Mike Miazga 2015-09-11 06:32:15
2015 SUPPLY HOUSE OF THE YEAR: This newly rebranded company continues to thrive thanks to its unique business model and an unrelenting desire to best serve customers. Dayton, Ohio is known as the birthplace of aviation, specifically as the place where the Wright brothers got their start in true entrepreneurial fashion. There’s also a PHCP-PVF company based in Dayton that knows a thing or two about entrepreneurs and helping them live the American Dream of owning their own business. And Winsupply Chairman of the Board Rick Schwartz sees plenty of similarities between the recently rebranded industry heavyweight (more on the name change shortly) and Dayton’s native aviation sons. “The Wrights weren’t well-financed, avoided the limelight and were self-taught engineers,” says Schwartz, who has been with the company 43 years. “They competed and succeeded against many well-funded people such as Samuel Langley who was funded by the Smithsonian. They used their own finances which they earned fixing and selling bicycles, some of which they manufactured. “The characteristics they had, their drive, desire and personal determination and the way they approached their goal of being the first to attain powered controllable flight differently than the rest of the pack, reminds me a lot of the same values and characteristics of our organization. Winsupply sometimes is accused of marching to a different drummer and of paddling up stream, but we sustain two goals. Our primary goal is to serve our customers and grow within our industry and our secondary goal is to promote free-enterprise capitalism and help our people achieve success in their lives.” And Winsupply, the 2015 Supply House Times Supply House of the Year, has done a masterful job in executing on each of those goals to the tune of fielding a roster of 575 local companies all with committed presidents who are part of a unique shared ownership model that gives them the freedom to run their own business and reap the rewards while drawing on the resources and support of a thriving national organization that enjoyed double-digit revenue growth in 2014. THE NAME GAME Previously, WinWholesale, which is revealing its company name and branding change exclusively in Supply House Times, was known as the Win Group of Companies, operating under names such as Winwater, Winnelson, Winlectric, Winair, Windustrial, Winpump, Noland Co., Carr Supply, Wyatt and the recently acquired Security Plumbing & Heating Supply. Another one of the names under the previous umbrella was Winsupply. “Three years ago we did some research to better understand the situation. If we were going to look at a new name and brand what would be preferred by vendors and customers?” Winsupply Chief Marketing Officer Steve Edwards explains. “Far and away Winsupply was the preferred choice.” From that point any new WinWholesale local company was given the Winsupply name, Edwards notes, and existing local companies now have the option to change to that moniker as well. “Like everything we do in our organization we take a bottom-up approach,” Edwards says. “What we had been seeing is not only customers diversifying their businesses among multiple trades, but our local companies were diversifying across multiple trades. The naming structure became less relevant and less accurate because our local companies and our customers were buying and selling beyond one industry. Going to market with fewer brands is more effective and based on feedback we’ve received we believe there will be quite a few more local companies that will change to Winsupply.” THE SPIRIT OF OPPORTUNITY Winsupply’s unique local ownership model traces its roots back to March 1958 when the Pueblo, Colo., branch of N.O. Nelson was seriously damaged by fire. Later, three Pueblo employees offered to mortgage their homes and invest all the money they could borrow if a recently formed entrepreneurial company called Primus (of which future WinWholesale CEO Dick Schiewetz was part of) would help reopen the business. Three days later the first of the current Winnelson plumbing supply companies was born complete with a local ownership profit-sharing plan. “The first Pueblo company sustained the same business model and philosophy we have today,” says Schwartz, who is set to become chairman of the National Association of Wholesaler-Distributors in 2016 (Winsupply’s 60th anniversary). “They started this equity partnership that still is replicated today.” The current Winsupply business model, the president and local team can own up to 40% of the company while Winsupply retains at least 51% (by law). The local presidents then have the benefit of the massive Winsupply back-office support system providing essentials such as inventory, IT, accounting, marketing and training. “Most people don’t wash a rental car because it’s not theirs and they don’t have an investment in it,” Schwartz says. “Our local companies feature owners who have pride in their own operations because they have substantial ownership in it. They have the highest levels of commitment and passion which results in high levels of job satisfaction. Having people with shared ownership makes all the difference.” Chuck Johnson, local president of Tulsa (Okla.) Winnelson, is a prime example of how the shared ownership model thrives. Johnson, 40, drove a truck for the Tulsa location during college summers before going to work fulltime for the company in 1996. He’s been the local owner in Tulsa for eight years and helped start an HVAC location last year. “I went to a guy working at a competitor,” he says of the HVAC venture. “He did everything there and did what he was told to. He now has the flexibility to make decisions. He feels like it’s not a job anymore, it’s a lifestyle. As a local business owner I can make my own decisions but still have the national backing, buying power and resources if I need them. Every check I write for more stock is another reason to smile. There is nowhere I could ever think to work where I could be the owner of a company, make decisions, reap the benefits and get paid more than I thought I could make any other way simply by putting in hard work and developing positive relationships.” Prisco Panza, president of Shelton Winnelson in Connecticut, started with Winsupply in 1978 as a truck driver after previously working on President Jimmy Carter’s campaign. “My first paycheck, I made $2.05 an hour,” he says with a laugh. Panza worked his way up from driver and held counter, inside purchasing, warehouse and outside sales positions until he started his own Winsupply company in 1994. He now has ownership in five other Winsupply local companies. Shelton Winnelson was named Winsupply’s plumbing company of the year in 2014. “I have the opportunity as an investor and owner to help other people attain their dreams and work with a group of professional people who have given us tremendous resources,” he says. “Most of us started as truck drivers low on the totem pole, but we all have a can-do attitude. We’re a special fraternity of people.” Cindy Smith, president of Arlington (Texas) Winnelson, says being a company owner is a tremendous benefit in the local market she serves. “You get to make decisions locally based on your own market and customer base and couple that with your buying power from corporate.” Winsupply Chief Operating Officer Monte Salsman adds: “Everyone here believes local is better. That’s why our model thrives. What makes us unique and will help us the next 60 years is we have this local ownership and we also have Winsupply at the parent level providing the tools and services. We are marrying local community involvement with big business support behind it so they can focus on best serving customers and creating lasting relationships.” Panza stresses his interactions with corporate headquarters is a two-way street. “Winsupply is support-driven,” he says. “We feed off each other. This isn’t the typical beancounting mentality from a corporate office. You really are the owner of your business.” EXPANDING HORIZONS Today, Winsupply has 5,200 employees working in 575 locations in 45 states. It operates 95 showrooms and four distribution centers (referred to as Winsupply Sourcing Services). The newest DC opened in Denver in 2013, while expansion is underway at the current Dayton regional hub. Rick McCann, vice president, supply chain, says the company is exploring the possibility of adding more distribution centers. However, he stresses immediate Sourcing Services goals include optimizing depth and breadth of products available to the local companies and ensuring the internal supply chain from the point where the manufacturer makes the product to where it is delivered to a Winsupply customer runs as efficiently as possible. McCann adds his department is kept on its toes because the local companies are not required to purchase products from Winsupply Sourcing Services. “We have to earn our lunch every day just like the local companies,” he says. “It’s a beneficial model that requires us to be at our best and forces us to listen and effectively communicate with our local companies. We are looking at ways to improve the ease-of-doing-business factor for local companies. If we can do that we’ve enabled a supply chain that truly will make our local companies successful.” Additionally, Winsupply opened seven new companies in 2014 and five more have set up shop thus far in 2015. The company also has made two major acquisitions in 2015 in the form of 12-branch Security Supply in upstate New York and single-branch M. Cooper Supply in the Chicago area that now operates as M. Cooper Winsupply (for more on the acquisitions aspect, see Page 43). But as Salsman notes, none of the company’s success and growth would be possible without the right people working for the company. “Our employees are everything. They are the business,” he says. “We believe our business model is the best thing. What other model gives people the opportunity to change their lives? We’re combining a great business opportunity with the very best people in the industry. When we find these people who believe what we believe, we can do a lot with them.” Winsupply provides a host of intensive training programs for its local owners and employees including a leadership academy, an advanced master’s program, a management training program, plus many Winsupply-produced online learning opportunities. Edwards notes more than 21,000 online education classes were taken by company employees last year. The company also lauds the training offerings it has used from the ASA Education Foundation’s ASA University. Addtionally, Winsupply is proactive in providing its employees with the latest technologies, while also keeping an eye on the future in terms of recruiting top young talent into the company. Winsupply President and recently named CEO Jack Johnston, a 38- year company veteran (and only the third company CEO), likens the training investment to a manufacturing company’s R&D dollars. “We have a really good business model here, but you have to start with good people,” he says. “When people are willing to put money in, they are telling you they believe in themselves and that is huge. This model speaks to the unique ability and passion the local people have in what they do.” Edwards adds: “In addition to the business acumen and leadership skills, we are putting experts in front of customers. We are no different than any other supply house, but our model and our people are our two biggest differentiators.” SEEKING PARTNERSHIPS Winsupply feels another key component to its success is the vendors it partners with. “We look for relationships beyond vendor and distributor. We want partnerships and look for people who sing from the same song sheet,” Edwards notes. Vice President of Vendor Relations Eddie Gibbs says the company has taken major steps forward in recent years simply by telling the Winsupply story and organizational structure to its vendors. The company’s second vendor summit in June attracted 268 people representing the top 100 vendors in the company (who make up 60% of the total purchases in the company). The 2015 vendor summit followed in the footsteps of the company’s 2014 annual meeting in suburban Dallas (By law Winsupply must have an annual meeting with each of its local companies, which operate as C corporations). The 2014 annual meeting featured 269 vendor booths with 4,300 one-on-one meetings. Both events were major eye-openers, Gibbs notes. “Our local company owners are going into these events along with the national sales manager and meeting with these decisionmakers from our vendors,” he says. “It benefits both sides when both players know each other’s business, and our biggest thing here is how we effectively communicate with our vendors.” A. O. Smith National Account Manager Phil McAfee is impressed with Winsupply’s ability to quickly adapt to a changing marketplace. “Their senior staff is incredibly experienced, dedicated and knowledgeable about what it takes for contractors to get the job done right,” he says. “One of the biggest benefits of their business model is the commitment to their leadership understanding the industry from top to bottom. Their team is well-positioned to move quickly and adapt to changing situations. They have built an excellent reputation in the industry and specifically within the A. O. Smith family. It’s a partnership that continues to grow.” Alice Martin, vice chairman and chief revenue officer at NIBCO, adds: “Winsupply’s business model makes them an exciting business partner for NIBCO. Because of the personal growth and financial opportunity they afford their owners, their employees are highly dedicated. By empowering owners and employees, they engender great loyalty. In an era of high employee turnover, Winsupply stands out for how they treat their people and how their people respond with high energy and long tenure.” Bill Freeman, CEO of Orlando-based manufacturers representative Spirit Group, remembers hearing Schwartz’s comment that ‘no one washes a rental car.’ “Rick was referring to the commitment they feel they get from their people who are partners in the business, with a vested interest, willing to put in the extra hours and sweat equity to be successful and make it last. Winsupply has a strong belief in capitalism, entrepreneurship and working to build small businesses in America. That is good for our industry and for our nation.” GOING FORWARD When he first started working for the company, Brock Smith, now the manager of the Dayton DC, recalls receiving hand-written orders from the receptionist and then taking the slips out to the warehouse and picking product. How time flies. These days, Winsupply has exploded into a company that has more than 12,000 vendors whose products are available to those 575 local companies. And there are no signs of slowing down. Schwartz points to an interactive map of the United States on the wall of the conference room at the Dayton headquarters that shows where the local companies operate. Edwards chimes in and predicts more dots will pop up in the future. “We are going to continue to look for profitable growth opportunities with opening new locations and giving other distributors an exit strategy to keep their businesses growing and thriving,” Schwartz says. Winsupply Chief Financial Officer Roland Gordon adds: “With an aging workforce and new generations coming into the business, we are a great option. We provide the back-office processes so our people can spend valuable time with their customers. The ultimate goal here is to serve the customers.” Salsman calls the present and the future, “the best time ever for Winsupply.” “We have an amazing history of 60 years of success with a great team of people focused on taking care of customers,” he adds. “I’m completely convinced if we execute on our strategy of putting great people in front of customers backed by technology and support then we have an absolutely brilliant future.” WELCOME TO THE FAMILY Winsupply expands its footprint through people-first acquisition process. Kim Willey, of Selkirk, N.Y.-based Security Plumbing & Heating Supply, says there is one main reason the 12-branch, 163-employee distributor was acquired by Winsupply earlier this year. “The previous primary and principal stockholders were looking for someone that would allow us to continue to operate in a similar business model, protect our employees and not destroy the integrity of the current operating company,” explains Willey, previously COO and now president of the company under the Winsupply umbrella. “Winsupply is a well-run organization with integrity, and an operations and financial strength that will fuel our future growth.” Winsupply also acquired Chicago-area-based M. Cooper Supply this year (now operating as M. Cooper Winsupply), bringing the number of major acquisitions it has made to four since 2013. Winsupply acquired 18-location Carr Supply and fourlocation Wyatt Irrigation in 2013. “We look for solid and profitable companies with strong management teams,” Winsupply Vice President of Finance Ward Allen says. “We’ve seen companies that have had success but just don’t have the proper capital they need. We have a local company down in Florida that we acquired. We inserted capital and support into it and it has grown by 150% as of last year.” Winsupply Chairman of the Board Rick Schwartz is mindful of the current industry climate where a distributor may be under-funded and looking for options or a scenario where there is no real succession plan or exit strategy in place. “Even in an acquisition environment we will share ownership where the previous owners become equity partners or we provide exit strategies for owners and families, but allow employees to eventually acquire ownership in the company,” he explains. “These are unique solutions as opposed to other exit strategy options that may be available.” Winsupply Chief Operating Officer Monte Salsman says the company’s acquisition process has the best interests in mind of all parties involved. “We’re not a financial buyer, we don’t gut companies and we don’t want to change company culture,” he says. “We look for people matches. Most distributors are entrepreneurial. That’s an instant match right there. We are giving these owners an exit strategy and their employees a chance at living the American Dream by giving them an opportunity at some point to have ownership in the local company. This is better for people. We want to help change peoples’ lives. We’re in this for the forever haul. Our horizon at Winsupply is forever.” —Mike Miazga
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