If the independent distributors that compose buying group AD were counted as one company, it would easily rank No. 1 on MDM’s Market Leaders list this year, topping such giants as Ferguson, Grainger and Amazon Business.
In 2019, members of the Wayne, Pennsylvania-based organization generated a combined $46.3 billion in total sales, up 12% from the year before, growth that wasn’t as robust as previous years but still solid relative to overall industry performance.
Of course, AD is not one company, but rather a collaborative of 800-plus independently owned members that run more than 5,000 distribution branches across numerous verticals and geographies. AD, which is North America’s largest marketing/buying group for construction and industrial supplies, is a “member-owned organization, passionate about bringing growth-oriented independent distributors and best-in-class supplier partners together with the purpose to outperform the market and to stay ahead of the competition.”
And outperform the market is something many of AD’s members have been doing for decades, last year being the latest example. In 2019, Plumbing, Heating, Cooling and Pipe (PHCP) divisions grew by 4%; Industrial and Safety divisions grew same-store sales by 3%; Electrical divisions grew same-store sales by 2%; and Building Materials grew by 4%. Each geographic region — the U.S., Canada and Mexico — all notched sales gains.
There’s more to AD than just the numbers, however. It’s the collective buying power of AD that makes it one of this year’s MDM Market Movers. AD, which will celebrate its 40th anniversary next year, is preparing to begin its fifth decade in a powerful position despite a global pandemic that has ravaged the economy in general, and wholesale distribution in particular, for the past six months.
Nevertheless, COVID-19 has presented challenges for AD and its members, which is why MDM is checking in with AD Chairman and CEO Bill Weisberg about how the organization and its members are faring.
Plenty has been happening for AD and Weisberg, who became sole owner and chairman of the organization in 1991 after taking over for his father, AD founder David Weisberg. Then, in 2018, the group successfully transitioned to member ownership accountable to a board of directors elected by the members.
During his tenure, Bill Weisberg has overseen numerous achievements at AD, including the expansion into seven additional wholesale industries, entering Canada and Mexico, and increased member services to include e-commerce, HR and procurement. And two years ago, he orchestrated a merger with IDC-USA, a cooperative of 76 bearings and power transmission products distributors.
This year, he and his experienced leadership team have been busy shepherding the organization through a global pandemic.
Our conversation with Weisberg addresses a host of topics, including changes at the buying group, how distributor members have navigated the pandemic and what’s in store for the buying group in the next 40 years and beyond.
MDM: As AD approaches its 40th anniversary, how has the role of the independent distributor evolved over the last four decades?
Weisberg: We’re so fortunate to be coming up on such an incredible milestone. For some of our members, they’ve been in business nearly three times as long! The strength of the independent business model — locally run, fiercely self-sufficient and agile — has enabled our members to continue to thrive over the years.
From an industry standpoint, their ability to make quick decisions, invest in inventory and continually develop their technical expertise has made them ideal partners for manufacturers seeking to drive new and existing products into local markets.
AD’s members are leaders in their local markets and help add value to their customers with new products, services and ways to procure product — like e-commerce. They have expanded their supplier base to help customers source products across multiple industries while providing services that differentiate them in the market. We also find that independent distributors are heavily invested in their local communities. Our members are generous in their efforts to give back.
MDM: How has AD helped drive the evolution?
Weisberg: AD expanded from our original U.S. Electrical Division with 48 members, which was established by my father, to 12 divisions across Canada, U.S. and Mexico. We utilize the market power of our $46 billion group to negotiate performance-based incentives, promotions and programs with world-class manufacturers, to help our members stay competitive and drive sales for our supplier partners.
Along the way, AD has continually invested in value-added programs and services designed in collaboration with our members based on their greatest needs to help them compete and win.
We’ve got so many great examples of the programs we drive for members. Our best-in-class meetings and networking offer best-practice sharing through structured, meaningful networking with noncompeting like-minded, growth-oriented independents.
eCommerce Solutions has helped over 100 of our members sell online. HR and Procurement Services help our members access best-in-class service providers at discounted rates.
Our warehouses in the U.S. and Canada help our members save money and leverage a streamlined ordering process and offer private label brands and opportunities for power buys.
MDM: Were AD members, by virtue of their membership in the buying group, better prepared for this crisis? How so, specifically?
Weisberg: Throughout this crisis, the AD community that includes our members, supplier partners and associates came together to support one another in a manner that’s only possible through an organization like ours.
Our AD associates have immersed themselves in activities centered on maximizing support to our members and suppliers, enabling the group to not only continue to recover from the pandemic, but grow and emerge stronger. Examples of these activities include our Community Message Board, launched as the lockdowns began, it provides our members with a central online location to informally ask questions of their peers and share best practices in areas like warehouse and delivery protocols, counter and pick-up procedures and HR.
In response to an immediate need to help our members understand market trends, we launched real-time business intelligence collection and reporting to provide members with a timely and evolving picture of the financial impacts of the pandemic. The reports provided relevant divisional, geographic and end-user specific data and trend lines that our members can use to navigate throughout the crisis and make informed business decisions.
Our tagline is “Together We Win,” and this certainly came to fruition as we partnered with suppliers and members to help build programs that support independent distribution.
The strength of together was evident when we conducted a personal protective equipment power buy across all U.S. divisions that provided over 600,000 masks for members who participated. Our Bearings and Power Transmission Division team led that charge, leveraging our U.S.-based warehouses in Indiana and Nevada to provide this critically needed item.
MDM: Beyond the obvious metric of member revenue, how is AD measuring success for distributors, suppliers and even the organization itself during the pandemic?
Weisberg: Like most organizations, we have a stable of financial metrics and performance indicators that help us manage the health of our business. However, in times like these one of the most important measures of success is business continuity. We leaned in even deeper to help our community, despite all of us working remotely. Our No. 1 mission is to help our members and suppliers get through the pandemic. Times are tough and we are working to help our community come out the other side of the pandemic stronger.
MDM: What have been members’ (both distributors and suppliers) most pressing needs during the last six months?
Weisberg: There are three notable areas. The first started with a clear and urgent need for information. There were so many unknowns at the front-end of this crisis and we helped bridge that need with frequent communications, member and supplier outreach, webinars on important topics like SBA Paycheck Protection Program legislation and IT security, and a series of virtual meetings with members and suppliers across all of our divisions.
As the crisis continued, the second area was an immediate focus on business continuity as organizations moved part or all their teams to work from home and ensure they were able to support their end-user customers. We’ve seen tremendous resilience, creativity and agility across our membership as they continue to operate and win in a challenging market.
The third greatest area of need has been support in addressing supply chain challenges that many manufacturers are facing. We continue to engage in with members and supplier partners find ways to address these challenges and prioritize members in our community.
MDM: What are the hallmarks (besides product mix) of a distributor that has not only survived but thrived during the pandemic?
Weisberg: Our members acted early, practiced strong leadership, communicated frequently with their employees, customers and suppliers, and they managed their cost responsibly. The AD community used the time to get stronger, by taking advantage of online education and resources, and promoting their commerce capabilities. We’ve seen tremendous growth in our e-commerce program, and now more than ever, members that have embraced these capabilities are winning.
MDM: Can you share an example of a member distributor that has been especially innovative in response to COVID-19?
Weisberg: The pandemic affected ever industry, geography, associate, member and supplier partner. Throughout this time, we’ve witnessed incredible agility in the community we serve. There are hundreds of examples of businesses that pivoted, innovated and swiftly took the opportunity to strengthen their position in the market.
One example of a member that has been particularly innovative in their response to the pandemic and featured on MDM’s Market Leaders list is Border States. This employee-owned AD multi-divisional member continues to find ways to compete and win. Whether it’s through diversification of their product mix, engagement with supplier partners or finding ways to grow, they are challenging status quo.
MDM: How has the collaborative nature of the buying group been beneficial for members during this crisis?
Weisberg: As a member-owned and governed organization, we’ve benefited from bringing together the best minds in the industry on boards and committees to help shape our strategy and response to the crisis. Our members have been able to generate new ideas and exchange best-practices, collaboratively problem-solve, and govern each of our divisions for the betterment of each independent and the group as a whole.
MDM: AD has pivoted its annual meetings this fall to virtual; how have expectations for these events changed both from AD’s and members’ perspectives? At the same time, is AD looking forward to in-person meetings resuming?
Weisberg: AD announced the shift to virtual meetings early in June because we understand our members need and want to lead from the front, staying close to their businesses and families. We recognize that virtual meetings aren’t the same as in-person meetings and we’ve modified our agendas accordingly. We’ve constructed core programs that consist of member and supplier updates, networking, and virtual booth sessions that allow our members and suppliers to review 2020 performance and jump start 2021 plans.
Additionally, we’ve given our suppliers the opportunity to host webinars in the days and weeks leading up to the fall meetings where they can share their plans and highlight key products and programs with our members. We’re all looking forward to active participation from our members’ and suppliers’ key decision makers. Our hope is that conditions will allow for us to resume in-person settings for our spring meetings, but we’ll remain flexible.
MDM: As AD thinks about the next 40 years, what’s in store for growing the organization and enhancing its value for members?
Weisberg: As we think about growth, it’s all about how AD can help independents outpace the market. We’ll continue to expand our membership, explore new verticals and invest in future-looking programs.
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