On the surface, Hayes Bolt & Supply, Inc., could pass for a typical independent industrial distributorship. With 17 employees, a single, 16,000-square-foot location, $3.5 million in sales and customers that range from OEMs to shipbuilders to aerospace manufacturers, this San Diego distributor of fasteners and electronic hardware looks like the average small-sized distributor in today's business environment.

Look below the surface, however, and you'll see that Hayes Bolt's operations are hardly average. In fact, the firm is built on sophisticated business principles introduced and implemented by company president Suzanne Dukes, who founded the company with partner Bill Hayes in 1976. After buying him out in 1984, Dukes brought concepts such as ISO 9001 2000, pay for performance programs and on-time inventory management systems into the fold.

For Dukes, using big business philosophies like ISO are key to being able to work on a level playing field with large customers like Northrop Grumman. "If we're going to mirror and match our customers, we have to be able to speak their language and work in their worlds," says Dukes. "Without these sophisticated systems in place, we wouldn't be able to do that."

The customers have taken notice, as evidenced by the Small Business Subcontractor of the Year award that Hayes Bolt won in 2002. Northrop Grumman Radio Systems Division sponsored the distributor for the award, which Dukes took home from a Small Business Administration luncheon last year. Ten years earlier, the distributor won an SBA Award for Excellence.

Dukes calls such recognitions "important" for the company because they show the rest of the world how a small firm like hers can provide consistent levels of quality service to its customers. "These types of accolades mean a lot to us," says Dukes. "Any time a customer goes out of their way to acknowledge the good work that you do, it's about as good as it gets."

With customers that include high-tech electronics and aerospace manufacturers, biotech firms, ship builders and ship repair facilities and government contractors in southern California and northern Mexico, Hayes Bolt relies on a handful of key programs to set itself apart from the crowd. Using a "pay-for-performance" model, for example, the distributor provides an on-time inventory management system combined with a valued-added strategy that helps reduce time and cost for all parties.

Hayes Bolt also relies on a team management system, headed up by team leaders Stan Janas, finance administrator; Terri O'Barski, sales and purchasing; John Sisk, warehousing; and Mike Dailge, quality supervisor. "Our teams average 99.6 percent on-time delivery and 99.3 percent customer satisfaction, including returns and customer complaints," says Dukes. "We get there by offering extraordinary service backed up by performance standards that clearly exceed industry averages."

Like most distributors, Hayes Bolt has faced its share of challenges in a commodity-based market plagued by eroding margins and rising costs of doing business. Dukes says the company's primary hurdle has been eking enough profit for growth from a business that distributes parts that sell for less than a penny apiece. To work it, Dukes says she simply "flat lines" the company's processes by implementing measurable, accountable programs that go beyond just selling parts to customers on a piecemeal basis.

"We also have quality personnel running those processes, and very low employee turnover. When you mix all of those advantages together, you end up making a profit via a pay-for-performance system," says Dukes. "The fewer the bumps, the more profitable the process."

After taking over the reins of Hayes Bolt in 1984, Dukes shifted the firm's primary market from the shipbuilding industry to the OEM sector, created a robust inventory management system to take out to customers and embarked on what she calls a "world class" quality program.

"In 1988 we committed to a quality control program that was way ahead of the curve for our industry," says Dukes, who in 1991 established a Total Quality Management program that led to the company's pay-for-performance program. Six years later, she expanded that program to include on-time delivery and measurable customer satisfaction performance.

In February 2004, San Diego-based Cohu's Electronics Division began reaping the rewards of Hayes Bolt's on-time inventory management program. A manufacturer of closed circuit television cameras, the company has been buying the bulk of its fasteners from Hayes Bolt for 16 years (and a portion of them for the last 20 years). Up until 2004, however, Cohu purchased, received, inspected and inventoried those commodity items internally.

Cohu purchasing agent Jim Kuykendall says the time came this year to unload some of that work and further reduce the cost of parts that fetch just pennies each. "The part might cost us only one cent, but by the time it was installed, that part was actually costing us $1 in all of the extra time spent handling it," says Kuykendall. "With Hayes Bolt taking over our fastener inventory management, the parts are just there when we're ready to use them."

Kuykendall is confident that the program will run smoothly, based on past experience with Hayes Bolt. Years ago, for example, he says the distributor was his first vendor to use Cohu part numbers instead of its own. "That's a luxury that any buyer loves," says Kuykendall, who calls Hayes Bolt's quality and timeliness impeccable. "Unless it's a unique part, I always know that the order—or at least a partial quantity—will be at my door the very same day."

That's exactly how Dukes, a stickler for high-quality, accountable processes, likes it. In fact, she's currently working on more infrastructure process reviews and continued process improvements, despite a "flat" sales environment that's left them scrambling to make up lost revenues. Dukes says she's been able to retain all employees through the downturn, and expects the firm to bring in slightly higher sales in 2004.

"We're committed to strong performance in our measurables, which translates into increased profits," says Dukes. " We hope our markets flourish in 2004, but reality shows a trend for small, conservative growth running through the next year. We'll use that time to make sure that our house is in order and that our employees are involved in a way that encourages them to assist us in growing profits."