This artcile first appeared in the March/April issue of ID. View it here.
Founded in 1981 as a buying group in the electrical industry, Affiliated Distributors has a long history of helping the independent compete on a national and global scale in the distribution sector. Now encompassing six distinct industries and with combined sales in excess of $20 billion annually, Affiliated Distributors is a big name in a big industry. AD’s Jack Templin, recently promoted to the position of President of the Industrial Supply Division, took some time out of his busy schedule to chat with Industrial Distribution about the reasons behind AD’s explosive success over the past year. He discusses how his Industrial Supply Division plans to grow and what makes him look forward to both the job at hand and to the future of AD and its independent affiliates.
ID: Why has it been important for AD to establish strategic business unit structures for each division?
JT: One of AD’s biggest strengths is our ability to leverage shared services across our multiple divisions. This keeps our operating costs down and allows us to maximize earnings for our members.
This strength works well with back office functions like accounting, divisional operations, HR, etc. However, as the divisions have grown, the differences and needs in the specific markets served have become more evident.
Our new structure allows us to continue to leverage back office functions while better positioning us to customize our approach to significant industries. This is most evident in the area of marketing – previously, an AD Corporate “shared service.” Now each division is able to develop marketing programs and initiatives targeted at their industries served. Provisions are still in place to share best practices and ideas between AD divisions, but we feel the ability to customize our approach by industry will serve both our members and supplier partners better.”
ID: At the beginning of February we ran a press release on how your division’s sales grew 19% last year. To what does AD owe the rapid organic growth of its industrial division?
JT: There are many contributing factors to the success of the division. None however, is more important than the quality of our members. AD has always had a selective approach to our membership. We would always rather have quality over quantity. I think if one was to look at the market and ask who the leading, non-national chain, industrial distributors are, chances are they are AD members. Our members are the “thought leaders” of this industry. Virtually all of the industry trends of the past 25 years have come from independent distributors. Integrated supply, VMI, and vending solutions all started with the independent distributor. More end user customers than ever are recognizing the experience and expertise of our members and rewarding them with their business. The same is true of our supplier partners. Not all suppliers are in AD, however, those who are represent industry leaders. The combination of the two is the leading reasons for our success.
ID: How will this growth serve as both a challenge and a benefit for you in your new role?
JT: Great question. The challenge comes in keeping pace and continuing the momentum. Refreshing and refining existing programs to maximize value to members and suppliers, while developing new initiatives will be very important to maintaining our growth rate. Working with our suppliers to ensure that our members are competitively positioned with the national chains will be very important to sustaining the growth of our members. For our supplier partners, we will have to reinforce our selective approach and drive conversions to AD suppliers. The benefit comes with scale. As we grow, we can staff the organization differently to improve both member and supplier satisfaction. Also, the scale reinforces our relevancy to the channel. At $4.6B in sales, ADs’ members are clearly in the top tier of industrial distributors — even when compared to the national chains.
ID: What type of specific plans do you have in place for continued growth?
JT: We have a detailed, long term strategy to maintain and accelerate our growth. Of the various elements of our plan, nothing is more important than the continued success of our existing members and our supplier partners.
Our members have to be kept competitive and profitable in order to fuel their growth. We must continue to align ourselves with industry-leading suppliers that value the independent distributor and their commitment to brand building and solutions selling. Rewarding our suppliers’ commitment to AD is equally important. We must continue to encourage our membership to support our supplier partners by actively converting business from non-AD suppliers to AD suppliers. Adjacent industry expansion, geographic expansion and the selective addition of quality new members and suppliers will also contribute to our sustained pattern of growth.
ID: What do you look forward to as you embark on these new responsibilities for AD?
JT: We at AD have two constituencies: our distributor members and our supplier partners. On the distributor member side of the coin, I look forward to being part of their continued success. While I am certainly a fan of the independent distributor and their entrepreneurial spirit, I am even a bigger fan of the people that own and work at these companies. As I embark on my new responsibilities, I look forward to our role as advocates for some of the finest people I’ve met in my career. Regarding our supplier partners, I look forward to working with them to defend and build their brands against the onslaught of private label products and ensure that we continue to meet our goal of above market growth.
ID: To what do you attribute this innovation at the independent industrial distributor? Is it because they are closer to their customers, therefore they know better what they’re looking for?
JT: Someone once said that ‘Innovators don’t see different things — they see things differently.’ I wish I could take credit for that quote.
I think the independent distributor certainly fits this description. They see things differently because they have to. Independent distributors typically have experienced tenured leadership and sales teams that result in a high degree of customer intimacy. The close connection with their customers results in customers trusting the independent distributor to help them solve their problems. The solutions to these problems are most often a collaborative effort between the end user customer and the independent distributor, and this collaboration results in innovation.
As I stated earlier, today many distributors are offering services such as VMI, integrated supply, and vending solutions. However, it wasn’t that long ago that these services were considered “new and innovative.” While I can’t state with certainty where these services started, chances are they began with the independent distributor. Likewise, I don’t know what the next industry trend or creative supply solution will be, but you can be reasonably assured that they will begin with the independent distributor.
In closing: The future is bright for independents, especially the industry-leading independents like the members of Affiliated Distributors. Like I mentioned earlier, a lot of the innovation and creative approaches to servicing the end-user customer have their origins in the independent distributor, and that is not likely to change. While we may not know what those future innovations are, we pretty much know that they are going to come from independent distributors like our members. Their position as industry leaders is well established.