Top 200 Electrical Distributors Expanding On Multiple Fronts To Fuel Future Growth

July 10, 2008
When electrical distributors look to grow in an uncertain economy, basic financial blocking-and-tackling goes a long way in this industry — keeping a tight rein on accounts receivables and inventory turns, taking cash discounts from suppliers whenever possible, and using the leverage of buying/marketing groups’ volume-purchasing agreements to get a break on pricing with vendors.

When electrical distributors look to grow in an uncertain economy, basic financial blocking-and-tackling goes a long way in this industry — keeping a tight rein on accounts receivables and inventory turns, taking cash discounts from suppliers whenever possible, and using the leverage of buying/marketing groups’ volume-purchasing agreements to get a break on pricing with vendors.

But as an article in the upcoming issue of Electrical Wholesaling points out, many of the companies in this year’s Top 200 are using some common strategies to grow. These companies aren’t battening down the hatches and waiting for an uncertain economic climate to blow over. They are investing in new facilities, markets, technology and people. Quite a few companies are investing on multiple fronts. For instance, in addition to opening new locations, they may be installing new software in the company. Or along with hiring new employees and investing in a management-training program, they are going after new market segments.

Some of the Top 200 respondents investing across multiple fronts include: Argo International Corp., New York; Fromm Electric Supply Corp., Reading, Pa.; Griffith Electrical Supply Co. Inc., Trenton, N.J.; NESCO / Needham Electric Supply, Canton, Mass.; Schaedler Yesco Distribution Inc., Harrisburg, Pa.; and Werner Electric Supply Co., Neenah, Wis.

New digs. With all the emphasis on acquisitions, it’s easy to overlook just how many new branches electrical distributors open every year. Growing through branch expansion can have some advantages over acquisitions growth strategies. You can use your existing computer system instead of sweating out the conversion of an acquired company’s computer network; there isn’t any new corporate culture or personalities to adapt to; and it’s a great way to promote from within and give star employees new responsibilities. Elliott Electric Supply, Nacogdoches, Texas, was particularly busy with new branches in 2007 — the company added 12 new locations.

The human element. Everybody talks about the importance of training and finding, keeping and motivating employees, but in this competitive labor market it’s a lot tougher than it sounds. Matt Brnik, president, Schaedler/Yesco, said beefing up his company’s management ranks and developing the proper structure to handle 65 percent growth the company anticipates over the next five years is the most difficult puzzle the company’s management team is trying to solve in 2008.

New software and tools of technology. Distributors break out in a cold sweat at the mere mention of a software upgrade or conversion. It’s a major investment — and often a cranium-splitting headache. But as the brain, heart and communication system that drives any distribution business these days, a new business software system is either a necessary evil or a wonderful tool that can be used to analyze and grow the business, depending on your perspective. Quite a few Top 200 distributors made the investment in the past year. Eclipse distribution software was most common in these conversions or upgrades. Two companies were implementing radio-frequency and/or wireless technology in their warehouses: American Electric Supply, Inc., Corona, Calif., and Yale Electric Supply Co. Inc., Lebanon, Pa.

Gunning for growth in new markets. Despite a rather lukewarm endorsement of the green market from many Top 200 distributors as a whole, the companies that had identified it as a growth opportunity were very enthusiastic about the sales prospects in it. Sonepar USA, Philadelphia, is rolling out an environmental initiative called “Blue Way” on a grand scale across the U.S.