Spiraling sales
McLeod Belting Co. reinvented itself as a distributor of high-tech belting products, and sales continue to climb as a result
By John R. Johnson -- Industrial Distribution, 9/1/1999
Loyd Rich's genuine leather business cards are a throwback to the days when McLeod Belting Co. was primarily a leather fabricator and distributorship.However, the black cards -- still custom made at McLeod Belting's headquarters in Greensboro, N.C., at a cost of 30 cents apiece -- are the company's only remaining connection to the days when flat leather belts were used to drive most machinery and were the bread and butter of what was then McLeod Leather and Belting Co.
Things have changed drastically since then but Rich, the company's president since 1983, says the cards provide one last link to what once was. McLeod Belting Co. began to transition out of the leather business more than a decade ago, and today makes a living in the high-tech world of lightweight belting products. Five years ago another link to the past disappeared when Rich dropped the word "leather" from the company name to more accurately represent its current business.
The company's shift from leather products began in earnest in 1976, when McLeod bought a local leather competitor "to give us another five-year run in leather while providing a cushion" as McLeod revamped its core business, says Rich, who has been associated with the firm for 35 years. "We've stayed in business by being able to change, and we were lucky there was never any resistance to change from our board. If we hadn't done it ... well, there's just no leather business left now."
"It was very fortunate that somebody had the great foresight to see the transition needed to be made, and that we needed to diversify and that the textile industry wasn't going to be the future," says Stan Ward, McLeod's 41-year-old treasurer who has been involved in the business in different roles for 18 years.
Interestingly, McLeod's parent company is Page Belting Co., a leather manufacturer based in Concord, N.H. But McLeod has discovered a niche in the competitive -- but profitable -- lightweight belting segment. The product now makes up about 70 percent of the company's sales. Even during its transition years, McLeod Belting has never had an unprofitable year.
McLeod, celebrating its 80th anniversary this year, has clearly re-invented itself and emerged as a survivor in a Greensboro community that has also seen dramatic changes in its economic base. The firm had sales of $6 million in 1998, and finished the first half of 1999 16 percent ahead of 1998's revenue rate, mostly due to gains from new products. McLeod employs 35 people, including those who work at a small branch it runs in Richmond, Va.
"Our strong suit is value added. Any time you make a belt endless or put on cleats or guides or do some kind of splicing, you add value to those belts," says Rich. "Normally with lightweight belting that's where your margins are, because everybody has the same product. If you just sell it by the roll it's one thing, but if you're able to fabricate it and take all the special orders it's kind of unique and you're filling a niche. Being a small independent you have to have a niche market, because you can't go out and compete with the giants in the industry."
A long history of success
The method of success used at McLeod is a simple one that dates back to its founding in 1919 -- it revolves around product expertise and quality service. While the company has changed over the years, its commitment to those traits has not.
McLeod has three shifts of personnel available on an emergency basis 24 hours a day to service customers with belting emergencies. And unlike many of its competitors who also dabble in rubber products and hose and accessories, McLeod's focus is strictly on belting.
"Most of our business is custom," says Rich. "We're really a job shop. Every order is different, although we do get repeat orders. But of all the orders we get today, no two will be the same."
"They definitely know belting," says John Glassford, executive vice president at Habasit Belting, Inc., one of McLeod's major suppliers. "We have a very positive relationship with them. I've [gotten] to know some of the principals quite well, and they are just an extremely knowledgeable group."
That could be considered an understatement. Take for example, the McLeod salesperson who saw a belting application being used in another industry and realized his firm could alter the belt and use it in some of the industries McLeod caters to -- mostly printing, tobacco, pharmaceuticals, woodworking, and food processing. That salesperson's trained eye for belting -- along with the fabricating staff's expertise -- resulted in McLeod's adoption of a new product called Spiral-Link.
The product has caught on at some of the major tobacco companies, which are still a key influence in the Carolinas despite the regulatory and legal concerns their industry faces. The belting product, which is also used by the forest products and non-woven industries, is more durable, has excellent tolerance for temperature changes, and low adhesion, which eliminates creasing. Most importantly, a 72-inch wide roll can be spliced seamlessly in 30 minutes or so. There is no vulcanizing involved; the spiral belt simply meshes together to form an endless belt, helping in the arduous task of moving raw tobacco prior to processing.
On the market for close to five years now, the new belting line already makes up nearly 25 percent of McLeod Belting's sales. As the firm's sales staff finds more customers with applications for the expensive, high-tech belt, that figure is sure to grow.
Take for example, the potential at R.J. Reynolds. The tobacco giant is still testing Spiral-Link belting, as it has been for almost 18 months. That McLeod officials were even able to get a new product in the door at the traditionally stodgy plant represents a victory in itself.
"Old habits die hard, particularly in the tobacco business," says Rick Larrimore, warehouse and procurement manager for central supply at R.J. Reynolds. "People are typically afraid to make changes, so it's a plus in the fact that this even has their attention. We are taking a look at it, and it's the first new thing to come along here in a few years that has got anybody excited. We've been looking at it for about 18 months. Our testing procedure is a long ordeal. Before they'll make a change, they want to be darn sure it's going to be a positive in their direction."
The Spiral Link product is unique in that it is a non-woven belting product. In strength, it's comparable to woven products, and it maintains excellent wear resistance and a wide permeability range, making it ideal for numerous applications.
"McLeod is coating it, which makes it extremely advantageous when it comes to seams," says Richard Smith, a product designer for Wangner Systems, which manufactures the spiral product. "This is put together with connections that can be made in 15 minutes, as opposed to one that needs to be vulcanized and could take up to eight hours. Reduced downtime has been a big selling advantage in using this particular product."
Innovative services like that are what Marie Jordan, maintenance purchasing clerk at Candle Corp. of America, likes most about McLeod Belting. Jordan primarily uses the firm's products to move completed candles along assembly lines during three round-the-clock production shifts. "We have all different types of candles, and for each candle we need a different type of belting for that line," she says. "We have to have different types of [belting] for the different temperatures that run through our heat tunnels. If it's not working right, they'll find something else they think would carry the candles better. If something's not exactly right, they'll make it right."
Miles of belting
McLeod stocks more than 250 types of belting in its warehouse, valued at close to $1.5 million. With close to 4,000 "active" accounts, product requests vary greatly. However, McLeod needs to have the stock on hand, even for those customers that may order a piece of belting only once every 18 months.
"We're kind of different from most belting houses in that we just carry conveyor belting," says Rich. "Margins get very close on some of the other products. We decided to put all of our expertise into filling the niche in the lightweight belting market. We have so many styles here that it can be difficult to keep track."
To help on that end, McLeod has a computerized inventory system, and Rich anticipates implementing a bar coding system sometime next year to keep track of everything from small remnant pieces of belting to the largest rolls of belting. The firm has used EDI to communicate with its suppliers and some customers for almost 10 years, and last year became Y2K compliant.
The company takes good care of its inventory, too -- even the small pieces that get cut off during the fabrication, or product testing, processes. At McLeod, the saying that one person's trash is another's treasure speaks volumes. For in that trash lies lots of profits. Every roll of excess belting is rolled onto a cylinder and stored in a special area of the warehouse. When orders come in for small lots, the staff looks there first.
"We're always looking for uses for the remnants," says Rich. "I think a lot of that comes from our old business in leather. When you cut leather, you're getting smaller and smaller pieces, and sometimes that's where your profit is."
McLeod Belting has found some odd uses for its remnants. Small pieces from one particular kind of belting are sold to a pool table manufacturer who uses them to pad the tables' pockets. And a manufacturer of trash cans began using so many of McLeod's "remnants" that they are now a regular special order item.
"That's really where the profit is," says Ward. "Our remnants have dwindled quite a bit with our new inventory system. Before, our remnants were stacked to the ceiling, but now, since we know what we have, we use that first before we order new belt."
The inventory system has also helped with customers like Larrimore, who is adhering to strict inventory requirements at R.J. Reynolds.
"We run a lot of stock belts that McLeod makes to length for us," says Larrimore. "Normally, we might have five or six, but if we get a run on them and get down to zero, notoriously they'll slide it right up in front and we get it the next day. Or we leave a message and they show up right away. We feel we've paid for that [service] and built up a relationship so that they'll do anything they can to pull our bacon out of the fire. Our goal here is to keep a minimal amount of inventory on hand to keep our investment down as low as possible. We just know we can depend on these folks to get us out of a jam."
COMPANY SNAPSHOT
McLeod Belting Co., Inc.
President: Loyd Rich
Headquarters: Greensboro, N.C.
Branches: 1 (Richmond, Va.)
Founded: 1919
Employees: 35
1998 Sales: $6 million
Web site: www.mcleodbelt.com
Customers aplenty
It's always been considered a gamble to put all of your eggs into one basket. That's not a problem at McLeod Belting Co. In a day and age when many distributors are paring down client lists and "firing" unprofitable customers, this $6 million industrial belting distributor counts 4,000-plus customers as active accounts.
McLeod's customer list is as varied as it gets. Its top customer, Stockhausen, Inc., represents just five percent of sales, and its 25 biggest customers equal just one-third of sales. For an industrial company, McLeod Belting is about as recession proof as you can get.
As company president Loyd Rich says, anyone with a need to move product is a potential customer. And, Stan Ward, McLeod Belting's treasurer whose father, Bill, works in outside sales, loves to see such customer diversity.
"We are almost recession proof," says Ward. "If furniture is down and appliances are down, there are usually still people printing and making pharmaceuticals and cigarettes. One industry might see some down time, but we have such a diverse customer base that we don't feel a real economic crunch. With the addition of the Spiral-Link belting we think our customer base will become even more diverse over the next couple years. So we think there's a very good future on the horizon."
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