with Drago Supply. We also operate as Ruston Industrial and Voorhies Supply, and Lewis Supply. These are strong names in their markets and we don’t want to lose that.
MDM: How does integrated supply work into your overall strategy?
Stevens: We think that integrated supply has a lot of opportunity based on some recent successes we’ve had. What we have done is centralize the systems and administrative functions to support this business.
A central procurement group offers a capability to obtain product procurement expertise outside of our traditional products. As you know, you can’t justify redundant services and expense across multiple plants.
The approach to utilize our system capability to manage across many product areas provides us the tremendous efficiencies and a sound business model to support our customers. Integrated Supply is a business that we’re investing in with both people and systems based on market demand.
MDM: Do you breakout publicly the revenues that run through Integrated?
Stevens: No, but I will tell you right now our integrated businesses sales are key to our growth. It’s a business we’re going to nurture because it’s given us a lot of audiences that we wouldn’t have had otherwise. We’re trying to be flexible and provide the customer or the market what is needed. Drago will be opening a contractor’s store in Beaumont, Texas soon and that is also going to be interesting. We have the products in bulk so they can come in, get what they need, check out, and go.
MDM: What critical issues do distributors face going into 2009?
Stevens: I think the most significant issue is the unknown future of our economy and the challenges we face in meeting our objectives. Whether we’re a private or public company, distributors will need to address the common issues of how do we retain, compensate, and provide benefits to our workforce. Healthcare remains an overriding concern. I think all distributors want to do the right thing, but sometimes the challenges of the economy make that more difficult.In Part 2 of this interview with Motion Industries President and CEO Bill Stevens, he delves deeper into trends he is seeing in Motion’s core markets, as well as issues distributors face going into 2009.
MDM: What opportunities do you have in the current market?
Bill Stevens: The exciting thing to me is the MRO market in North America is still very large. As long as there are manufacturing plants, some of what we sell is needed and that is an encouraging thought. My greatest concern is the instability of our economy. Our customers are most definitely affected by the deepening economic downturn.
How many people thought companies like Lehman Brothers and others would go like they did as quickly as they did? I think we all thought they were pretty sound companies, and I think that’s shaking all of us. No one is immune from today’s economic reality. Hopefully we will see some stability soon.
I think we’re going to continue to see the manufacturing mergers that we’ve seen in the past as well as mergers and acquisitions across the entire supply chain. Certainly that’s where we think, via acquisition, that we have a great opportunity to grow.
In this economy, it will be important for Motion to continue building upon our strategic plan to develop new markets, capitalize on our technological lead, and develop new product lines. We have a strong foundation in place to serve our customer needs and we are adept at meeting those needs as they change.
In recent years, fluid power has become more of a focus. Fortunately, we’ve been in the hydraulic business for 30 years and the pneumatics business for about half that time. These are both continued growth businesses for us. We have hydraulics offerings through all of our Motion branches, so we’re able to serve those markets effectively. We operate 35 service centers in North America to provide fabrication, repair and hose assembly.
MDM: Why is this an important area for you?
Stevens: We see repair as a key part of being a distributor in our segment. We have a program called ART -Asset Repair and Tracking -and are able to track warranties and repair for our customers including all relevant warranty data for reclaiming warranty dollars.
These warranties are often a forgotten cost savings opportunity in many plant environments. Of course, we assist with repairs or work through a consortium of suppliers to handle non-Motion repairable assets. And we’re doing a lot of this work for our customers. We think owning our service centers will give us a strong position in the market to meet this growing need.
MDM: You mentioned that you have the recently acquired Drago Supply Company calling on the same customers as Motion. You already have the footprint out there in terms of your branch networks. I assume that you’re putting industrial supply salespeople into your branch network to leverage the infrastructure there.
Stevens: We have some account representatives in certain markets taking advantage of the opportunities to sell our complete offering. However, we have learned that if we are going to be as successful as we want to be in the industrial supplies category, we need to have people that own the responsibility.
We learned that we can’t grow a new product area just because we have it available in the market. The central point of our strategy is that the sales representative services the customer. We see just adding more products supported by product specialists as the answer.
But we’re not buying industrial supply companies to affect our core business. We want to nurture and grow these businesses as well. We toyed with different ideas in industrial supplies before we developed our acquisition strategy. We wanted it to have its own ownership, its own identity such as we have done