Industrial Distribution speaks with Industrial Distribution Group president and CEO Charles A. Lingenfelter as part of ID's Executive Q&A Series.
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Charles A. Lingenfelter |
ID: What is the most misunderstood aspect of your industry?
CL: The profitability of the independent industrial distributor. The typical member of Industrial Supply Association (ISA) has gross margins of approximately 24 percent and profit before taxes (PBT) of less than 1 percent. A high performing ISA member generates approximately 3 percent PBT. The improvement for the higher performing member is typically achieved by leveraging their business through better expense control and higher margins. Few customers and suppliers clearly understand the ISA financial model.
ID: When did you begin your career in this industry and in what capacity?
CL: I began my industrial career as a technical sales engineer for Ingersoll Rand’s Tool Group in 1973. In the early years of my career, we sold direct to the customer. After a few years we began to sell through industrial distributors. We quickly saw many advantages to selling through distribution. After 15 years with a manufacturer, I decided to try the distributor side of industrial sales and marketing. I quickly learned “The grass is not always greener.” With the tighter margins on the distributor side, there is little room for error.
ID: What would you consider to be the biggest changes you’ve seen the industry face throughout your career thus far?
CL: The biggest change is obviously the internet. It brings both pluses and minuses. Today, the customer has access to technical information, product availability, and global pricing at their fingertips. This has changed both the manufacturer and industrial distributor’s role and value proposition to both the customer and our suppliers. The larger distributors can best afford to take advantage of the opportunities as it takes significant capital for inventory and necessary technology.
ID: Why might you recommend the industry as a career choice for the younger generation?
CL: Despite all the changes in the U.S. manufacturing landscape over the past several years, industrial distribution remains an essential link to U.S. manufacturers. Our industry continues to provide ongoing career opportunities for entrepreneurial young people. Those that are willing to work “smart” and hard can establish a rewarding career.
ID: What is the best idea you’ve seen your team implement in the last year?
CL: We have had many good ideas, but for IDG it all began over five years ago when we chose to make our company “One Company” from a fragmented group of acquisitions. The “One Company” has allowed IDG to more efficiently and effectively serve our customers. Today we have one sales, marketing, and operations team that delivers a consistent and compelling value proposition to our customers and an excellent return for our shareholders.
