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In 2013, MDM is recognizing distributors that are innovative in their approach to their markets. Machinery Tooling & Supply, Schaumburg, IL, was selected as an MDM Market Mover for its focus on, and long-term dedication to, successful strategic planning practices.
2013 MDM Market Mover
Company: Machinery Tooling & Supply
Headquarters: Schaumburg, IL
Leadership: President Bob Cuthbertson
Details: In today’s environment, it can be difficult for distributors to find time for long-term planning while still meeting the demands of day-to-day business. But Machinery Tooling & Supply set the time aside to create the company’s first strategic plan in 2005; management stuck with it and has seen a 129 percent sales increase since. The distributor shares its story in this MDM Market Mover profile.
Since 2005, Machinery Tooling & Supply, has grown its sales 129 percent, from $17.5 million to just under $40 million in 2012. The key to success, according to Bob Cuthbertson, president of MT&S, was the five-year strategic plan the company created in 2005.
It can be difficult for smaller companies to find the time for strategic planning, Cuthbertson says. “We tend to spend all of our time working in the business and not on the business,” he says. But when Cuthbertson and Ron Major, CEO of MT&S parent company Machinery Systems, started working toward a full buyout of the business in 2004, they both recognized the importance of strategic planning. It was important to establish a new vision and a more aggressive growth direction for the company, Cuthbertson says.
One of the most critical revelations on how to achieve growth was reached in the early stages of planning. “We thought that we were going to go after acquisitions and product lines to achieve the aggressive growth goals we had out there,” Cuthbertson says. But the team quickly realized that pursuing increased market share in its existing market could provide growth without the excessive risk or cost of acquiring. “Ten years later, we’ve nearly tripled our sales, and we still think we have tremendous organic growth potential.”
With the help of regular strategic planning meetings, the planning team, made up of key members of management, recognized an increased focus on integrated supply as an ideal growth strategy. Cuthbertson says the company already had inventory management programs in place, some of which included vending machines, but integrated supply wasn’t yet a focus for them, nor was it a focus for other companies in the Chicago metro market.
Early on the company made the mistake of partnering with customers who weren’t fully invested in the program. After seeing that some of the vending machines that had been placed weren’t being fully utilized, the company decided to prioritize which opportunities to pursue. It now focuses on larger-volume accounts where buy-in exists at multiple levels of the customer company.
The program now serves more than 50 customers and accounts for more than 50 percent of annual sales for MT&S. Prioritizing opportunities and closely monitoring inventory, receivables and processes has supported program growth and profitability. Opportunity prioritization, as well as a commitment to details, has also helped ensure service levels for existing customers, Cuthbertson says.
Another initiative, which Cuthbertson also credits to a focus on strategic planning, was the addition of a complete offering of MRO and safety supplies, a category which he says has seen a 300 percent sales increase over the past three years. As business dropped dramatically in 2009, the planning team felt that the timing was right to add the lines. “The big ‘aha’ for me was that we always had stayed focused on cutting tools, because we thought that’s where the value-added was," Cuthbertson says. "Well, we found that our customers could really see a value-added on the MRO and safety side, as well.”
Due in part to an annual reworking of its five-year plan, the company realized soon after the addition of its MRO and safety lines that while customers liked being able to buy those products from them, they were looking for an easier way to do it. MT&S added a catalog system into its website, customizable for each customer. The customized catalog enables each customer to quickly view products that they commonly order, while still allowing access to a broader search tool.
The ability to tweak goals and initiatives is part of what has made the company’s strategic planning so successful. “It’s important, because things change. Look at just how much the market’s changed in the last four years,” Cuthbertson says. For example, manufacturing customers’ focus on competing more effectively with China has lessened, as U.S. operations have become more cost-competitive. When competing with China was a top priority for its customers, MT&S’s priority was on driving down customer costs to help them compete. While improving customer profitability is still MT&S’s goal, Cuthbertson says customers are now competing much more effectively in the global economy.
Having an outside facilitator has also been key to Machinery Tooling & Supply’s strategic success. While using an in-house facilitator would have been cheaper, having an outside perspective helped the company make big picture decisions. “He brought an element of professionalism, team building, and frankly, fun to the process, while constantly challenging us to expand our thinking,” Cuthbertson says.