In its response to the pandemic, fluid power distributor Motion & Control Enterprises (MCE) is finding a balance between keeping the business focused on long-term company goals and addressing near-term employee concerns and necessary operational changes. Speaking to the Pittsburgh-based distributor’s experience during Friday’s MDM Live webcast (click here to watch), CEO Charley Hale described how MCE’s four locations and 20 partner retail stores are adjusting.
Like many distributors, business was looking pretty good through the first half of March before a “pretty accelerated drop” in the last two weeks of the month, Hale recalled. In reviewing the company’s top customers based on first quarter sales, about 20% of MCE’s revenue base is currently closed and about another 20% are on maintenance-only operations. The rest are a mix of relatively normal to reduced operations. MCE sales reps are not able to visit most customers, but what has caused some challenges is that most customers’ purchasing staff and payable teams are working remotely, making them hard to reach.
Hale feels fortunate that out of MCE’s own approximately 200 employees, no one is currently sick. The majority of office staff are working remotely, including finance, accounting, purchasing and most customer operations staffers. Its four distribution facilities and 19 of the 20 partner stores remain open. Counter business has adjusted to one person in the store at a time, with appropriate distancing.
Keeping the Company Playbook Intact
In the effort to carry forward MCE’s business strategy, the company has not stopped exploring M&A opportunities — what Hale calls a key part of the company’s playbook. “We've put together a nice management team. We've got great financial backing. It's time to continue to look for acquisitions and we will do them where we can,” he said.
The MCE value proposition goes beyond pricing to support customers with availability, timeliness and technical support and expertise. The company’s growing systems business continues to be active, allowing MCE experts to act as “an adjunct engineer” for customers. Its resulted in several large orders in the last few weeks, including converting a longtime prospect into a customer.
“I’m a big proponent of strategic pricing, emphasizing value and being really focused on pricing analytics. We're driving that here and it's working,” said Hale. “I think the initial reaction when you have a tough top-line environment is, ‘Let's cut price and let's extend terms.’ Clearly, we want revenue. Revenue is at a premium today, but we don't want to sacrifice the future of the business through making bad working capital decisions or bad pricing decisions.”
Helping customers to design systems is not ideal from a distance, but Hale said MCE is making it work with Zoom meetings, FaceTime plant visits and the like. “We're doing the best we can under these scenarios. It's less than ideal, but it's working,” he said.
The Right Time to Move
Since before the pandemic took off, the company has been focused on salesforce effectiveness and efficiency. Hale sees COVID-19 as accelerating those efforts, rather than slowing them down. The company, he said, is working on:
- How do we segment our customer base?
- How do we apply our best resources to serve that customer base?
- How do we move people to an outbound inside selling effort?
- How do we leverage e-commerce more to transact business?
“We had about a 12-18 month runway to roll through this,” Hale said. “We’re accelerating. We're going to shorten that to a 6-9 month transformation. It’s a lot of work, but we can do it now. It's clearly easier to do it when we're not stressing the system at the top line. So, we're driving down that effectiveness and efficiency.”
Of course, that does not mean ignoring the fact that there is a real global crisis going on. The MCE management team meets daily to focus on cash generation. The company has made some cost reductions, including letting some team members go and furloughing others. “We know we're going to get to the other side. When we get to the other side, I think we're going to have a nice pickup in business. We've just got to be prepared and we've got to be optimized to do it,” Hale said. “We've got to balance that short-term crisis mentality with the vision for what we want to do as a business.”