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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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MATERIAL HANDLING |
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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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ELECTRICAL |
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RUBBER |
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TRAINING |
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SAFETY |
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IBT Listens to MRO Purchasers to Keep Competition at Bay
By Susan Avery
Purchasing.com
As big, national distributors continue to grow - and reap rewards derived from MRO buyers consolidating their purchases with fewer suppliers - smaller, regional players need a game plan if they wish not only to survive, but to thrive in the years ahead. A regional distributor may specialize in one type of product offering and become a niche player or expand its services and take its business national.
IBT, a Merriam, Kan.-based family-owned distributor of bearings, power transmission products and other MRO items, has adopted a two-pronged business model that is helping it to evolve into a national provider of supply chain services. The distributor has 35 stores serving the central and southern states.
Besides maintenance repair and operations (MRO) items, the distributor also offers such services as integrated supply chain management, tool crib management, in-plant storeroom management and vendor managed inventory (VMI) through its Integrated Services Group. The company also has media, recruiting, safety consulting, and maintenance training businesses.
Services available through the Integrated Services Group are those IBT has long been providing some customers, mainly purchasing professionals working at companies in the food processing and energy industries, U.S.-based businesses that want to keep manufacturing in this country. Yet, faced with stiff competition from around the globe, they need to come up with creative ways to reduce costs and improve productivity, such as integrated supply chain management. Often, purchasing operations at these companies already have worked to strategically source direct materials and are looking to do the same with categories of indirect goods and services spending such as MRO.
While many purchasing operations tried applying integrated supply chain management in the 1990s, with some more successful than others, it appears that some MRO buyers are taking a fresh look at the strategy. While there are as many definitions of integrated supply as there are companies applying the strategy, generally the term refers to the elimination of waste from the MRO distribution process.
Recognizing renewed interest in integrated supply among purchasing operations, IBT hired Mike Nemechek to grow the business in that area. He, in turn, hired Trevor Finger, who has experience with integrated supply from working in the distribution industry, to lead the Integrated Services Group as vice president.
The new business model is proving to be a success for IBT. In the past three years, the company has seen revenue climb; the fiscal year ending Sept. 30, 2005 saw record sales growth of 11% to $125 million. That places IBT at 41 on Industrial Distribution's Big 50 list for 2006.
Simply put, IBT is responding to its customers. Jeff Conrad, director of global procurement at ICI-National Chemical, has a three-pronged strategy for his MRO buy: 1) reduce costs of operating the storeroom while increasing overall performance in the function, 2) lower working capital tied up in the storeroom while improving service levels, and 3) deliver ongoing savings. "IBT listens to us and has put together a program that moves us forward in obtaining our goals," says Conrad, who was a member of Purchasing's All-Star MRO Buy Team in 2003.
Similarly at Leggett & Platt, a diversified manufacturer with 300 facilities in more than 20 countries, Jim Ampleman, director of commodity management, is working to eliminate non value-added activities, consolidate the supply base, and is using the Integrated Services Group at IBT to either sole source the MRO buy or outsource the function entirely at some of its larger locations. "Leveraging the MRO buy in this manner helps us to meet challenges of today's dynamic business environment," says Ampleman. "Furthermore, the efficient distribution center-based model that IBT uses provides quantifiable savings for Leggett & Platt."
When working with customers through its Integrated Services Group, IBT often turns to its suppliers for assistance. The distributor invites manufacturers to participate in plant surveys and help identify opportunities for productivity improvements and cost savings. It also works with manufacturers on streamlining internal processes from purchase order to invoice. For instance, IBT is currently working with SKF on a Lean Six Sigma project to automate such processes between the two companies, an effort that it plans to replicate with other suppliers where possible.
Based on its recent success, Nemechek says that the Integrated Services Group could eventually become more than 50% of the company's business. "We are going to have this two-model approach because the branch-based business represents a solid core for us," he says. "We have a great cadre of IBT employees who know the product lines and are serving our customers well. At the same time, we have to find a way to move into the future and sustain IBT's growth during economic downturns."
Addressing concerns of MRO buyers of the potential loss of jobs if their company's strategy includes integrated supply chain management, Nemechek responds by pointing out difficulty many purchasing operations have today hiring skilled sourcing professionals. Outsourcing MRO buying may mean a purchasing professional either will be hired by a provider of integrated services such as IBT or redeployed to a more strategic position within his or her own company, he says.
© 2006, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.
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