IBT @ 50
Despite intense competition, this 'hybrid' Midwest-Sun Belt distributor plans to stick around with a flexible approach and new competencies
By Ken Brack -- Industrial Distribution, 6/1/1999
AS IBT, INC. MARKS IT'S 50TH ANNIVERSARY this summer, the company has ample reasons to celebrate its success -- and be concerned about the future.The firm has been profitable every year of its existence and reached $123 million in sales during 1998. Started by Forrest and Bonnie Cloud in Kansas City, Mo. as the country's first distributorship to sell power transmission products and bearings out of the same store, IBT today has a solid presence in 10 Midwest and Sun Belt states, and plans to expand into new areas.
IBT focuses on providing value-added services and targets customers who appreciate that. An extended-family culture persists among more than 400 employees and the firm expects to continue its geographic growth by adding branches rather than making acquisitions. The company has also built a media division unique to the industry that develops presentation and training materials for customers as well as for internal use.
At the same time, IBT faces significant competitive threats. Industry giants Motion Industries and Applied Industrial Technologies are a growing presence. Pricing pressure is particularly intense in the power transmission industry, and second-generation owner and CEO Stephen Cloud says that market and other ones continue to tighten as many end users turn to national contracts or integrated supply deals in an attempt to obtain lower prices.
In some cases, IBT's own integrated supply initiatives are overshadowed by competitors who moved more quickly into that market. Only four percent of its revenue comes from integrated supply, but several recent contracts should boost that this year.
Cloud insists the future is bright for a "hybrid," regional distributor that stresses value-added activities. He and several customers say IBT's strengths include being flexible enough to meet the needs for single or multiple commodities at various plants. It is also big enough -- with $12 million of inventory at its central warehouse -- to meet customers' spot demands and support its 46 locations.
"We've had slowdowns before, we've had recessions before, we've had newcomers coming to town before," says Cloud. "In all cases the response has been, go out and make the same calls, go out and continue to provide value to our customers. We will make it another 50 years."
Despite the occasional purchase offers and persistent rumors that the company is up for sale, and so far, with no definite successor emerging among his three (young adult) children, Cloud says he and other family members will retain ownership. His brother, Forrest Cloud, plans to step down as chairman of the board of directors in September and Stephen Cloud will assume that post.
Staying profitable
Known for years as Industrial Bearings & Transmission, IBT began expanding beyond its traditional product lines more than a decade ago.
One key to its growth is an automation group that designs, sells and services conveyor systems and electrical drives. IBT has set out to be a world class fabricator of lightweight belt, for example, investing heavily in machinery such as a $100,000 high-tech slitter last year. The firm sells considerable lightweight conveyor to the food processing industry -- which remains its largest customer base -- and heavier belt to the road aggregate industry and others. In the past decade, IBT's engineering staff has grown to include designers of robotics systems, vision inspection equipment and automatic conveyor systems.
Other capabilities include a hose department where employees place fittings, do crimping and test hose pressure. Recently IBT has also focused on helping customers cut energy costs by offering variable speed motors and related equipment that reduces electricity consumption.
Bearings and power transmission components still make up 60 percent of the business but automation equipment and belting have become more profitable. The shift is driven by automation projects for customers, such as bottling plants, says Ron Aupperle, vice president of sales and marketing.
Cloud says IBT continues to find profitability in two areas: by selecting customers that will pay for services and by running "a tight ship."
"We've tried to pick and nourish relationships with customers who are willing to participate in a value-added concept that we offer, as opposed to a contract which six bearing houses bid and only the lowest gets," he says. Doing this avoids fighting margin battles constantly.
To trim expenses, Aupperle and Cloud say there is a continual focus on leveraging better supplier pricing, controlling inventory, and reducing errors. Cloud is reluctant to resort to layoffs in lean times but is quick to take other measures. When customers last fall were postponing projects such as large material handling jobs, for example, IBT held off on filling about 15 positions -- but no one lost their job.
"We took it case by case," Cloud recalls. "We saw it as more of a short term phenomenon and were optimistic that after '99 some projects would resume and indeed that's happened."
Flexible or vulnerable?
Despite its strategy, IBT's growth has been slowed by industry consolidators that appear to be zeroing in on the firm. Cloud acknowledges that the growth of Applied and Motion Industries in particular stunted IBT's "freewheeling expansion days" years ago.
But he says IBT has also gained business when firms like those failed to service smaller customers, and he claims IBT has stayed away from national contracts which turned out to be unprofitable for larger integrators. Increasingly, Cloud says he also hears mixed reviews about the performance of single-source integrators.
"We've seen some opportunities when they lose contact with customers" who may order "only $50,00 to $60,000" of products, says Cloud. "I think you can get too big in this industry."
"Smaller companies are trying to maintain the service levels they have, not leverage the buying power" of the big guys, adds Aupperle. "We're finding the smaller five- to ten-plant companies are looking for IBT to provide competitive pricing and service levels to keep the plant running."
Advantage: mid size
In some cases, being mid-sized and flexible creates an advantage. Frozen food maker Schwan's Sales Enterprises, which operates a manufacturing unit called SSE Manufacturing in Salina, Kans., recently picked IBT to handle bearings and power transmission products at its nine U.S. plants.
Steve Deaton, a category manager for MRO and capital, says IBT showed a flexible approach to address diverse inventory and information systems needs. It was selected from 10 distributors as the company decided to adopt a commodity-category management program rather than use integrated supply.
"We are asking for more from the suppliers than we have in the past in terms of helping us improve our processes," says Deaton. "We've decided to go with best of class and IBT will help us with bearings and PT."
Deaton says that while IBT will provide level pricing for those products, he expects long-term savings will come through continuous process improvements. "We will be relying heavily on their engineering and their expertise in running parts rooms," he says. SSE Manufacturing also intends for IBT to become involved earlier in the design of plant expansions or new equipment.
Another customer, Missouri-based American Italian Pasta Co., recently chose IBT to stock its plant in Columbia, S.C. in addition to one outside of Kansas City. Director of engineering Eric Johnson has worked with IBT for seven years and says the levels of service and inventory -- even for unusual Italian-made metric parts -- is unmatched. In March IBT began a consignment inventory program in Columbia which includes doing an inventory audit and implementing its computer system to order and track parts. The contract includes PT, bearings, belting and other equipment, and the pasta maker pays half the cost of one IBT employee who remains on site.
"It's an advantage for us -- we don't have to carry the inventory costs," says Johnson. "It's still early but we're all optimistic on it ... We were loyal to them because they performed for us."
Lead by example
It's mid-day in November of 1998 and Stephen Cloud is standing in the center of a conference room, hands in his pockets, addressing 13 or 14 outside salesmen. They are gathered for several hours of training with some Goodyear Tire & Rubber marketing representatives, a "spot session" which supplements the twice a year, two-week long training academies select salespeople attend.
Cloud asks how things are going and two salesman say activity is flat.
He inquires if the slowdown is primarily a result of the fall's stock market downturn. One man says it's partly due to that, while another salesman reports that some customers blame the "Asian flu" for declining business.
Despite the responses, Cloud does not skip a beat and he delivers a short pep talk about Goodyear's black heavy conveyor belt line. He cites the tradeoff in longer wear and less downtime customers like sand and gravel pit operators will experience with the line of black belt.
Cloud, who served in the Kansas Legislature as a state representative for six years in the 1980s, uses a politician's touch to instill and reinforce personalized service throughout his company. It is not a cynical, self-serving political style. Rather, Cloud leads by example. He appears completely at ease in his warehouse, talking fly fishing with one worker, kidding another who cut his ponytail. He calls employees to congratulate them on their anniversary date with the company. Each week he usually travels to a branch and helps make sales calls, visiting every one on average once every other year.
On those trips, Cloud hears employees' feedback on IBT's direction, receives timely tips, and he usually returns with several items to work on. Just as important, visiting customers gives him unfiltered views of IBT's performance and demonstrates commitment.
"I think it makes an impression when the president and owner goes out to them and helps solve their problems," he says.
Several employees say they expect, and hope, the business will remain in the Cloud family's hands.
"The fact that it's family owned means a lot to us," says branch manager Phil Pope. "We feel like we have some input into it. We're not just a number, we give input. It may not always be heeded, but it's listened to."
COMPANY SNAPSHOT
President: Stephen R. Cloud
Headquarters: Merriam, Kans.
Founded: 1949
Locations: 46
1998 Sales: $123 million
Primary products: Power transmission components, bearings, belting, automation systems, electrical drives, hose
Web address: www.ibtinc.com
Salesman Phil Pope: Build trust gradually
Phil Pope is a problem solver.
Formerly one of eight IBT outside salesman in the Kansas City area, Pope started with the firm 21 years ago. He sold shoes during college and worked as a metallurgist building aircraft engines for eight years after graduation. Until his recent promotion to branch manager, Pope's daily contacts were maintenance supervisors and plant engineers.
He says the key to IBT's approach has always been selling value-added and engineering solutions.
"We're not out there to sell products as much as to help them solve problems and become more productive, and become part of their team," he says. "We're not the cheapest out there and never will be."
He believes in building trust gradually, which means bringing in products that help with a production problem, such as a new automated control.
"You don't really want to get someone's business overnight, because it means if you do, another guy can do it," says Pope. "Sometimes you get frustrated because they call you with minor stuff that they could do, but you want them to rely on you."
While driving a company-owned Chevy Lumina to an American Italian Pasta Co. plant north of the city, a large account that he calls on two or three times a week, Pope says he tries to always bring something new -- on one day last fall it was a new keyless bushing. Once inside, Pope occasionally takes "problem" components apart. He helps prepare for a scheduled plant shutdown once a month, taking notes on conveyor belts that need repairs, for example. As part of its maintenance program, IBT installation specialists then go through the plant to repair or replace belts, which may damage equipment if the lacing becomes too tight. Re-lacing is done at the belt shop in IBT's warehouse.
Plant maintenance manager Russ Bouknight says IBT's 24-hour deliveries and face-to-face customer service by Pope are important. At times he has dealt with larger distributors that also made products easily available, but did not provide the same overall service.
"An industrial supplier can make or break you," he says. "We're in a business that demands an immediate response ... I know that whenever we need him, he comes over."
He calls other IBT workers "beltologists" and credits them for staying up on technologies that his maintenance crews cannot do. "They've solved some costly belt problems," he says.
Ken Mason, a plant engineering manager at CTB Grain Systems, which makes grain bins in Kansas City, agrees that Pope is handy finding solutions. One afternoon Mason showed him a worn out mechanical variable speed drive, which ran a conveyor line where corrugated roofs are made. He planned to replace it with an AC variable drive. By the next day, Pope designed a new drive and provided specifications for Mason.
"We'll call him down here and we'll tear something up and say, 'We have a problem,'" says Mason. "He'll take some measurements and get some data ... They do a good job."
IBT presents ... DVD
For two decades IBT Media Group has supplemented industrial sales by producing training videos and marketing materials for customers.
This spring the media division took presentations to a higher level. It now offers digital versatile disk, or DVD, technology which enables salespeople to prepare and show first-class marketing videos anywhere.
DVD players and DVD-ROM drives are already becoming popular in personal computers and for home entertainment. Using improved compression technology they store about six times more information than compact disks.
IBT invested in DVD equipment that encodes video in real time and then provides tools to import graphics and other media to produce a high-end program for training sessions, sales or shareholders meetings.
"Your sales force equipped with DVD laptops can present a marketing video anywhere," says Craig Campbell, manager of the media division. "A DVD video can play all day in your company's trade show display without your reps worrying about tape ends and lengthy rewinds."
IBT's system encodes video from established formats such as AVID, Beta SP or D-2. The technology allows DVD to play a full-screen, full-motion video with no loss in quality from the source.
IBT CEO Stephen Cloud says the media group boosts sales outside of the core business -- early this spring it did a DVD job for Sprint and finished a another for a Sutherlands Lumber trade show display. The division also opens doors with existing customers, he says.
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
