It was a year of continued economic malaise. If a month began with an upswing or apparent set of optimistic figures, it ended in the red, and vice versa. Hopes for an accelerating lift out of the doldrums were raised and then dashed many times.

In times like these, distributors look for ways to increase their market share, gross margin and net income. In a shrinking economy, they need to find other ways to survive. Innovation in purchasing processes, inventory methods, products, services, customer relationships and salesmanship becomes a key ingredient in the recipe not only for survival but for real growth.

Overall, distributors found that selling products is only one of the necessary skills in today's marketplace. Selling solutions to problems and offering comprehensive services like repairs are becoming just as important.

As ID interviewed distributors for stories that ran in 2002, we discussed some of the fresh plans and ideas they were putting into place in their businesses. Some of the more innovative ideas are worth a second look.

One innovative program begun by two distributors was born of frustration with the industry status quo. In our feature, Teaming up in the Midwest , from January's edition, we visited Fuchs Machinery ($20 million annual sales, 65 employees) and Midwest Industrial Tools ($35 million, 60 employees), both headquartered in Omaha, Neb. They have long been friendly but avid rivals in the machine tool business. The owners and their salespeople see each other at trade shows and industry meetings. They share several customers.

Tom Berger, president of Fuchs, and Allan Chartier, president and CEO of Midwest, began chatting about the marketplace at one meeting, and the idea of doing a marketing project together quickly took shape.

Both agreed that the name of the game was quickly becoming "networking." They saw that rivals in many businesses were creating alliances and partnerships to find ways to satisfy customers. As far as Berger and Chartier were concerned, the benefits of a joint marketing event far outweighed any potential problems.

So they established the first Manufacturing Technology Exposition. The event, held in October, 2001, reinforced the idea that if a machine tool was sold in the region, chances are the customer was getting brand comparisons, pricing and delivery from both companies. It was folly, they reasoned, to expect otherwise.

However, the other main consideration – wider attendance from a more diverse user group than current customers – needed to be addressed. To reach a bigger clientele, Chartier and Berger started a broad mailing and advertising campaign, using literature imprinted with each company's name. The distributors say that thorough planning and attention to details were the main reasons the exposition, now a semi-annual event, was a big success.

Manufacturing Technology Expo 2003 is in the works.

Jim Smith, of Nail Fast, Inc. ($2.5 million, 9 employees), is one of many small distributors that battle "big box" retailers for contractor supply business. In a May story about charging fees for unbundled services, Smith said that his business has many attributes that big boxes can't offer, and vice versa. Rather than trying to compete on a volume basis, Smith attracts the small – one to 10-person construction contractor – operations in his region by offering an a la carte menu of repair services along with the lowest possible price on tools.

Contractors can pick up their items for cash and pay less by not having a service contract. If the customer needs repair work at some future date, they pay cash for it. He built his repair business by making it cash-and-carry, as well.

"You begin by segmenting your customers for the best fit," Smith said. "Many customers won't repair tools at all because they think it isn't worth it. But others pay as they need service."

Smith created a repair price sheet by estimating as many of his costs to repair as he could. This was a labor-intensive process, but he is now able to more accurately price repairs.

Another small distributor chose not to get bigger, even as competitors around it grew. ID interviewed the owners of Robi Tool Sales ($5 million, 16 employees), in Somerville, Mass., for a March feature. Robi Tool is owned by a pair of brothers who have a succinct business philosophy: It's not how much you sell, it's how much you keep.

It is innovative to shun growth for growth's sake while the business world changes at mach speed. For over 30 years, Paul and Robert Robichaud resisted rapid growth as the others changed quickly.

The Big Dig is the huge Boston highway construction project just minutes away, but the Robichaud's don't try to do business with Big Dig contractors. They necessarily reduced the number of customers to keep those that are profitable.

Using lean business practices in all economic environments, and choosing the supplier partners and customers who understand the same principles, the company keeps a workable profit margin intact. Their small warehouse is packed with inventory and product literature, floor to ceiling, but new space is not a priority; keeping customers and suppliers is.

Explained Paul Robichaud: "I believe we've reached the point where we all have to realize that profit for all of us is the only way we're going to survive."

Like Robi Tool, another small Northeast distributor found that it can grow if it deliberately keeps itself small. However, this little distributor takes on big contracts in a way that few attempt. The theory that smaller can be bigger works for Albeco Fastener & Supply Corp. ($7 million, 10 employees) of West Newton, Mass., a distributor featured in our Fasteners Target Report in August.

The company has been in a dilemma, albeit a happy one, since it doubled its $1 million annual gross with one contract a few years ago. Fastener inventory takes up a lot of room and since Albeco is located in the same small space it's occupied since it was founded in 1951, some innovative thinking was needed.

According to president Fred Belcher, the cramped quarters, where tons of inventory are stacked in every available space, forced he and his brother, general manager Al Belcher, to focus on inventory and the number of lines Albeco carries. This problem created a mindset that big contract orders should be shipped direct. In some cases, Albeco has destroyed old inventory rather than go through the hassles of trying to return or auction it, Belcher said.

Fred doesn't consider a customer or contract too large, so the company's major accounts include the Massachusetts Highway Authority, Seabrook Nuclear Generating Station in Seabrook, N.H., and Boston's Big Dig and Logan International Airport. Belcher had to figure out shipping schedules, contact vendors about deliveries and, in some cases, make sure he could get a price that made the deal worthwhile.

Albeco's lack of a corporate superstructure eliminates red tape and allows the company's 10 employees to think on the fly. Sometimes, an order or delivery schedule has to change at a moment's notice, he said. Also, the Belchers are always on the lookout for a supplier that offers rebates and cash discounts.

The company's other innovation was to set up a network over the years of 14 small businesses like themselves to sub-contract items that Albeco does not include in its lines. It makes all the difference to a major contract if one supplier can fill all the items, Belcher said. His "specialists" can supply everything from paint to janitorial supplies. In this way, Albeco can fulfill the requirements of city and state government contracts.

Yet another innovative small distributor is Reynolds & Son, of Burlington Vt. ($7 million, 38 employees), whose approach to sales is the flip side to that of Robi Tool Sales. Its main territory is the state of Vermont, and no customer is too small, no business segment too marginal, to escape its sales effort. ID interviewed the company's principals for a feature in October.

Owners Bruce Seel and Ted Goulette are both specialists and generalists of necessity, said Goulette.

"It's because we don't have a huge amount of smokestacks … You have to think of everyone as your potential customer," Goulette said.

That being the case, the company sells to industries from ski resorts to granite quarries, making friends and customers throughout the state. For many years, the company relied on forestry, construction and the stone industries, including marble and slate, to grow its business.

Seel and Goulette realized that state and municipal governments, and utilities, offered business they hadn't gotten previously. To further its generalist presence, Reynolds & Son joined a marketing group and bought comprehensive computer distribution software. It is all meant to find products for customers as quickly as possible and at the best prices.

"Customers want you to be their eyes and ears," Goulette said, "…and find what they need. If you come through, they'll come back to you."

Looking around the busy warehouse, Lori Martin was taken somewhat aback. As the director of organizational development for Industrial Distribution Group, Inc., in Atlanta, Ga., she spent a day in the warehouse to see what transpired.

"Four rigs were waiting to be unloaded. Thirty more deliveries arrived in the morning and five trucks came in the afternoon," Martin said during a March interview about managing freight costs.

It was clear that inbound freight had become a morass, with each new arrival slowing all the rest in confusion. In any case, IDG moved to take control of inbound freight, reducing the number of carriers by creating partnerships.

Like the upfront work that Jim Smith of Nail Fast did to cost out his repairs, and the meetings that Fuchs Machinery and Midwest Industrial had to plan their exposition, the process undertaken by IDG was tedious and labor intensive in the beginning. However, IDG reduced the number of incoming freight carriers from 180 to 10 at its Atlanta facility.

Martin first set up criteria for doing carrier business electronically with IDG. Companies that couldn't comply were, unfortunately, dropped. The results were remarkable: freight cost as a percentage of sales dropped from 2.41 to 0.88 percent, invoices were reduced by 5,000 and the speed of information from vendors and carriers increased.

One distributor who claims to be in a state of constant innovation gets things done for its customers only one way: fast. In a July profile, Birds of a Feather , we noted that when someone orders a part from Brown Transmission & Bearings ($10 million, 26 employees), they can certainly have it their way, as the saying goes. The company has three fast-delivery plans and customers pick the one that best suits their needs. Brown's TNT Delivery System^™, meaning "Today, not tomorrow," includes its Early Bird Service, Night Owl Service and Roadrunner 24-hr. Express Service.

Early Bird Service delivers an order placed by 9 a.m. the same day. Night Owl Service delivers orders received by 6 p.m. the next day before 8 a.m. Roadrunner Service delivers packages within hours, day or night.

The key to offering such delivery services is not trying to do the deliveries with your own people driving vehicles, said president Thomas Kealey. After several years of trying to maintain a fleet of 10 trucks, Kealey hired a regional carrier to fulfill fast-delivery requests. The company continually looks for ways to deliver faster and less expensively, he said.

Like Albeco Fasteners, Brown Transmission is a small, specialized distributor that has broadened its product offerings over the years. Where others are reducing vendors, Kealey's team developed a regional distribution center model that, in part, helps reduce inventory duplication, with the focus always on fast delivery.

As one Brown Transmission customer said, "…They have the 'big guy' capabilities while keeping a hometown feeling."