brands in each of those markets. We’ve worked hard on creating that right mix.
MDM: That sounds challenging.
CC: It is challenging. It’s a unique opportunity. It’s one of the reasons that we’ve brought our international businesses together under one roof. And it’s also a critical reason why we created D.G.’s global supply chain role. Because, we need to really have leverage and scale and a global view not only on the customer-facing side or the business unit side but also on the procurement and supply chain side.
We have worked very hard to ensure that complexity never comes through for the customer. Whether it’s in Canada, Shanghai, China, or in Monterrey, Mexico, we want them to have the best local experience that brings together a mix of the right local suppliers for that market but also the leverage of being one of the largest players in the industrial distribution space.
MDM: Could you provide an update on where Grainger is in boosting profitability and efficiencies in the Acklands-Grainger business?
CC: On a local currency basis, this was a C$640 million business (in 2006). We finished up in 2008 at over C$770 million. We’ve seen significant growth over those 24 months. In 2006 we had an operating margin of 2.7 percent. And we finished in 2008 with an operating margin in excess of 7 percent. We’ve expanded our supply chain capacity dramatically. And we have significantly enhanced our fill rate. We’ve had a lot of success improving service to customers.
We’ve enhanced and upgraded our branch network significantly, some expansions but a lot of enhancement, upgrading, remerchandising and improvement in the facilities.
We’re very pleased with the work that has transpired in the Acklands-Grainger unit over the past two years.
MDM: Could you expand on the improvements you have made to Acklands-Grainger’s supply chain capacity?
CC: As opposed to adding new facilities, what we’ve really focused on is increasing the square-footage of our existing facilities and optimizing the space. So we’ve been able to get more productivity from our existing assets.
That allowed us to drive a significant enhancement in our fill rate to customers, as well as allowing us to enable product expansion over the past 24 months.
That product expansion at Acklands-Grainger has not been as aggressive as the tens of thousands of items that Grainger in the U.S. adds every year. This year (at Acklands) it was 13,000 to 14,000 new items. The product line expansion in Canada has allowed us to improve service and also to drive incremental growth.
MDM: What are your goals for China?
CC: I’m still new into the role and still very much in the assessment phase of our business in China. I’m very pleased with the leadership team that we have in place in that market. I think they’ve made terrific strides.
We’ve built a very solid foundation for growth. We’ve actually had significant success with both local and multinational customers in growing the business. The next thing for me is to really assess what the long-term strategy is for that market, in terms of both profitability and growth, and then what that would require from an investment standpoint.
One of the important things in China is that it is a very unique market. It needs to have a local approach. It needs to have a unique approach. And at the same time, we’ll have to make sure that we’re taking advantage of our leverage on a global scale.
MDM: How does the Mexican market look right now?
CC: Mexico interestingly enough looks a lot like the Canadian market. The market is slightly smaller than the Canadian marketplace but still a sizeable multibillion-dollar opportunity. The market is highly fragmented, similar to Canada. And we have a fantastic team in that market that’s done a great job aggressively growing our business, particularly over the past several years.
We’ve been focused on building infrastructure in that market. In 2005, we had six branches in Mexico. We have 22 branches there in 2009. We will open in the second quarter a new distribution center and country head office in Monterrey, Mexico, that is an absolute state-of-the-art facility. It will be one of the first LEED-certified distribution centers in Mexico if not the first. We’re really pleased with that building and what that will allow us to do in terms of product line expansion and service to our customers. We think we’re in a great position to continue to grow aggressively in that marketplace.
MDM: How are you leveraging your Web site capabilities in these other countries?
CC: We have e-business teams in those markets. Mexico and Canada have similar capabilities to the U.S. Web site in terms of customers ordering through those channels and all of the tools around search and product information and workflow and buyer approval authorization.
In China, we do not yet have a transactional Web site. And that’s less about the technology and more about the nuances and uniqueness in that market around issues such as payment, how that market functions and how customers like to buy. It’s something we’re certainly exploring in China.
The e-business groups in each market work very closely together, from a best practice and marketing standpoint but also from a technology standpoint. That’s an area where we have good leverage today and there are opportunities to get even more leverage going forward.
MDM: You were 34 when you were named president of Acklands-Grainger. How should companies approach the retention and recruitment of younger talent such as yourself?
CC: In the distribution business, as in any business or anything in life, success is all about the people on the team. Whether it’s sports, a community organization, or a business, you’re going to be successful if you’ve got the best folks, you take great care of them and you support their success. That’s a point that transcends age.
How do you attract the best people to your organization, engage them, grow them and make them passionate about your business? It’s really about creating an environment where the best people can thrive.
We talk about being the best place for the best people. It’s one of our key themes in the Canadian business. And that really comes down to how good their leader is. People’s job satisfaction and engagement level are most closely tied to their relationship with their immediate supervisor, and so we spend a lot of time and training around making sure that those managers are set up for success. We hold them accountable for developing our next generation of leaders.
We ensure that there are learning and development opportunities for our best folks. And I’m a big believer in simple recognition and praise and making sure you let people know how much they’re appreciated and how much they’re valued. These are all really simple, common sense, apple-pie types of things. But that’s because they really work.
One of my key roles in this international position is to make sure that we’re doing that on a global basis. Jim Ryan, our CEO, has tasked me with making sure that we’re sharing that talent globally.
It makes the company even better because it helps us import and share best practices from around the world and ensure diversity of thought in our business. It is the thing I am most passionate about. Grainger continues to strengthen its global operations; recently it tapped Acklands-Grainger President Court Carruthers to a newly created post, president of international businesses. As part of that, Grainger also recently named D.G. Macpherson to oversee Grainger’s global supply chain operations.
In this interview with MDM, Carruthers talks about Grainger’s plans globally, business improvements at Acklands-Grainger, and how the distributor views talent recruitment and retention. Carruthers has been with Grainger in Canada since the summer of 2002. He has been the president of Acklands-Grainger there since the end of 2006.
MDM: Why did Grainger put this position in place? What are your goals in this new role?
Court Carruthers: By putting the major international operating businesses under one umbrella, it gives us a fantastic chance to leverage best practices, to further leverage our global supply chain capabilities and also to create a platform for talent-sharing and development on a global scale.
At the same time, we believe that in both China and Mexico we have a strong foundation for growth. One of the benefits of this role is that it allows us to increase our focus in those markets, and we think that will take us to the next level of success.
MDM: Grainger also does business in India as well, correct?
CC: We have a joint venture in India, as well as Japan and Korea. We also opened in Panama in mid-2008. But my focus is really on the core Grainger-branded operating businesses: Canada, China and Mexico.
MDM: How are you approaching the new position? The markets in China and Mexico are very different from the Canadian market.
CC: I’m new to the role and so I really spent the first few weeks learning the business in those markets and getting to know the folks on those teams. I definitely have a good foundation to build on. We have very strong teams in both Mexico and China.
Over the past several weeks, what I’ve been doing is getting to understand the differences in the local markets. I think what’s important is that, at the end of the day, there are differences in every local market in industrial distribution. We want to make sure we’re aware of those, that we cater to those, and that we’re successful in serving the local needs in all of the markets in which we operate.
I am focusing on making sure we’re meeting those local requirements but at the same time leveraging the best elements of Grainger on a global basis.
MDM: How do you want to leverage your supply chain and the tools you already have in place to create better service for your global customers?
CC: An important part of that was creating a global supply chain role for D.G. Macpherson. This includes our global sourcing operations, as well as our supplier-partner relationships. My role and D.G.’s role go hand-in-hand in terms of really making sure we’ve got the right organizational structure to leverage that global opportunity.
MDM: Grainger has expanded its product catalog significantly over the past few years in the U.S. How is Grainger approaching this task in its international businesses?
CC: We’ve historically worked together very closely in terms of leveraging certain products on a cross-border basis. It’s not just leveraging U.S. products into the other markets.
Our U.S. business has expanded into some new product areas – such as fasteners – that Canada has been involved in for a long time; it’s actually been a two-way relationship in terms of leveraging products on both sides of the border. The Mexico business also has a strong tie-in to our U.S. supply chain.
We make sure that we’ve got the right mix of global and national brands but also that we’ve got the right local