Industrial Distribution recently sat down with David Crawford, senior vice president at DoAll Co., who oversees the firm's industrial distribution division, DGI Supply. DoAll has been a manufacturer and distributor for years, but re-branded its distribution business as DGI Supply (DoAll Global Industrial Supply) this year. We asked Crawford to explain the reasons for that change, talk about how the firm separates its manufacturing and distribution concerns, and give us the company's five-year outlook.

This is the second in an occasional series of Q&As with ID's Big 50 distributors. DGI Supply ranked No. 30 in this year's Big 50 report (June 2006). The company is headquartered in Wheeling, Ill., has 59 locations, 1,200 employees, and roughly $238 million in sales.

INDUSTRIAL DISTRIBUTION: Why did DoAll Co. decide to re-brand its industrial distribution division as DGI Supply earlier this year?

DAVID CRAWFORD: We did it because we really have worked on differentiating the capabilities of the distribution organization, as well as generating additional opportunities for distribution and the products we manufacture…We wanted to show separation of the businesses.

We've been vertically integrated for 40 years, and our manufacturing companies were completely dependent on sales through the distribution organization. Frankly, in some markets we were not as strong as we should be, and it created a capacity issue in some of our manufacturing plants. …We wanted to use outside distribution as a means of helping us grow our business with the products we manufacture ourselves.

At the same time, we've been reinventing the distribution company. We've been fortunate to align ourselves with the premier manufacturers in the industry. Many of our competitors have got a product offering of good, better and best, and we're just best. And we truly do have the best manufacturer line-up that there is—with the DoAll band saw blades, with Sandvik Coromant, Norton, OSG, and others—there are no better manufacturers in the industry that any distributor could bring to their customers. Those manufacturers will help us, ultimately, lower our customers' cost of parts per use—and that's our job.

ID: Are DoAll Co.'s products still sold through DGI Supply? How do you separate the manufacturing and distribution arms of the company?

Crawford: DoAll makes band saw machines and band saw blades. DGI Supply distributes everything DoAll makes, and we also sell those products through other distributors in different markets.

We recently moved the [sales office] of the DoAll branded products out of our corporate headquarters. They are in their own, stand-alone facility now. This is another change to show complete separation between the manufacturing and distribution divisions. We also hired Jim Cary [Cary is vice president of sales for DoAll sawing products and is charged with growing sales and distribution of DoAll's manufactured products]…He really understands the distribution community and has helped drive the separation between DGI Supply and our manufacturing company. DGI Supply is still DoAll's largest distributor, but we've successfully added some very good distributors in different market areas.

[On the distribution side], our targeted customer is anybody who buys from $5,000 up annually, to [large contracts] through our integrated supply capabilities. This year, we introduced a new master catalog that has approximately 55,000 SKUs, as well as what I consider to be a best-in-class Internet site that emulates our master catalog exactly. So, it makes it easy for the customers to buy our products electronically and through our printed media.

Traditionally, our business has been metal cutting and finishing, but with the acquisition of [Houston-based] Groves Industrial Supply [earlier this year], we're expanding into safety and more general MRO supplies…Now, we'll be able to sell deeper and broader into existing accounts, thus growing our business even further.

ID: Does DGI Supply do any private labeling of products?

Crawford: We still do a select amount of private labeling, primarily “Made in the USA” type of products in our core strengths—the cutting tool areas. Private labeling is less than 5 percent of DGI Supply's business.

ID: What is DGI Supply's geographic scope?

Crawford: The scope is really North America, from a distribution perspective. We've got an extremely strong presence in Canada and the United States, and our presence in Mexico is greatly improved. We've got six locations in Mexico now, and our business is growing in leaps and bounds down there, through our traditional distribution business and our integrated supply business.

ID: Where do you see the greatest opportunities for growth?

Crawford: We still feel like the greatest opportunities for growth are in two places: First, with our existing account base, penetrating them deeper and further with MRO supplies and safety products—which we're much stronger at now with the acquisition of Groves. Second, with what we consider to be house accounts through our catalog and Web edition. When customers are looking to buy the best manufacturers in the industry, and they see the product availability and the pricing offered from our organization, it makes that buying decision very easy. And once they start seeing the benefit of our one- to two-day delivery anywhere in the country, I feel like that's going to augment our sales that much more.

ID: You mentioned the Groves Industrial Supply acquisition. What does that bring to the table and how has the integration gone?

Crawford: The integration has gone very, very well. All the personnel that were with the organization when we acquired it have stayed with the company. It also brought us another regional distribution center—in Houston, which is a very dynamic market area right now. That facility is a 125,000 sq. ft. stocking [location]. Groves' core competencies are in paint, safety and general MRO, which is a strategic area for us. At the same time, [Groves is] really benefiting from our cutting tool and metal-finishing abrasives capabilities. So, DGI Supply's capabilities are also augmenting their business.

ID: Is acquisition the main growth strategy for the company? What does DGI Supply look for in acquisition candidates?

Crawford: We really believe there's going to be continued consolidation of industrial distributors in the marketplace. We still have an appetite and are looking to fill strategic areas [geographically] where we're not as strong as we should be.

ID: Many distributors tell us that globalization, technology and finding new talent are some of the toughest challenges facing the industry today. What's your take on this? What are the most significant issues facing your company?

Crawford: Our biggest concern is the erosion of the manufacturing base in the United States…The trade deficit that we have with China is a huge concern. We've lost a number of manufacturing companies in the United States to China over the last several years. The Chinese do a nice job of protecting their country from imports from the United States, and we really don't feel like our government has put that same type of protection in place for manufacturers in the U.S.

ID: What is the five-year outlook for DGI Supply?

Crawford: In five years, I see our business doubling in sales volume, both through organic growth and acquisition. And we are going to continue to be very aggressive in our approach toward best-in-class products, logistics and service.