Yesterday it was announced that IDC-USA, a cooperative of 76 bearings and power transmission products distributors, has merged with the marketing group Affiliated Distributors, which had 31 members in its bearings/PT division prior to the merger. It’s a milestone in the history of industrial cooperatives and the markets they serve; it’s also an interesting study in the pretty complex mix of variables that change over time that define the value of these entities – changing markets, the strength of national competitors, supplier relationships and even the personalities of the co-op leaders and members themselves.
There are a lot of parallels between IDC-USA and its now fellow AD members that are part of AD’s industrial division that has 154 members. I.D. ONE was a cooperative of industrial MRO distributors that formed in 1987, about the same time IDC-USA was forming. There was intense opposition to these cooperative entities by manufacturers and competing distributors, and many hours of intense debate at association meetings well into the 1990s. Many suppliers fought the organizations tooth and nail because of the very reason they were formed – to gain more volume purchasing and negotiating power with suppliers.
Over time, these organizations developed additional support services in marketing and training, and in IDC’s case, warehousing and private-label product sourcing. You could argue that these organizations provided important counterbalances to broader cyclical trends that otherwise would have sharply limited the ability of its traditionally small, independent members to grow and compete effectively.
A common characteristic was the strong personalities of the co-op directors and key members that fought the battles and altered the competitive dynamics just as national distributors started gaining scale in the 1990s. Anyone who knows Dan Judge, who became president of I.D. ONE in 1993 and founded NetPlus Alliance in 2002, or Jack Bailey, who guided IDC-USA up until a few years ago, appreciates the leadership qualities required to align a group of independent distribution company owners in intensely competitive markets.
I.D. ONE grew to 60 members and $4 billion in sales by 2000, when it merged with Affiliated Distributors, which until then had been exclusively a privately-owned marketing group of electrical distributors. After I.D. ONE, three other cooperatives became part of AD and expanded its coverage into other product sectors: CL Watt for plumbing, The Piping Connection for PV&F, and Amarok for building materials (2008).
The Independent Distributors Cooperative was started more than 30 years ago as a purchasing group to level the playing field against “big-box” competitors. It opened a stocking warehouse in 1995, and today has warehouses in Indianapolis, IN and Reno, NV with more than 70 suppliers. AD formed the Bearings & Power Transmission Division in 2015 with eight founding companies.
Arguably, the value proposition of cooperatives over time – providing scale to independent distributors – changes and is challenged to meet what can be increasingly diverse objectives for its members based on their respective size, markets and product portfolios. They have played critically important roles to help sustain a diversity of market competition and choice for customers and access to markets for suppliers.
The final pieces of the puzzle for this IDC merger to take place interestingly came back to personality and organizational structure change, as in August AD completed a transition of ownership from its chairman and CEO since 1991, Bill Weisberg. Weisberg’s father, David Weisberg, founded AD in 1981. AD is now member-owned. AD’s competitive culture under Weisberg’s leadership over more than two decades has often contrasted with the organizational cultures of its competitors.
“Voting to join AD was an easy decision for me, as I suspect it was for the majority of my fellow IDC independents,” said Chris Hughes, Board Chairman of IDC-USA and President of Transmission & Fluid Equipment, Inc. “Frankly, with AD’s recent transition to a member-owned organization, it made the decision that much easier. It’s a win–win for all independent distributors.”
As a part of the merger, IDC-USA President & CEO George Graham will take on the role of president of the AD Bearings & Power Transmission Division. He replaces bearings industry veteran Bill Childers.