Ready to Run

The future looks bright as Lawson Products Inc. nears the end of a major transformation in its sales approach, products, and infrastructure.

The outlines of the new Lawson Products Inc. are already clear, although customers will see it unveiled next year. The transformation of the Des Plaines, Ill.-based distributor began about four years ago and is changing its product offerings, sales strategy, infrastructure, and business processes, company leaders including CEO Tom Neri said during an Aug. 8 interview.

Lawson Products CEO Tom Neri (Lawson Products Inc. photo)The most thorough customer research done in the company's history preceded the transformation and caused Lawson Products to broaden its product offerings, said Neri, who described the transition this way: "It involved changes in our pricing strategy. It evolved out of us doing some comparisons to our competitors, doing some market research, and doing a lot of customer research. It involved talking about what we had to do to position ourselves better in the marketplace and how we related to what the strengths of Lawson were over the years, where the market had changed, and what we had to do to change with it."

Christian Wiltrout, vice president of product management and marketing, was heavily involved in Lawson Products' launch of a safety products line last year. He said offering a broader array of products was done "to be more meaningful to our customers, to become more of a one-stop shop, [and] for us to create more loyal customer relationships and meet our customers' needs. Specifically, with safety, our customers were asking us to provide them safety products.

"Our customers were coming to us, and so what we created was a very focused offering of safety products that really consists of exactly what our customers told us they need, nothing more and nothing less. At the same time, we have access through our supplier partners to a very broad offering, an extensive offering of other safety products if the need arises," Wiltrout added.

Not surprisingly, PPE was the customers' greatest need. Wiltrout said sales of the safety product line have grown significantly, with particularly strong growth in commercial business, in government, and in strategic accounts, which the company defines as large accounts with multiple locations and more than $100,000 in annual spend with Lawson Products. (On July 28, Lawson Products reported its second quarter 2011 sales rose by 4.8 percent, to $84.2 million, from a year earlier. The company operates in North America, Puerto Rico, and Guam, with a small presence in Mexico.) As a result of this focus on the largest customers, Schlumberger and United Rentals have become the largest accounts for the company; their spend with Lawson Products is growing, and safety products are the largest category Lawson Products is providing to them, said Neri.

"What we've learned in the last couple of years is that we can compete for those customers," Wiltrout said, adding that the Lawson Products sales force and engineers in the home office provide essential support for these customers with multiple locations – United Rentals has more than 550 rental locations -- each with its own problems and needs. He said the company's experience at saving money for small customers helps it serve the large ones well.

Lawson Products has adopted a hunter/farmer sales model for the large accounts. Writing recently in Industrial Distribution magazine, company COO Harry Dochelli described it as a powerful strategy for distributors targeting large enterprise accounts.

"The value we provide them is heavily tied to the technical support we provide to our customers," Wiltrout said. "We may not be as deep in specific subcategories. So we may not have 10 different colors of the same ear plug, for example. While we reflect the overall market for safety products, we may not be as deep, but we do have access to other products. Our catalog section might be a little bit thinner than some of our competitors."

Neri said the company did a similar launch two years earlier for a new tool line. A line of green maintenance products -- including lubricants, cleaners, and low-VOC coatings -- was launched more than five years ago and has been expanded during the past two years.

The green products line started with Lawson Products' industrial chemicals and cleaning chemicals. Wiltrout said Third Power, a proprietary product, is safer for end users and better for the environment because of its chemical makeup and because it is concentrated, so less fuel is consumed in shipping it to customers.

"It's an important foundation for us because it increases safety for workers. It also ties into the segmentation we were talking about," he said. "The large segments that we've been working on and trying to build in the past several years are really beginning to grow now. And one of the segments is the government segment, primarily the military. The green products fit in very well with the military. I think you can imagine, with any government activity, you really need to be up to speed with any type of green chemicals."

He said customers made it clear that they need a full line of green chemicals, not just a smattering.

'Everything is Now Integrated'
"One of our hallmarks has always been the expertise of our field agents, our field sales force," Neri said. "We had a very broad offering of tools, very high end to low end. What the customers were really looking for was something that really just met their needs." Previously, the company simply took its products to market, but management began rethinking that approach about four years ago, he said.

"We're trying to match product offering to what customers said they really wanted. We started with some of the fasteners, we started with some of the tools. But the most significant launch was this [safety] category because we really didn't have much of an offering in the past," Neri explained. "We're really beginning to segment our end market and our customers, and we're beginning to target our products to those segments, as well."

In addition to supplying the products, Lawson Products is training its sales force to become much more technically oriented in these product categories. "What we're finding out is that's becoming the differentiator for us, both the products that are being offered and the expertise being supplied," Neri said.

They have stratified the customer base into accounts under $5,000, those between $10,000 and $100,000, and then accounts over $100,000, with a different sales approach for each level. The sales transformation includes offering more sales channels, relaunching an e-commerce offering next year, and investing heavily in a new call center.

"The timeline is moving along quickly now," Neri said. "One of the most significant aspects was this ERP system. You hate to say technology drives your business, and I don't believe it does. I think technology can leverage our business. We really didn't have the types of information, the types of efficiencies of system, to help drive the things we were looking at doing."

Currently, almost all of Lawson Products' government business consists of providing hardware for U.S. Army bases' motor vehicles. A lot of that business was somewhat cyclical because it was tied to deployments, said Neri. While there will be increasing pressure on federal government spending, he said management believes there is an opportunity to expand beyond the bases currently served and into other military branches, and in addition to supply different types of products to the military.

Lawson Products implemented an SAP ERP software solution in early August 2011 on which it is spending more than $25 million, Neri said. With it will come some unique sales tools that will dramatically improve Lawson Products' service, he predicted.

The company had been using what he described as handmade, internal legacy systems and manual processes since carrying out a failed ERP installation in 1999. Among the problems this caused was having no insight into the inventories inside its distribution centers, each of which was run and managed as a stand-alone profit center, he said. So while the DC in Reno might be short of some products, the warehouse in Chicago might be overstocked with them.

"This made it very difficult to supply as a national distributor. SAP really begins to solve all of those issues," said Neri. "Everything is now integrated, from the demand planning to the purchasing from vendors to the inventory system. So we can make on-the-fly adjustments in where we want inventory, and also the pricing of inventory. Where in the past it might take us 30 to 60 days just to put a price increase in, now we'll be able to do that within one or two days. It changes the entire way of how we’re going to support the marketplace." For example, once the ERP solution is fully implemented, when a sales agent places an order, the customer will know right then whether the inventory is actually available in the company's warehouses, from where it will be shipped, and what it will cost.

The company's old model really catered to plant inventory (VMI). "We need to get to same day/next day delivery. The next evolution in our supply chain is to get to that same day/next day delivery. That's something I think we can fix in the next six to 10 months. It's not an easy problem, but it's a problem we can solve," Neri said.

He said the ERP technology is wonderful and expensive, but it's simply the tool for leveraging what has consistently been the key advantage for Lawson Products: sales force technical expertise.

"We're all sort of anxious to get through all of this -- the ERP, the network optimization," said Neri. He said the company's mantra for several years has been focus on the customer. The new mantra is we want to become the customer's first choice for MRO products.

"I'm very optimistic despite the economic downturn and some of the issues we have," he said. "We have a really good team that's been put in place the last three years. A lot of these folks have come from very good distribution companies outside of MRO. We have an optimism and an aggressiveness that I think is going to begin to pay dividends very soon."

This article originally appeared in the November 2011 issue of Occupational Health & Safety.

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