News

Modern Distribution Management, April 10, 2001

by Eric A. Holloway

MDM Apr 10, 2001 - When I left in the 1980s for Hamilton College, a small private liberal arts college located in upstate New York, I had no idea what career path I would take. Although I had worked in the warehouse of my father's industrial distributorship, Holloway Bros. Tools Inc., the option of working in the family business was not my first choice. As graduation neared, I contemplated many career alternatives but was drawn back to Holloway Tools.

While on summer breaks from school, I began to learn the products and the systems of the company. As I absorbed more of the business, I began enjoying the process. By graduation, I decided that the family business would afford me the independence to succeed or fail on my own merits. That characteristic of independence is inherent in distribution.

In addition, through the attendance of many conventions and vendor meetings with my father, I found the industry to be close-knit and friendly. When I announced my intentions to join the business, my father announced he would not hire me until I obtained another degree - this one in industrial distribution. I attended Texas A&M University under the tutelage of well-known professors such as Don Rice, Mike Workman, Tim Underhill, Steven Pearce and Katherine Durbin. The program gave me the opportunity to learn the technical aspects as well as the business and marketing aspects of how a distributorship operates.

I graduated from Texas A&M in 1989 and immediately assumed the purchasing position at Holloway Tools. I reflect upon those early days with fondness as I grappled with learning our Prophet 21 system as well as understanding each manufacturer's product line and associated terms and conditions.

With five years under my belt and an understanding of how to run the business, I bought the company from my father in 1994. Now, I had the opportunity to implement a new management style that involved more two-way communication and empowerment. Fortunately, I had a sales force with decades of experience to help guide me. Plus, as the economy improved so did our fortunes. In 1995, I acquired an air tool specialty firm and refocused the company towards that specialty, as the trend towards specialization seemed to be an industry trend worth following.

In the same year, we left the Evergreen Marketing Group and were instrumental in starting the Industrial Supply Division of Affiliated Distributors. This group became a mechanism for independent, privately held distributors to counter the growing trend towards large, publicly traded distributors who could bring clout to the buying and selling process. Looking back at the issues confronting us and every other independent distributor, it seemed as though we were always under siege from one trend or another. Issues ranged from large distributors opening branches in our market or mass mailing catalogs to our customers, to our customer base consolidating and looking to reduce vendors, to the move towards integrated supply. In every case, the predictions pointed to the demise of the independent distributorship.

Consolidation turned out to be the trend that lured me out of the business in 1998. In the four years I owned the business, we had strong growth and profitability and I was therefore reluctant to sell when MSC approached me about acquiring Holloway Tools.

Yet, after doing some research, I learned that MSC had an incredible fulfillment process with large inventory and regional distribution centers financed by public equity markets. I had always believed that technical services and local inventory would win, but I became concerned that technical service would be overwhelmed by the efficiencies and magnitude of offerings by large publicly held businesses, thereby impeding our ability to effectively compete as an independent. The integration of branches on one common platform gave MSC great advantage over independents that were banded together without a common back-end. With these thoughts in mind, I sold my business to MSC less than three months after they first made contact with me. MSC had decided to pursue the "planned-needs" arena, which had been the domain of the privately held independent distributor who had been doing system contracts for years.

The next 22 months were trying as I helped integrate our branch into the MSC network, while grappling with the future of my own career. I learned a tremendous amount over that period, especially the business dynamics of a large publicly held company. I also learned that the consolidation program that had resulted in the acquisition of my company was abandoned within six months of the sale due to a change in the valuations of the large distributors as well as the realization that independents provide many value-added services MSC was unwilling or unable to provide.

Realizing that the growth opportunities at MSC were limited, I began to explore the next major trend in both the distribution world and our overall economy - Internet commerce. In the spring of 2000, I joined a dot-com company that envisioned a marketplace where customers and distributors would gather to perform business. My role was to help develop a new model of commerce for the 21st century. But with the dot-com shakeout, the company's business model quickly changed toward providing content services. Fortunately, another focused opportunity beckoned.

During my tenure in the dot-com world, I had been soliciting Prophet 21 to join and have its customers connect to that company's marketplace. As my relationship and understanding of Prophet 21 grew, I became familiar with their Trading Partner Connect Internet trading network. The value proposition was simple and straightforward - a solution to connect distributors and suppliers who want to engage in e-commerce. I approached them about using my distribution experience to grow manufacturer interest in this up-and-coming Internet network. I was attracted to this offering as a real-world solution to streamline supply chain inefficiencies.

I cannot say where my travels in our industry will take me next. Having seen the industry from various viewpoints - owning a distributorship, working for a large, publicly traded catalog distributorship, participating in the dot-com rise and bust, and now finding a realistic e-commerce initiative to help forward distribution - I have come to the following conclusions:

• There will always be a place in the business for independent distributors who offer service and value to their customer base.
• The services offered by distributors are sometimes intangible, such as knowing how to navigate through a large corporation and help different departments interact. Many times this knowledge is taken for granted until the relationships change and do not work as smoothly as in the past.
• I once thought technology could replace the expertise and relationships distributors have developed. However, that conclusion does not hold true for distributors who are proactive and embrace technology to streamline their costs and increase productivity in the supply chain while still maintaining their customer relationships.
• Distributors who pay attention to the changes within their customer base and respond accordingly will always survive. Being proactive is the key.

In the past, I might have thought technology could replace the expertise and relationships distributors have developed. However, that conclusion does not hold true for distributors who are real survivors and plan on embracing technology to streamline their costs and increase productivity in the supply chain.

Back to Top