Dual focus
Midwest Industrial Tools places equal emphasis on selling machine tools and MROP supplies
By Susan L. P. Srikonda -- Industrial Distribution, 4/1/1999
Midwest Industrial Tools, Inc. has built its business on selling machine tools and maintenance, repair, operation, and production supplies. Though this dual focus is not new for the 30-year-old company, its importance grows each day as distributors strive to differentiate themselves from their competitors.MIT is a full-service distributor that, in addition to MROP supplies, offers computer numerical controlled and conventional machine tools, turnkey machine tool systems, industrial engineering and consulting, and integrated supply services.
Allan W. Chartier, MIT's president and chief executive officer, bought the business in 1982 and has since directed its steady growth from a $4 million company with 17 employees to its current size of $40 million in annual revenues and 75 employees. Chartier has served as both president of the Industrial Distribution Assn. (1994) and chairman of the American Machine Tool Distributors Assn. (1998), which exemplifies his equal commitment to both the MROP and machine tool industries.
Dual sales approach
There is a real synergy between MIT's machine tool and MROP businesses, says Chartier, because the product categories complement one another.
"Most machine tool distributors probably don't call on the smaller accounts," Chartier says, "but because we sell MROP, we call on them every week. So when they're ready to buy capital equipment, we already have a presence. And vice versa, our machine tool sales enhance the sale of MROP -- they pull each other along."
The Eaton Corp. in Shenandoah, Iowa, buys both types of products from MIT. The heavy-duty truck transmission manufacturer began buying hand tools from MIT over 10 years ago, and later became a machine tools customer. MIT's quick response time and ability to service its products are two of the primary reasons Eaton continues to buy from the company, says Caroll Duysen, manufacturing engineer.
"If I have a problem with a machine, I need and expect fast response time," says Duysen. "There was a time when we had a high speed grinder we were having problems with. We couldn't get the amount of pieces off the wheel that we'd estimated to start with. MIT had a technician down here for quite a while trying different methods of grinding, different coolants in the machine, and different processes until we got production where we needed it to be."
Selling machine tool and MROP products requires MIT to be flexible enough to roll with the idiosyncrasies of both product categories. For example, the selling cycle for MROP products is much shorter than the selling cycle for machine tools, which often runs one to two years.
"Creating a selling force that has the capability to deal with both of those selling cycles is a real challenge," Chartier says. "Motivation and organization are the major issues. Once you factor in the investment of time and effort, both in dollars and time -- and then maybe not get the project -- to keep your sales force motivated is a real challenge."
MIT faces that challenge with a team sales approach which recognizes the differing technical capabilities of its sales and application staff members, and the varying needs of each customer. All of MIT's salespeople go through certified machine tool sales engineer training and work together with MIT's applications engineers to provide customers with a full range of engineering and applications services.
Addressing the product and services needs of both MROP and machine tool customers places widely divergent demands on MIT's staff. However, those demands can be met with common underlying selling principles, says Jim Duggins, MIT's vice president and general manager of two MIT branches.
"One, you have to have a good product," Duggins says, "not only what you're selling, but also your company. And you have to understand the market that you're selling to. And the relationship with your customer is important: he has to trust you and you have to become, essentially, part of his business and I think that's true of selling both MROP and machine tools."
Person to person
MIT is committed to establishing strong relationships with employees, customers and suppliers alike. While business partners like Don O'Grady of SMW Systems, a machine tool accessory manufacturer, credit MIT's technical expertise, they are also quick to acknowledge the company's focus on relationships.
"I've found Al and his people to be extremely professional and really looking out for the end-user's best interest," says O'Grady. "They seem to be extremely concerned about keeping the customer happy after the sale. They want to make sure their customers are getting the full benefit of the product -- I find that unusual in today's marketplace where everyone is so eager to make the next sale. They're interested in building long-term partnerships with their customers, and their customers look at them as solutions people."
MIT's commitment to its customers is to provide a quality product and to back that product with the on-going service and support necessary to guarantee the customer is getting his money's worth.
"We deliver the machine and the services to utilize the machine to its utmost: to keep it in service, to make sure it's applied properly, and to make sure their staff is properly trained," says Duggins.
Okuma America Inc., a manufacturer of CNC turning, machining centers and grinders, depends on MIT's focus on Okuma products, its relationships with the end-users and its ability to service those customers.
"They're very focused toward our products," says Paul Simard, regional sales manager for Okuma. "The fact that we've worked with the same people there for a number of years is important because [their longevity] creates a better relationship between the OEM and the distributor, so the more successful we are in selling products. Obviously, the skill level of their employees also goes up the longer they're in the business and working with the products."
One example of MIT's propensity for going the extra mile is provided by Tri-V Tool & Mfg. Co., a builder of custom plastic injection molds, metal stamping dies, gauges and special equipment, headquartered in Omaha, Nebr.
"We've been doing business with MIT since we began in 1984," says Dave Vyhlidal, president of Tri-V. "When we first started business, we did not have the proper equipment to unload machines. They came to our facility and helped load equipment that we purchased from them as well as from other suppliers. Usually companies are not too willing to move other suppliers' equipment. This was very generous of them; one tends to remember those kinds of things."
Beyond the customer, MIT is equally committed to its relationships with its employees. In fact, Chartier says that is the secret behind his company's success.
"When most people analyze a company, what's missing on the balance sheet is the people assets," Chartier says. "That's been the success of our company: the people we have working for us. Nobody knows how to value that.
"One of the secrets to our success is our longevity. Our company will soon be 30 years old and about this time next year, there will be 12 of us that have been here longer than 25 years. It's a two-way street in management style. I never forget what our employees do for us, never underestimate their value, and hopefully they never forget what we do for them."
What the future holds
MIT is truly a family business. Every member of Chartier's immediate family is involved in the business: Chartier's wife, Lynda, is director of administration; Darin, the oldest son, is machine tools manager; daughter Jennifer is human resources manager; and Evan, the youngest son, is operations manager.
"My wife and I aren't planning to have any more children, but if we did they'd be involved," Chartier jokes.
There are many issues that will hold the Chartier family's attention in the coming years -- legislative product liability reform, the rate of machine tool consumption, the qualified labor shortage, and emerging automation technologies among them -- but none are as compelling as consolidation.
As with many family-owned distributorships, consolidation in the industry is often a topic of conversation for the family. The succession plan is, Chartier says, to keep the business in the family ... but he prefaces that with a caveat that is nearly unavoidable for today's industrial distributors. National and global competition presents a critical challenge for machine tool distributors, Chartier says, especially those like MIT that are located in remote markets where few customers have corporate headquarters.
"One of the challenges is the decisions companies like ours have to make on issues like 'Do you involve yourself in a large consortium and maybe have the opportunity to participate in that national or worldwide arena,' " Chartier says, "or 'do you stay small and independent and focus on the smaller market?' Where am I leaning? What day is this?
"Every day I have to think about it," he says. "We've been approached a number of times about merging or being purchased ... and to-date our answer has been that we'll stay independent. I don't know what's going to happen two weeks from now, much less two years from now. It's a continuing challenge."
COMPANY SNAPSHOT
Midwest Industrial Tools, Inc.
Headquarters: Omaha, Nebr.
Founded: 1969
President and CEO: Allan W. Chartier
1998 sales: $40 billion
Employees: 75
Territory: Idaho, Montana, Wyoming, Utah, Colorado, New Mexico, South Dakota, Nebraska, Iowa
Web address: www.midwestool.com
Consolidation begins in the machine tool industry
Machine tool distributors are waiting to see whether or not Ellison Machinery Co., Robert E. Morris Co. and Hartwig, Inc. started a trend when they merged in October. Consolidation is rapidly gaining momentum in other industry segments, but has been slow in the machine tool sector.
Lee Morris, chairman of the Robert E. Morris Co., says the merger was strategic in nature. "The Hartwig, Ellison and Morris businesses have strong histories and we felt that by pulling together we could create a whole that was greater than the separate parts that would be appealing to customers, suppliers and to our employees," he says.
The support of Okuma America Corp., a mill and lathe manufacturer based in Charlotte, N.C., which is represented by all three distributors, was a key factor in making the merger possible.
"If Okuma had objected to our merger activity, that would have discouraged us," Morris says. "But Okuma has seen an advantage in it and saw it as making their distribution stronger by consolidating our strengths and additive services."
The interdependent nature of the machine tool manufacturer/distributor relationship may serve to temper similar consolidation activity.
"I don't know if [similar consolidation efforts] would be acceptable to other machine tool builders because it really means putting your eggs in one very large basket," says John Hackenberg, president of J&H Machine Tools Inc. of Charlotte, N.C. "I think it would be difficult for a group of companies to get the blessing of all the builders they represent in aggregate. What made it feasible for the Ellison-Morris-Hartwig merger was the common Okuma thread."
Ralph Nappi, president of the American Machine Tool Distributors Assn., agrees. "The distributors in our industry represent a far smaller number of manufacturers and the relationship is very different. In many cases, the manufacturers they represent make up a large percentage of their business. The distributor's business is often very dependent on one manufacturer."
Several distributors looking to consolidate would need to have the tacit approval of the manufacturers they represent, Nappi says.
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