James Ryan, president and COO of Grainger, provided his observations on the MRO market at the Electrical Products Group 2008 Annual Conference. Ryan will become CEO on June 1:
Procuring MRO supplies historically has been a back-burner concern for most organizations. It’s typically unorganized and unproductive. But that’s changing. More and more people who operate facilities are seeing the time and the costs associated with managing MRO. Yet it can be a big challenge for them to reduce those costs, and eliminate the headaches.
“As companies fight to be competitive in their industries, they want reliable partners who can help them identify savings and improve productivity. The opportunity is there for MRO suppliers with the skills and know-how to help in some of the neglected corners of their business.”
Here is why Ryan says he is bullish on the MRO market:
1. The worldwide potential for MRO distributors is estimated at more than half a trillion dollars. The rapid growth of many emerging economies is increasing the size of the worldwide market.
2. The demand for MRO supplies is relatively steady. In good economic times, there’s plenty of expansion going on. In weaker times, there’s still the need to maintain facilities. And, in all phases of the economic cycle, facilities managers need maintenance supplies. Regardless of industry, the size of business, or the location, there’s a common requirement to maintain facilities, to keep them functioning, well-lit, clean, safe, and, down here, cool.
3. This is a highly fragmented industry. Today, no player has double-digit share -in the U.S. or anywhere else, according to Ryan.
Some numbers in Ryan’s speech:
Grainger has 1.8 million customers in every state and province in North America. According to Ryan, no customer represents even 2% of the company’s total revenues. No single supplier represents more than 4% of total sales dollars. “Our diverse customer and supplier base allows us to spread risk across industries and geographies,” Ryan says.
In addition, the distributor had $1 billion in e-business sales, or 20% of total sales. It has added 1 million square feet to its branch footprint as part of its branch expansion program. This year’s catalog has 100,000 more items than in 2005.
Ryan says Grainger has “aggressively expanded” its sales force, with more sellers focusing on fewer accounts. The distributor has also added inside sellers, who serve medium-sized businesses.
Ryan’s speech and slides are available here.