boundaries.
This represents an irreversible long-term trend. Many regional distributors face a stark choice: become “boutique” suppliers to end users with a small geographic footprint or evolve into national suppliers capable of supporting customer locations throughout North America.
Such has been the case at IBT, Inc. Early this decade, the company, a privately owned, multi-line distributor, endured three straight disappointing years. Revenues declined by about 5 percent annually. When I joined the company as its president in late 2003, the mandate was clear: identify the reasons for the revenue slump and implement a strategy to reverse it.
Although I brought management and financial experience to this position, I was a newcomer to industrial distribution. Fortunately, I could rely on a veteran management team and an experienced work force of more than 400 employees. Together, we analyzed our options in light of the preceding five-year period and a projected turnaround for the economy.
We evaluated sales performance during the revenue slump and determined that technological advances had shifted power from traditional decision-makers like plant managers and maintenance personnel to corporate headquarters.
Armed with better data and instant communications capabilities, corporate executives could oversee national contracts more effectively and demand greater adherence to existing contract provisions. Also, they were more likely than before to require blanket coverage of all facilities regardless of location.
It was obvious the company was not well positioned to support companies with facilities outside its 10-state region. As a result, market share had declined.
Executing a New Strategy
Based on this assessment, the decision was made to transition from a regional distributor of products into a national supply chain services provider, while continuing to support our traditional branch stores. The key to this strategy was an integrated services model that involves close integration with the end user and a customized approach to meet the needs of each customer plant location.
In an information-rich era, the product offerings of most industrial distributors are vulnerable to commoditization and price-pounding from online competitors anywhere in the world. Distributors that can bring additional services to their customers will enjoy a competitive edge.
Under a new integrated services model, we provide MRO purchasing services for customers, operate on-site storerooms and implement Web-based procurement solutions.
One customer, for example, is a multi-division metals fabricator with factories in more than 30 states producing items ranging from mattress springs to engine blocks. IBT employees operate storerooms and manage MRO purchasing activities at some of the customer’s facilities.
Others use a Web-based capability to submit orders to a local IBT branch or service center.
In addition, suppliers are supporting the company’s service-oriented approach, which includes ways to increase plant productivity through better asset management and utilization.
This new business model has been successful to date. Revenues have grown for two years running. In the fiscal year that ended Sept. 30, 2005, IBT set a record for revenues, signaling a return to profitability.
The integrated services model is no fad. It’s here to stay and will be an increasing force in the years ahead. Only you can determine whether it’s the right strategy for your company.
Mike Nemechek is president of IBT, Inc., based in Merriam, Kan. He can be contacted
here.
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To learn more about ISG services from IBT, contact us today!
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