North American buying and marketing group Affiliated Distributors, Wayne, PA, is expanding into the bearings, power transmission and motors market.
Initial founding committee members include APEX Industrial Automation, Baldwin Supply Co., Bearing Service Inc., Eastern Industrial Automation, IBT Industrial Solutions, Purvis Industries, Troy Industrial Solutions and Van Meter Inc.
“It’s a natural migration of our value proposition into another vertical,” says Jack Templin, president of AD’s industrial supply division.
AD’s electrical division is its core, formed in the early 1980s, and today accounts for roughly half its member revenues, according to sources. It formed the industrial supply division in 1994 and now has more than 130 members.
MDM Analytics, estimates the core U.S. electrical products market to be more than $100 billion (not including controls), and the core U.S. industrial supply market to be between $100 billion and $150 billion, depending on how narrowly the product portfolio is defined.
The next largest product category is power transmission, which MDM Analytics estimates at roughly $55 billion, depending on product categories included. About $8 billion of that is in bearings, the largest single category, with more than a dozen additional fragmented product categories rounding out the portfolio.
In recent years, these three product verticals have seen the walls between them melting. Each has complementary products to sell for each of the respective specialists. And from a national accounts perspective, AD starts to fill the gaps its competitors had been systematically filling.
“Channel convergence is alive and well in the industry and for our members,” Templin says. “That said, we have strict membership criteria established by the founding members to make sure that people in the group are active participants in the bearings and power transmission vertical, not just people who’d like access to certain lines.”
Power transmission distributors have been acquiring industrial supply companies to broaden their offerings. More recently, there have been several strategic acquisitions between PT and electrical products distributors. Through its SupplyForce sister company, AD will now have a platform to go after national account business held in large part by the top three power transmission distributors.
Competitively, this announcement impacts the primary buying/marketing group in power transmission – IDC-USA. The cooperative, formed in 1987, has 85 members with about 300 locations nationally. AD, a privately held company with seven divisions, has historically had a policy of exclusive membership – member companies can’t belong to competing buying/marketing organizations. According to sources, six IDC members – five electrical division members and one industrial supply division member – will leave IDC for AD.
“Our entry into the bearing and power transmission vertical is was in no way an effort to target another group; many of our founding members were unaligned with any group,” Templin says. “Our value proposition is different than that of others in the space; we saw the opportunity to offer the similar value proposition that we offer in our other divisions to independent bearing and power transmission distributors.”
It sets up a contrasting set of value propositions. IDC built a strong platform for independent distributors to be more competitive with the dominant national distributors – Motion Industries, Applied Industrial Technologies and Kaman Industrial Technologies. Specific value-proposition strengths of IDC have been its warehousing network, IDC-branded products to complement its support of select brands and inventory sharing. AD has no plans to inventory product or offer private label brands.
Of the founding members announced in AD’s PT division, IBT is ranked 10th in the 2014 MDM Market Leaders list of the largest North American power transmission distributors with estimated 2013 revenues of $138 million. Van Meter was ranked the 24th largest electrical distributor in the 2014 MDM Market Leaders list with 2013 revenues of $235 million. Both companies have been IDC members.
Bill Childers will lead the new division as vice president/managing director of Bearings & Power Transmission. He is the former president of bearing manufacturer C&U Americas.
“Bill is an established veteran of the PT and bearing world, an area we admittedly have no expertise in,” Templin says. “So it was important to find someone who brought that expertise and credibility to our efforts.”
Affiliated Distributors reported in January that sales for all AD members, across all AD divisions and countries, grew by 9 percent in 2014 to $31.2 billion.