Mike Miazga 2017-10-06 04:47:07
2017 SUPPLY HOUSE TIMES SUPPLY HOUSE OF THE YEAR: PUTTING ITS MONEY WHERE ITS MOUTH IS Dakota Supply Group backs up its unwavering commitment to its customers through a host of partner-centric programs. 100-2-200. To Fargo, N.D.-based Dakota Supply Group, those numbers represent the trifecta of superior customer service. And if you work at the employee-owned distributor, odds are you will walk by a poster with those numbers on it multiple times during the day across DSG’s 37 branches in 34 separate physical locations throughout the upper Midwest states of the Dakotas, Montana, Minnesota and Wisconsin. The 100 stands for 100% order accuracy, meaning the customer will get exactly what they ordered and the peace of mind that comes with it. The 2 refers to DSG’s credit policy that states it will issue a credit within two business days or less. And finally the 200 represents DSG’s Top 200 list. If the product a customer needs is on the Top 200 list, DSG will have it in stock and ready when the customer needs it. If DSG’s stumbles on any of those three, the customer receives a $25 certificate to redeem on a future purchase. “If we make a mistake we’re going to pay you 25 bucks,” says DSG Sales Manager Ryan Tracy, who joined the company through the acquisition of South Dakota-based Plainsco in 1995 and has been with Plainsco/DSG for 22 years. “We know the 25 dollars doesn’t cover what the contractor spent on what happens when a wrong product is delivered, but it makes us accountable. They just want you to get their damn stuffright and trust me we want to, but we put our money where our mouth is and are going to continue to make ourselves better. We want to be the best and we want to tell the world if we aren’t the best, we will pay you.” So exactly how is WIT & Co. buying group member DSG faring with its customer guarantee? You can find out for yourself on the company’s website at www.dakotasupplygroup.com. As of this writing, DSG was at 98.9% in terms of the Top 200, 99.7% with 100% order accuracy and 99.9% with twoday credits. “We constantly monitor this,” CEO Todd Kumm says while sitting at an indoor picnic table/office setup in the company’s new Plymouth, Minn., location that recently held a grand-opening/tent sale that drew a large crowd. “A 99 sounds great, but if you have 100 lines and you miss one, for a distributor these days you could lose a whole order. We can push this even more. We can show a contractor why working with us is of value and here are the statistics to back it up.” Don Omailia of Temp Right Plumbing & Heating in Missoula, Mont., sees great value in doing the majority of his business with DSG. “They’re not just order takers,” says Omailia, who lauds the work of outside sales rep Mark Johnson. “They go the extra mile. They get our material when we need it and will adjust their delivery schedule to help us out. Mark is in communication with our job foremen every day. He takes care of each individual job and keeps them running smoothly.” The DSG customer-service guarantee is but one of a bevy of programs the company has put in place, all aimed to continue the distributor’s growth in the main plumbing, HVAC and electrical verticals it does business in. DSG’s unwavering commitment to its channel partners through these proactive means is the basis for it being the recipient of the 2017 Supply House Times Supply House of the Year honor. “Dakota Supply Group provides everything a manufacturing company looks for in a wholesale-distribution partner,” Moen Regional Manager Bob Ismert says. “They do a great job. They support us and their people are professional. They are not only knowledgeable about the product lines they sell, but they understand the needs of the customers that will be installing our products. DSG has a broad scope of coverage from rural markets to major cities and can provide Moen products to customers no matter where they do business. Their outside sales team helps us introduce our new products to plumbers and builders, while the inside sales team and counter people are some of the best in the business.” THE LONG, WINDING ROAD DSG, members of both the American Supply Association and HARDI, can trace its roots back to 1898 when it was founded in Fargo as Fargo Plumbing, later changing its name to Dakota Electric Supply in 1929. Ownership split into contracting and wholesale divisions in 1948, going their separate ways. The first employee purchase occurred in 1954 and the company later downsized to a single Fargo location in 1960. An employee stock-option program was started in 1976 prior to a 1980 expansion into Grand Forks and Bismarck, N.D. The company was acquired by Esmark in 1981, which was then purchased by Beatrice International, whose product lines included Butterball turkeys and Playtex undergarments, as well as wholesale electric products. From 1985 to 1989 Dakota Electric Supply was bought and sold as part of a larger group of electrical distributors eight times until employees bought the company back in 1991 (for more on the DSG ESOP, see sidebar on Page 30). The company’s major expansion started in 1999 when it acquired Plainsco, an acquisition that reintroduced the company to plumbing and HVAC, while adding waterworks and automation to the mix. Dakota Electric Supply changed its name to Dakota Supply Group in 2001. Other acquisitions in recent times have included W.A. Roosevelt Co. and MDM Supply in 2012, WoodruffCo., in 2014, and Pipeline Supply in 2015, which greatly bolstered the group’s presence in the Twin Cities market. “Our challenge is to run this at a local business level from the customer’s view point regarding what they need as opposed to a corporate picture,” Kumm says. “It starts with culture and values. If we have the right values, our employees will see that and will want to do that at the local level and will want to take care of the customer at the local level.” With a large influx of talent in recent years via acquisition, DSG is in the midst of working on a culture initiative to further bring its employees together and working toward the same goal. “Every one of the acquisitions came here with its own culture,” Tracy points out. “Every company did things their own way and had certain experiences. At Dakota, we have our own culture. None of the cultures are bad, but in the short-term we have to figure out what our culture is and drive that down so everybody knows how they participate in making our customers’ experience the best and helping customers better than anybody else so they can continue to grow. In the short-term here it’s all about culture and adapting to the new and the old and putting our arms around what we have.” MORE PROGRAMS, HUGE IMPACTS That three-step customer-service guarantee is the tip of the iceberg when it comes to programs DSG has in place to best help their customers win in their businesses. Of note is DSG’s P4 Learning Lab, an interactive two-day seminar that delves into a contractor’s business and how to improve on items such as hourly-rate determination, creating service agreements and other tips to help contracting firms increase profitability. “We bring in outside help to talk and we keep things neutral,” Kumm explains. “We’re trying to help them succeed. Not all lawyers charge the same fee and neither should contractors. It’s a progression. What things add value to your business? We talk to them about marketing. Put your card on every water heater you sell so they know who to call. Sounds like a simple thing. Put shoe covers on and clean up after yourself. Things like that leave a huge impression.” Chief Segment Officer Mike Tupa has been with DSG since 1977 and celebrated his 40th year with the company in June. He’s seen the P4 Learning Lab pay immediate dividends for DSG customers. “Ninety-five percent of people are tradespeople who own their business. They aren’t business people who happened to get into the trades,” he says. “We get into the financial side of things. They open their books and put it out there. I have not talked to one contractor who has not increased business after coming back from our seminar. If they aren’t successful, we aren’t successful. We also do a lot of training with manufacturers and contractors together. They understand the value proposition throughout the supply chain. Our goal is to get that partnership going throughout.” Tracy adds: “If you make more money you will buy more from me instead of fighting over the price of a half-inch 90.” Tupa says vendor scorecards and bid-tabulation scores also have greatly aided the company over the years. “We show those cards to manufacturers,” he says. “I would say on 95% of the scorecards we’ve lost more business on bids than they actually got with our company. That’s scary. If you are losing $450 million in bids a year and you use this process to get 10% better, that’s $45 million. That’s a lot of money. We grab that information and we share it. It’s been fun watching us grow.” Another recent innovation has been the company’s after-hours service where customers can reach a live DSG employee on the phone until 10 p.m. The service is fueled by the use of voiceover IP technology. “The after-hours program is huge,” DSG Plumbing Segment Manager Darrin Walts says. “I don’t know anywhere else in the industry where you can talk to a live person up until 10 p.m., to get help placing an order regardless of the segment. We are a resource for the contractor. We find different points where the contractor needs to do business so we can get him the supplies he needs when he needs them.” Kumm says the night service is an excellent complement to its userfriendly website. “It’s a step better than having a website,” he says. “It’s also meant to supplement our e-commerce. Customers can ask questions. It drives something beyond numbers. It drives loyalty and appreciation. A contractor might say, ‘I forgot this, but I know DSG still is open.’ “It’s been a huge help in our rural markets. A lot of contractors there wear the tools all day and then do their bookwork and ordering at night. Grainger gets most of its orders on its e-commerce site at night. Maintenance crews tend to work at night. We’ll be that company with the web commerce and the live person. If we are going to beat the Amazons and Graingers of the world, we have to provide a better service. We have that knowledge base to do that. We’re able to serve a large area with a few people.” Other key company programs include the DSG Kids Club and a DSG scholarship program. The Kids Club educates the children of its employees and customers about the industry. “How many companies focus on kids and telling them what their moms and dads do for a living?” Tracy asks. Kumm adds: “We are trying to teach them about the industries. It’s not just about distribution.” For the scholarship program, DSG puts aside a certain dollar amount and earmarks it for individuals who would like to get into the trades. “Every year we give every person within Dakota Supply Group $250 to spend anyway they want either to a charity of any kind or this scholarship fund. Either is fine,” Tracy explains. “Within that dollar amount, the scholarship fund continues to grow. We want to help people get into the trades.” THE TRIFECTA Tupa is the last original segment manager still with the company. When the name change from Dakota Electric to DSG occurred, the company named segment managers in plumbing, HVAC and electrical to highlight its three main verticals. DSG also is involved in the waterworks and underground utility markets. Tupa now oversees the company segment managers. Many of the company’s branches cater to all three main segments with HVAC/R Segment Manager Greg Servais noting DSG’s 60-ft.-long counter at its brand-new Plymouth, Minn., branch is the largest city desk in the metropolitan Minneapolis area. “An HVAC contractor also is going to buy plumbing materials and a plumbing contractor is going to dip into HVAC and electrical,” he says. “The crossover is natural. Most of our branches are three-tier segments now. If you have our truck coming to your shop tomorrow and you need some HVAC and plumbing stuff, you can have it on one truck. That makes a huge difference.” Tracy agrees DSG’s goal continues to be that one-stop shop for contractors. “It’s one phone call to us, one purchase order and one accounts playable instead of calling three different people and trying to get three different deliveries and receivings. It’s a great benefit.” Jase Rosendahl, branch manager at the company’s Rochester, Winona and Austin, Minn., locations, takes things a step further and notes DSG is able to thrive in those segments because it understands the needs of its local markets. “Every market is different and has its challenges,” he says. “We understand that and we address that at the local level, plus we align with the right reps and vendors to help us thrive in each local market.” Jon Jacobson, who runs the Rochester showroom, adds: “I like the aspect of people coming to you with their needs and you get to take care of them on a local basis. We’re here to help the end customer. I’m their most economical salesman and I’m not on their payroll. If you provide the products customers need and the service they desire, they will come back. And they always will be back for the knowledge. We’re very good with answers.” Zurn Regional Manager Bill Woehlke says DSG mirrors the engineered water-solutions manufacturer in one key way. “Dakota Supply Group is similar to Zurn in that it’s a onestop shop. They are the expert,” he says. “Their contractor base trusts them. It is one direct source supplied to one direct resource for a wide customer base. It’s a team sport when manufacturers and distributors work together because you truly are working toward a shared goal. Dakota Supply Group serves diverse trades. They give us valuable feedback and we listen. They are as personable as they are professional. It’s a win for everyone involved because it’s an effort from everyone involved.” Tracy notes DSG’s territories currently present a mix of key opportunities and some challenges. For example, with its purchase of WoodruffSupply, DSG is firmly entrenched in the Rochester, Minn., market where Tracy points out the Mayo Clinic is investing a whopping $2 billion in infrastructure in the next 10 years. He also put to rest the myth that the oil patch drives the economy in the Dakotas. “I beg to differ,” he says. “Agriculture is at an all-time low in South Dakota because it’s been very dry. Yes, oil and gas are down, but corn crops went from $8 to $2.30. When farmers don’t have money, they don’t spend. Farmers have been here a long time. They drive the economy. Oil comes and goes.” Kumm says more acquisitions are possible in the future, but a key focus remains on growth via organic means. “We would rather grow organically by serving our customers,” he says. “We want to stay with our bread and butter, which is the upper Midwest. We’d rather reach out from Minneapolis instead of going to Atlanta. The further away you get, the harder it is to develop that culture. People want to see you and know you are involved in the company. “We want to help our customers grow every day. They are our partners. The same with our vendors. Sometimes manufacturers and distributors can get parochial and you think you are out on an island. We continue to look at the entire supply chain from manufacturing to point of use. We will continue to respond to customers and their needs. We are a great source of knowledge. One of our six cultural beliefs is keep climbing and improving every day. That’s what you are going to see from Dakota. We’re going to keep climbing and improving every day.” SKIN IN THE GAME Dakota Supply Group’s employee stock-ownership plan fosters success. At various times in its long history, employee ownership has been part of the fabric at Dakota Supply Group. When the company was repurchased by employees in 1991, stock ownership was limited to 35%. Five years later in 1996, DSG rolled out an employee stock-ownership plan and in 2001 the distributor became 100% owned by employees through an employee stock-option plan or ESOP. “Our employees are owners and they see the rewards of ownership,” DSG CEO Todd Kumm says. “We don’t have employee votes for all decisions because you can’t react that way, but our employees feel more connected to the organization. It motivates employees to do the best thing. They see more of an intrinsic value. They don’t feel like they are working for the man.” DSG Sales Manager Ryan Tracy feels the ESOP aspect of the company is a game-changer. “I think our people care more,” he says. “Would you rather work for somebody or work for yourself? When you walk in here in the morning, treat this building like it’s yours. If you see a can on the ground, I hope you pick it up. If the phone rings at 5 p.m., I hope you pick it up instead of going home because you are an owner. I think we look at customers a little differently because of it.” Kumm says when the company makes an acquisition, the ESOP facet of DSG takes a while to set in. “It’s an interesting phenomenon,” he says. “It doesn’t necessarily hit them until the first or second year here. That first year is really more about am I going to lose my old job and am I going to go backward in benefits? The longer they are with the company, the more they see the benefits of the ESOP and what it’s doing for them.” Chief Segment Officer Mike Tupa says DSG might not be the company it is today without that ownership plan in place. “It’s an attraction as an owner to pass that opportunity on to your employees and it’s an attraction for acquisitions,” he says. “When it’s your company and you get that direct benefit of everything that goes on where you work along with the value of your stock, you should work hard. You can influence everything you do. You’re not just an employee. You are an owner. We always are open to ideas and suggestions. That’s how we encourage our branch managers to be their own entrepreneurs.” Tim Glander, an account manager based out DSG’s Rochester, Minn., branch, pins a good chunk of the company’s success on the ESOP. “Being an ESOP company is really important,” he says. “Our ideas and views are taken into consideration and relayed to upper management. You have ownership in the company. I have the freedom to act and see things through to the end. I also feel like I’m part of each of my customers’ companies. I want to make them profitable.” Tracy puts the power of DSG’s ESOP into perspective. “A lot of people are retiring as millionaires at Dakota Supply Group,” he says. “We have counter guys who have been here 20 years retiring with a million dollars. I want to retire with a million dollars in my account. I’m a driven dude. We have to double and triple that stock just like the people who are retiring right now did. Where else can I do that? You can’t do that working for anybody else.” —Mike Miazga
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