Atlanta —When Industrial Distribution Group was formed as a roll-up corporation four years ago, the idea was to become one of the largest distributors in North America while retaining the positive characteristics and independence of smaller distributors. Unfortunately, the strategy didn't work as planned. The company has suffered from the lack of a common vision, and has failed, as a whole, to deliver for shareholders.

But IDG is on the mend and has a new plan to return the company to profitability, said CEO Andrew Shearer.

He spoke with INDUSTRIAL DISTRIBUTION in mid-December about his vision for the future and the important changes made during his first 100 days as CEO of ID's 19th largest distributorship. "It was clear that we needed to make specific, significant changes quickly," said Shearer. "We developed a 100-day plan and made short-term decisions to improve profitability."

The corporation had not shown a profit in the previous three quarters, losing $163,000 in the fourth quarter of 2000 followed by losses of $596,000 and $725,000 in the first and second quarters of 2001. Sixty days into Shearer's tenure as CEO, the company was notified that it was in danger of being delisted from the New York Stock Exchange.

Shearer said the company's plan to remain listed incorporated his changes and vision, including the proposed new structure of IDG. The NYSE accepted the company's plan and Shearer expects IDG to meet or exceed the objectives it laid out.

"We have consolidated corporate staff, managed working capital, paid down debts substantially and are increasing sales of our Flexible Procurement Solutions while improving general and administrative expenses," said Shearer. "We have all of the resources in place to be successful."

He said the plan was rolled out across the organization in November. Shearer noted that third-quarter results have improved. The company reported a loss of $116,000 during the period ending Sept 30, 2001. Sales are down approximately seven percent in an industry that is down from 10 to 15 percent, Shearer said. He expects IDG to be well positioned for substantial growth if economic conditions recover in the coming year.

Part of the restructuring plan involves the change in management structure and business units. The business units were reduced from 12 to six with the following management: Southern Division, Charlie Lingenfelter; Northeast Division, Mark Fuller; Midwest Division, Jeff Hayes; Northwest Division, Marty Burkland; Wichita Business Group, Dave Schreiner; and Cardinal Business Group, Steve Wherry. The primary management team includes the four division presidents, senior vice president and CFO Jack Healey and senior vice president Thomas W. Aldridge.

The other major feature of the restructuring plan involves expanding the Flexible Procurement Solutions program, said Shearer. FPS involves IDG's integrated supply business but it also involves streamlined procurement processes that bring cost reductions and offerings of software solutions and unbundled services, he said.

"FPS is focused on reducing customer costs," said Shearer. "It's not just integrated supply. It is more process than product related."

He said that while integrated supply is usually focused at the largest accounts, FPS offers solutions to mid-market customers as well. Integrated supply accounts are a source of strength and long-term relationships, however, adds Shearer. Although sales at many accounts are down by 10-30 percent, integrated supply business is up 19 percent over last year due to 30 new integrated supply sites. FPS sales are up seven percent, he said.

Shearer said one of the most important features of his vision for IDG is providing a common goal across the organization.

"We went through a very detailed strategic planning process," said Shearer. "The outcome of that process is a common vision for IDG. We have put the necessary resources in place to be successful in that plan."

He said IDG has several great strengths. Although the company is just four years old, many of the businesses that formed IDG had been in business for more than 50 years. In addition, Shearer said IDG retains many experienced associates, strong relationships with suppliers, and long-established relationships with customers.

"The other positive aspect is that we have a true competitive advantage as an organization," said Shearer. "This enables us to bring forth product and process improvements like FPS."

Another of IDG's advantages is its size and corporate resources, he said. The company's decentralized structure during the early years hindered that advantage.

"We never had the structure to be successful," said Shearer. "We were lacking leadership. I hope to instill that leadership in coordination with the management team."

IDG is using its corporate resources to closely monitor the profitability of its business through methods like activity based costing, said Shearer. He expects these efficiencies to increase as the organization adopts a common systems platform after last year's abandoned implementation of a JD Edwards ERP system.

"We have instilled the necessary fiscal disciplines within our business to evaluate accounts and make necessary decisions to improve the profitability of those accounts," said Shearer. "The contracts we are awarded are more profitable and improving. We understand the value we bring, are delivering on that value and are being compensated for that."

Shearer said managing change is one of the difficult challenges IDG will need to face. A major component of that change impacts IDG's associates. Reducing corporate staff in Atlanta by 20 percent and instituting a mandatory furlough program across the organization has had some impact on the associates, he said.

He said many of the associates have been frustrated that IDG wasn't successful as a company. Shearer noted the increased market share in integrated supply and FPS and expects that to continue and provide profitability when the economy recovers.

"One of our greatest challenges is that many of our associates have been part of traditional organizations that are resistant to change," said Shearer. "We will be driving change throughout the organization. I am confident we will be successful in that process."