Orgill and the spirit of improvement
“The concept of consistent, incremental improvement applies to just about everything we do,” said Ron Beal, the CEO of Memphis, Tenn.-based distributor Orgill.
In that sentence, Beal captured the essence of the distributor’s spirit of improvement. There’s no single hero, no silver bullet and no rainmaker. Instead, Beal describes an environment of measuring, benchmarking and improving. And the results were impressive in 2010, a difficult year for home products. Orgill posted 2010 sales of $1.179 billion, up 9.3% over $1.079 billion in the prior year.
The question is, “How?” Part of the answer involves a combination of strategy and statistics. “We measure every phase of our operations, and one of the key benchmarks is our performance compared with the preceding period,” Beal said. Then he pointed to three examples of metrics that — if acted upon properly — can pave the way to significant company-wide improvement.
• Distribution Center expense as a percentage of sales
“During the period of 2000 through 2010, we averaged an annual improvement of 2.8% per year. In any given year, this was good, but not headline news. However, the cumulative impact of this steady, annual improvement resulted in a cumulative improvement of 27%. This means that the cost of operating our distribution centers as a percent of sales in 2010 was only 73% of the 2000 amount — a huge productivity gain.”
• Sales per delivery
“Another important productivity measure is Sales per Stop, or the amount of sales generated for each delivery made on our trucks. Since 2000, we’ve averaged growing this amount by slightly more than 4% each year. Pretty good, but the cumulative impact of this consistent improvement means that we are delivering 58% more product each time we make a delivery stop in 2010 than in 2000. Again a tremendously significant productivity gain.”
• Sales per man-hour
“This means the sales dollars generated for each labor hour in our distribution centers. Since 2000, we averaged a 4.4% annual improvement — not too shabby. But when the cumulative improvement is computed, it means that our distribution centers are producing 60% more sales per man-hour in 2010 than in 2000. A significant improvement, especially considering this was a period in which our average selling price on merchandise sold actually dropped.”
Orgill operates distribution centers in Sikeston, Mo.; Inwood, W.Va.; Tifton, Ga.; Hurricane, Utah; and Kilgore, Texas.
“The cumulative gains in each of these areas is significant in and of itself; however, when combined they can make huge differences,” Beal said. “We believe that by benchmarking against ourselves, we will steadily improve and continue to keep our customers competitive in a brutal retail environment.”
Incremental improvements also can take place on the merchandising side of the aisle. Steve East, the distributor’s VP advertising, pointed to the example of paint. Adding SKUs, gaining experience, and then — an important step — emphasizing the breadth and depth of the assortment, are keys to improving in the area, he told Home Channel News.
“We’re going after the niche business in specialty paint,” he said. “Paint and sundries are one of the biggest departments we have, and we can supply just about anything to anybody.”
The distributor’s focus on incremental improvements across the board doesn’t mean it sacrifices ambitious moves for new business. Consider the case of Canada. Late last year, the company cemented a partnership with Castle Building Centres, the Canadian co-op buying group with 275 ship-to locations. The move, about three years in the making, makes Orgill a bona fide Canadian distributor, serving the market from its Utah and West Virginia distribution centers.
“This is still a high-priority item for us, and we are making a maximum effort to have a complete selection of fully compliant products for our Canadian customers,” Beal said.
Ken Jenkins, president of Castle, described the Orgill partnership as strong and growing. Castle members are seeing 10% to 35% cost improvement on some Orgill-supplied categories, he said. Orgill’s efficiency and buying power are one part of the equation. Exchange rates are another — the Canadian currency strengthened relative to the U.S. dollar has made the cost equation for Canadian customers more attractive.
“We started the process about three years ago, believing that the Canadian market needed a different approach,” he said. Jenkins added that he expects Orgill to be a dominant distributor north of the border over the next 18 months.
Beal takes a day-to-day view of the matter. “Every day is a learning opportunity, and we’re spending a lot of time making sure we have the right products to meet local codes, etc.,” he said. “There are always regional and local brand preferences, but we haven’t had any real surprises, at least so far.”
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Bartlett’s Lumber & Hardware
Bartlett’s Lumber & Hardware had been a successful lumber and hardware store, serving the Texas Panhandle for nearly 75 years, but, until recently, its pricing decisions were mostly guesswork.
During a long economic downturn and encroaching big-box competition, VP Terrill Bartlett knew that “guessing” didn’t cut it anymore when talking about the bottom line.
So in January 2010, Bartlett’s Lumber & Hardware implemented a new spreadsheet program that communicates with its POS system. “It just gives us an immediate big-picture view of how our pricing decisions affect the bottom line,” Bartlett said. “We can make these changes at the SKU level, by vendor, by class or at the department level simply by plugging in a new margin. Once we like what we see, we sync this with our POS system, and the changes take effect the next morning. It has been a big time saver.”
The spreadsheet program shows an overall store margin based on a rolling 12-month sales history. This way, Bartlett’s Lumber & Hardware can see immediate results if it has to change the margin on a particular item. “For example, if we have to lower the retail on 7/16-in. OSB, it will show the immediate effect to the store’s margin and margin dollars,” Bartlett said. “We can then locate other items that we can raise the margin on to make up the difference.”
THE RIGHT FIT
As with many small town, independent hardware retailers that continue to serve their communities profitably during tough times, Bartlett’s bases its success on the foundation of product knowledge, personal service and competitive pricing. Of the three, pricing is particularly important in a market in which patrons can choose from among two Lowe’s and two Home Depots, in addition to Bartlett’s.
“Therefore, we have to remain competitive,” Bartlett said.
Through its wholesale partnership with Orgill, which shops the competition and develops pricing strategies for its dealers, they have been able to do fight fire with fire, he said. “There were a lot of a la carte programs that were offered by Orgill, and with them, you participate in what you want to participate in. That strategy has worked for us,” Bartlett said. “I also like the fact that they are in touch with our needs; they are accessible. There are fewer administrative levels to deal with, so it is easier to talk to the person you need to speak with.”
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You don’t win the hardware retailer of the year award in Worcester, Mass., for 15 straight years by being passive in the marketplace.
To meet the challenges of a tough economy, Barrows Hardware ramped up its merchandising efforts with aggressive endcap promotions that in turn have generated increased sales.
Brian Barrows, president, said that as part of its “Door Busters” promotion, Barrows places up to 30 endcaps in the store featuring name-brand products and selling the items at cost.
“We rotate the endcaps constantly,” he said. “The items are timely, they are the right items and at the right time — seasonal, smart assortments. We focus on brands that people know and want (including DeWalt, Stanley, Benjamin Moore, Scotts and Bosch). We’ll fill the entire endcap with one item.”
Barrows Hardware also uses its Facebook page to promote its brand partners and other in-store events. On occasion, representatives from the leading brands visit the store to answer questions or educate customers on the latest products. Barrows also brings in leading experts in horticulture, painting and other disciplines as an added-value benefit.
Barrows said the aggressive promotions have met with success in myriad ways — from increased strong traffic to better visibility for his store and customer retention. “It’s not rocket science; it’s essentially textbook retailing,” he said. “Over the years, we’ve changed the assortment to meet the needs of our changing demographics.”
Today, Barrows offers what he calls “niche services,” such as propane, while continuing to emphasize the name-brand products that draw customers in.
Once they come into his store and speak with his sales professionals, he is confident of landing that customer.
“In a down economy, we’re playing up our strengths. We epitomize customer service, it is not just a catch phrase,” Barrows said. “We have a great group of guys here, a seasoned sales staff. For independents like us, it’s about service.”
Ten years ago, Barrows Hardware signed a deal with Orgill, the wholesaler, in a deal that Barrows said has changed the course of his operation for the better. As he explained it, “I liked the way they went to market, the way they put their programs together. They offer the programs and services the independent needs to compete in today’s world. It’s allowing you to choose your direction or path. The package they give you is real nice; they give you the assortment that a good hardware store needs.”
THE PERSONAL TOUCH
Barrows, who was president of Barrows Hardware prior to its relationship with Orgill, said his company can maintain its independence, while benefiting from Orgill’s market muscle. “Working with Orgill is the way it ought to be,” he said. “Everything runs so smoothly, and their customer service is so great. I wouldn’t want to do anything differently.”
Specifically, Barrows likes the approach and accessibility of Orgill’s staff. “Everyone from the top guy in the company to the guy who drives the truck is there for you — and they are all helpful,” he said. “When you have something you need, they have it. From their circular program to their electronic file maintenance and electronic price change, they really have it all. It would be difficult to run our business without them.”
BARROWS ARTICLE PROVES ONCE
BARROWS ARTICLE PROVES ONCE AGAIN - A TRUISM THAT OFTEN, RETAILERS GO OUT OF BUSINESS OR CLOSE THEIR DOORS BECAUSE OF WHAT THEY DON'T DO (AND COULD) TO HELP THEMSELVES - MORE OFTEN THAN NOT - OR - DO TRY, BUT OFTEN IT'S ALREADY TOO LATE. RETAILERS CAN IMPROVE THEIR BUSINESS AS DID BARROWS, BY PICKING UP THEIR HEADS, OPENING THEIR EYES AND EARS, AND LOOKING/LISTENING TO WHAT OTHERS ARE DOING. IN BARROWS CASE, IT IS ORGILL - BUT THEY SHOULD GET OUT AND LOOK AT HOW GROCERS MERCHANDISE THEIR STORES (COSMETICS, PET FOODS,EVEN FEMININE HYGIENE, VITAMINS)- DON'T JUST LOOK AT HARDWARE! - DRUG STORES TOO DO A GOOD JOB OF MERCHANDISING, PARTICULARLY BECAUSE THEY ARE SO LIMITED IN SPACE - AND DEPOT AND LOWES CAN HELP YOU BE A BETTER MERCHANT TOO. YOU DON'T HAVE TO CONFINE YOUR LOOKING AND LISTENING TO THE SAME TYPE STORE AS YOURS, AROUND THE CORNER OR DOWN THE STREET.