The can-do supplier
Attracting and growing quality employees gives 60-year-old Sanders Tools & Supplies, Inc. the cutting edge
By Ken Brack -- Industrial Distribution, 12/1/1998
Caterpillar Inc. makes no excuses for flattening its supplier base from more than 4,000 firms to nearly 100. With plans to almost double its size to $30 billion by 2006, the heavy equipment manufacturer wants to slash costs and find top-notch distributors to supply its growing number of small and scattered parts-making plants.That's precisely why John Schultz believes Sanders Tools & Supplies, Inc., a cutting tools and abrasives distributor based in Peoria, Ill., will survive as Caterpillar's partner.
Schultz, a buyer of materials like cutting tools and fluids for Caterpillar, says one thing Sanders does extremely well is provide customer service.
"They've been so positive in the past, we believe they will be one we do business with in the future and will be within the 100" distributors Caterpillar retains, says Schultz. "I can't emphasize enough that you've got to have can-do suppliers working with you, otherwise you can't make anything go. There's a lot of companies, even the little bitsy ones, that do not understand customer service."
Sanders' employees not only understand the concept, they exemplify it. For its growing reputation of providing technical assistance, inventory management and rapid delivery such as 24-hour emergency service, and for the benefits and incentives the company provides for its employees, ID selected Sanders as its 1999 Excellence in Distribution award winner in the over $20 million category. Customers and suppliers alike point to a team culture that is geared to learning the end users' business and saving them serious money.
Sanders president Hunt Taylor and other senior managers say the key to excellence rests with employees who, in "the Sanders culture," are expected to frequently upgrade their skills and receive monthly performance bonuses in an open-book management climate. While larger consolidators continue to muscle into the cutting and machine tools markets, Sanders holds a forte in specialty tooling, gauging and work holding applications by retaining talented people. Its 15 outside salesmen have an average 17 years of industry experience and six years with Sanders, for example, while 11 inside salespeople have more than 12 years of average industry experience.
"I get every distributor in the Chicago area calling on me and 99 percent of those come in here and say, 'Have you got anything for me?'" says Eric Overbey, purchasing manager at Tibor Machine Products, a production machining manufacturer with three plants in Illinois. "The difference between them and Sanders is, Sanders comes in and says, 'I've got a solution for you.'
"These people give a level of engineering service that's so detailed," he says. "Tibor Machine Products would just not be as competitive if we didn't have them as our supplier."
Applications acumen
The company was formed in 1938 by five partners that included Harold Taylor, Hunt Taylor's father, as a general mill supply house primarily serving the steel industry. During the 1960s Sanders began to move into specialty tools and Hunt Taylor continued that trend after joining the company in 1971 and becoming president in 1977. His brother, Kent Taylor, joined the firm 14 years ago and is a vice president. Hunt's stepson, Patrick, also works at the company.
Sales revenue last year totaled $31.2 million and the company expects to reach $35 million during the 1999 fiscal year, which ends next July, despite concerns about the health of agriculture, the construction and heavy equipment industries.
Taylor family members along with some Sanders employees also have ownership in a small tool and die shop in Peoria which manufacturers maintenance parts, fixturing and some gauging.
Customers say one of the key reasons the distributorship continues to grow is the applications know-how of both its inside and outside sales staff. Managers actively recruit industry veterans who help develop young talent.
"Our 15 (outside) salesmen know how to recommend speeds and feeds for today's high performance tools," says Hunt Taylor. "Our inside people can discuss tool applications as well as design and build gages."
Overbey says Sanders has helped cut expenses dramatically on every application they have worked on. Tibor Machine Products, a supplier for Deere & Co.'s Dubuque and Davenport Works, saved $20,000 when veteran salesman Ken Bidstrup helped devise a work holding system for four new CNC turning centers. Tibor was looking at long lead times and a complicated system to hold a family of parts.
"We wanted to have an effective way to handle all of the parts, with as little change over as possible," Overbey recalls. One morning Bidstrup, a Tibor tool engineer and others discussed the problem, and "by 10 a.m. he had the most effective work holding system we had ever had in our history," says Overbey. "They made a program work that otherwise wouldn't have by using their strengths."
"We helped ensure that it would keep them with Deere," says Bidstrup, who has 36 years of experience in machine shops, as a manager and salesman for cutting tool manufacturers and distributors.
Bidstrup says the solution devised for Tibor is typical of Sanders, which he joined in 1995 after both Taylors sought him out to be a mentor for younger salespeople. (Bidstrup also worked briefly for Sanders in the early 1970s).
"They're very aware of the right kind of people to go out there and hire," he says of Hunt and Kent. "If they see a need, they are not pennywise and pound foolish. The company is well structured but there's a lot of flexibility for these outside people to be creative."
At Ispat Inland Inc., an integrated steel manufacturer in East Chicago, Ind., Sanders is highly regarded for its technical help. Salespeople make weekly calls at the facility's machine shops to discuss specialty applications and recommend cost-effective solutions, says supply manager Cindy Hansen. After four years, Ispat makes about $500,000 in direct buys annually. Sanders also acts as a small integrator, coordinating EDI and purchasing for several other suppliers at Ispat.
Cutting inventory costs
Rapid delivery has become such a trademark for Sanders that within a year, Hunt Taylor expects the distributorship will be open 24 hours a day. That's because some large customers like Caterpillar, which accounts for 30 percent of Sanders' business, already runs some plants three shifts, seven days a week. Sanders delivers within three hours to some of those plants.
Sanders has provided JIT delivery and managed tool cribs at many Caterpillar plants since 1988. In the mid-90s it initiated 24-hour emergency service during a prolonged strike at the manufacturer's plants and provides the round-the-clock service on a limited basis for other customers.
Add all that up and "we consider them to be the can-do supplier of tooling for the company," says Schultz.
As Caterpillar adds more "focus facilities" or semi-autonomous, parts making plants in the Southeast and other regions, Schultz says it is looking for Sanders to expand beyond its Midwest base and service more remote locations. Taylor says Sanders will likely acquire other companies to do that. He expects to announce such moves early in 1999.
Another value customers cite is Sanders' work reducing inventory and procurement costs through its KanBan ticket-direct order entry systems and its consignment program. KanBan is a tool system management service customized from a system used by Kennametal in the early 90s. Products come with bar-coded ticketing cards, which are scanned into a computer to order more.
Danville Metal Stamping Co., which makes parts for the aerospace industry in Danville, Ill., has used the ticket system for about nine years. It eliminates time spent making out purchase orders and checking prices. Once a year Sanders sends out a disk listing its products and pricing, which purchasing agent Ruth Ann Brown says she easily matches up against a competitor's. The monthly billing is also seamless.
"There's no surprises," says Brown. "You've already done your competitive pricing."
To further streamline ordering and reduce inventory, Sanders invested in EDI software and made operational changes such as reorganizing the company into profit centers. Operations manager Susan Koehler, who is a director of the Chicago Prophet 21 Users Group, oversaw development of the computer systems including networks linking Sanders to large customers. Direct order entry with KanBan is a great alternative for smaller firms.
Last year the company was divided into profit centers, allocating and assigning costs for service and support. This allows managers to measure the firm's progress in reaching its true profitability.
Can-do culture
When he graduated from college with a degree in social sciences, Hunt Taylor didn't want to get into the distribution business. His father forced him to. But since then, Taylor and the company's other senior managers have made sure Sanders offers a work environment where people want to stay and grow. Customer service is paramount and employees get evaluated twice a year on their individual performance and their contribution to meeting corporate goals.
One of the evaluations is a self-review in which employees tell their manager what they've accomplished and what they expect to do for the rest of the year. Those reviews, initiated three years ago, "allow them to contribute to what they're doing rather than being told what to do," says Koehler, the operations manager. "It's interesting that good employees are self-critical of their ability, more so than managers."
Sanders' bonus package may be unique for the industry. Annual and monthly bonuses are awarded to all employees based on meeting the firm's financial goals. Each month, employees from receptionists to shipping clerks receive a percentage of sales commissions based on the budget -- and bonuses increase as sales beat the mark. "What we're trying to do is motivate our people to respect our customers," Hunt Taylor says. "How do I get them involved and making sure they get that order?"
The 50-year-old Taylor says it's working. "I think it's apparent in our low turnover. With a family-owned company the benefits are shared with the employees."
Kent Taylor, who is 38, agrees. He points out that Sanders' compensation is generous due to the level of sales per employee, which is much higher than most other I.D.A. members.
"We're glad to have that problem," he says. "If we didn't have great people we wouldn't have that profitability ... We both are of the opinion that you find the best people, you pay them well, and they're going to do great things for you."
From the Taylors on down, the firm's 55 employees are also required to continue their education -- usually with three classes a year -- whether at a local university, a manufacturer's product school or seminars. Sanders reimburses its staff 100 percent for tuition, although Koehler says that if someone receives a C, "we jump on you a bit."
Start the grill
The generous benefits Sanders provides at its Peoria and Itasca, Ill. facilities continue a tradition set by the firm's founders, who paid 100 percent of health premiums starting 60 years ago. The company switched to a self-insured plan this year, adding long-term disability coverage and employees for the first time now pay a small percentage of health insurance. Life insurance and a self-funded 401K are also provided -- with the firm matching 50 cents on the dollar for up to four percent of an employee's salary. Weekly barbecues are held Friday afternoons.
All this adds up to a team that customers say is committed to pitch in and solve their problems or correct any errors. It certainly helps manufacturer's too. Carboloy Inc.'s sales through Sanders grew by 27 percent in 1996-97 and were in double digits again earlier this year, distribution and sales program manager Paul Kieta says.
"They key in on their customers and value-add in everything they sell," says Ronald Stocking, national sales manager at Fansteel VR/Wesson, another manufacturer.
Hunt Taylor says the idea is empowering employees to make decisions and handle problems themselves.
"We don't dictate how to solve the problem," he says. "If management has to look over their shoulders all the time, they cannot accomplish all the goals they have to set for themselves."
COMPANY SNAPSHOT
Sanders Tools & Supplies, Inc.
President: Hunt Taylor
1998 Sales: $31.2 million
Founded: 1938
Headquarters: Peoria, Ill.
Locations: 2
Primary Products: Cutting tools, precision measuring instruments, abrasives.
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
