Entrepreneurial Spirit, Operational Clockwork

DXP Enterprises, Inc. has a history of providing solutions right where they are needed. The company started as Southern Engine and Pump Company in 1908, providing water pumps – and even cotton gin engines – to the rice and cotton industries in the surrounding Texas countryside.

This article first appeared in the July/August issue of Industrial Distribution. To read the original, click here.

A century & counting: DXP Enterprises has an entrepreneurial spirit, and the resources to back it.

DXP Enterprises, Inc. has a history of providing solutions right where they are needed. The company started as Southern Engine and Pump Company in 1908, providing water pumps – and even cotton gin engines – to the rice and cotton industries in the surrounding Texas countryside. The company migrated into the oil and gas industry upon the discovery of oil in nearby Beaumont, TX. The discovery tripled the population of the city, and the need for oil and chemical pumping solutions followed suit.

A Bit Of Luck

While it may seem like luck was the order of the day for the Houston-based company, it’s taken more than luck to keep the company pumping along for over 100 years. President, Chairman, and CEO David Little has made some tough decisions since joining the company in 1975, and those decisions have certainly paid off in the long run.

When Little started at the company, he came with a background in accounting and an entrepreneurial drive. In 1979 the company rebranded from Southern Engine and Pump Company to SEPCO, and by 1982, the company had grown to $36 million — and then oil dropped from 30 dollars a barrel to ten. George Allen, grandson of the founder of the company, promptly handed the reins to Little, making him president of the company, and Little had the unpleasant experience of taking the company’s employee count from 250 down to 150.

“I knew I never wanted to do it again,” says Little. He set out to make SEPCO a growth company so that he wouldn’t have to repeat that experience, purchasing the company in full from Allen in 1986 for $6 million. Little sold off the gas compressor segment of the business in order to gain back some cash, and merged with Shoreline Supply. With the merger, SEPCO gained the Goulds product line, and the line continues to be a best seller in the company to this day.

Still, Little knew that SEPCO needed to be more than a pump company. Rather than purchase more and more pump distributors and increase their vertical stronghold in the market, Little opted to take an entirely different approach from most industrial distributors at that time. He began to buy into different product categories, adding disciplines like bearings and power transmission, safety, and MRO to the company’s portfolio.

“We bought companies with the idea that we would offer the customer more than one product category,” says Little. “This way we could become that one-stop source for our customers, helping them reduce their vendor base and save money, while at the same time capturing more of their MROP spend.”

SEPCO continued to grow through acquisitions in the 80s and early 90s, until it was finally time to take the company public. Following a reverse merger in 1996 with Newton Communications Company, where SEPCO was essentially purchased by a shell holding company in order to become public, SEPCO became DXP Enterprises, Inc., without raising any money in an IPO — a significant feat, considering how much the company has grown since.
The opportunity to rebrand was a chance to wrap some of the new businesses into the overall company name, positioning the company as not only a distributor, but an innovator in the channel.
“SEPCO meant pumps to our customers,” says Little. “We had to either make it mean more than pumps, or create a fresh name.” Somewhat shorthand for “Distribution Experts,” DXP Enterprises was born, and so were the three major reporting segments of the company: Service Centers, Innovative Pumping Solutions, and Supply Chain Services.

Geared For Growth

Ever since Little took over the operation, DXP has been a company focused on exponential growth. The company plans to grow 20 percent each year: ten percent organically, and ten percent through acquisitions.
“We are constantly trying to capture more of the overall spend of our customers,” says Little, “but ten percent is hard to do in today’s economy.”

To compensate for years when they are not able to grow as aggressively organically, DXP plans to make up the difference through acquisitions. “We either want smaller distributors to join up, or we want to take market share away from them,” says the CEO. “We are not targeting other big players in the industry, but trying to grow incrementally in a different way.”

When considering which companies to acquire, Little and his team primarily want to look at companies with a similar culture to DXP. John Jeffery is the Senior Vice President of the Supply Chain Services Segment, Corporate Marketing, and IT departments. He stresses that any company that DXP looks to acquire must have an entrepreneurial spirit.

“Most small business owners are entrepreneurial and driven for success,” Jeffery says. “We want the owners of the companies that we acquire to stay with us and continue to run their businesses. They have obviously been doing a successful job of it so far, or we wouldn’t want to acquire them.”

DXP stresses that it is the talented people that makes a company attractive. In fact, a customer once mentioned how much she liked working with “DXPeople” — and the name stuck.
Just as the company is geared for growth financially, it is also invested in growing its employees. Once DXP has acquired a company and its talent, the company’s extensive technical training programs take center stage.

Employees are given the resources they need to excel in their positions and the opportunities to advance in their own careers. DXP makes it possible for their employees to bring the most value that they can to the customer.

Driving Operational Excellence

Oftentimes, a downside to being an entrepreneurial-minded company is like having too many chefs in the kitchen: everyone has ideas and gumption, but not always the resources or strategic direction needed to be a fully functional company. Luckily, DXP learned this early on and has taken steps to implement strong back-office processes to keep those spirits in check when needed.

“We value having an entrepreneurial front end of the company — sales people who go out and drive innovation well, but we have a disciplined, results-oriented back office to keep the business balanced,” says Todd Hamlin, Senior Vice President of the Service Centers Segment and President of the Bearings & Power Transmission Division. Hamlin notes that operations has to be able to support sales when they make commitments tothe customer, ensuring that those commitments can be met.

“Distribution is a family business. Trust and relationships are built with the customer by execution of value-added services that the customer needs,” Hamlin adds.

Part of DXP’s growth strategy is simply to work better and more efficiently. Two years ago the company took their 5S program to a 6S one: adding safety. According to Hamlin, much of the company’s operational efficiencies have come from the 6S program, where different segments are encouraged to identify and share best practices with the other divisions. The company shares recognized best practices on their internal website to ensure that everyone has access to the latest procedures.

A strong culture of operational excellence also ensures that new acquisitions build on to the company with as little struggle as possible. The company recently added a Mergers & Acquisitions segment in-house that oversees the process of adding new companies into the corporate structure.

“With 18 acquisitions since 2010, the entire process was becoming taxing to the senior management team,” says Jeffery. “This was a necessary step for us to continue to push ten percent of our growth out via acquisitions.”

For DXP, the process of folding a new company into the existing one is a practice in branding strategy. DXP keeps the existing management team in place, and allows that team to dictate the speed at which their brand is replaced by DXP Enterprises. The faster the company integrates, the faster the DXP resources become available to them, which is a huge incentive for speed.

Those resources include a strong onboarding program that teaches new employees who DXP is as a company, what the corporate values are, and how to succeed in the company’s framework. Taking the time to reinforce the culture of DXP underscores the value of the company these employees are becoming a part of — and reinforces that the decision to sell was the right one.

“When the DXP brand becomes more important to them and their customers than their own brand – when their own brand starts to get in the way – that is when they want to very quickly adopt the DXP brand and all that entails,” says Hamlin.

It is important to DXP that its brand means more than a financial transaction to the owners. “We want to be the acquirer of choice,” adds Little. “This keeps our acquisition possibility pipeline full.”

Customer-Driven Solutions

Part of the distribution business is listening to customer needs. As Jeffery puts it, “DXP allows the employees at the company to bring the solution and be the solution to meet the needs of our customers.” This results in engaged employees, who are customer-driven.

“The distribution business is challenging and rewarding,” says Little.

As someone who has brought a 20 million dollar revenue company through a reverse merger, going public, and more than two dozen acquisitions to become the billion dollar plus business that it is today, David Little – along with his DXPeople – is the right kind of person for the challenge.