Stellar Industrial Supply strives to achieve ideal customer/supplier partnerships

by Rich Vurva

Triumph Composite Systems recently presented Stellar Industrial Supply with a trophy in recognition of the distributor’s superior service and zero stock outages for 2006-2007. But more valuable than a trophy, purchasing agent Debra Smith also paid Stellar a supreme compliment. When other distributors ask her how to win back business they’ve lost to Stellar, she tells them, “It’s hard to compete with excellence.”

The story illustrates the type of bond Stellar president John Wiborg strives to achieve with every customer. It’s an example of “ideal customer and supplier partnerships,” which happens to be Stellar’s new vision statement.

“It’s just a few words that fit on the back of a business card, but our intent is to continue to work hard to bring that to life,” Wiborg says.

In addition to customers such as Triumph, a component supplier to Boeing and other aerospace manufacturers, Stellar has a diversified customer base. It provides MRO and safety supplies to the wood products, refining, steel, marine and composites industries, plus serves nuclear facilities, municipalities and the military. With nearly 3,000 active accounts, defined as customers with purchases in the previous 12 months, Stellar’s largest client comprises less than 10 percent of total annual sales.

“To be sustainable, you have to be diversified in terms of product, markets and industries. We do that as much as we can,” says Wiborg.

Stellar booked about $37 million in sales in 2007. In December, the company diversified further when it merged with Bassett Industrial Supply of Portland, Ore., a $9 million cutting tools and abrasives specialist with 20 employees. The merger raises Stellar’s headcount to 130 employees in nine branches in Washington and Oregon, and will push Wiborg closer to his goal of $50 million in sales in 2008.

Besides adding cutting tools expertise, the merger will improve Stellar’s onsite inventory management capabilities for customers. Bassett specializes in developing automated vending solutions for machine shops and other facilities, using WinWare’s CribMaster automated inventory system. Wiborg believes Bassett’s experience should open doors at new accounts.

“There’s a lot of excitement among our salespeople. They’re all jacked up about the possibility of getting cutting tools business going. The Bassett people are excited about getting direct access to the MRO business,” says Wiborg.

Brian Bassett, former president of Bassett Industrial and now vice president of Stellar’s Cutting Tools Division, says the merger will broaden the product and service offerings for the combined companies.

“I knew of Stellar as an aggressive, hardworking, well-run company that was growing their market share in a lot of areas where we didn’t participate, such as MRO and safety,” he says. Before the merger, only about 4 percent of Stellar’s sales came from cutting tools, and it had only one customer with an automated inventory vending solution.

Expanding into new markets
Wiborg anticipates that the cutting tools and abrasives division will open doors at accounts where Stellar previously had difficulty establishing relationships. The company experienced similar success when it launched a safety division in 2001 by hiring safety specialist Ernie Heide. The decision to expand into safety supplies was driven by the trend among customers to purchase more from fewer suppliers.

“Our objective at first was to focus on Stellar’s existing customer base. We went after the current customers that weren’t buying safety products from Stellar and offered them a new line of safety products,” says Heide.

Heide says other industrial distribution companies try to offer safety supplies as an add-on sale, but don’t get much traction in the marketplace because they have no safety specialists on staff. With three safety specialists in addition to Heide, Stellar offers respirator fit testing, glove surveys, safety seminars, OSHA training and similar services. Heide says Stellar is now one of the largest safety distributors in the state of Washington.

“I think you’re better able to respond to your customers’ requirements if you don’t think of yourself as only a safety distributor or only a cutting tools distributor. If they want janitorial supplies, why can’t we do that? The better job we do on service, the more the customer starts presenting us with opportunities for them to consolidate their vendor base,” says Wiborg.

Growth through acquisition
Wiborg is no stranger to mergers and acquisitions. Stellar has acquired six distribution companies since 1988, including Eltee Tool & Supply, New Era Construction, Morse Industrial Supply, Wentworth Sales, and Everett Industrial.

Some acquisitions opened new geographic markets and others introduced new product lines or customer segments. The key to any successful acquisition is to integrate the acquired companies as smoothly as possible, says vice president of finance Tim Daly.

“When we acquire or merge with a company, what we’re really looking for is the quality of the individuals running those organizations. We’re not just buying assets,” he says. “A good acquisition to us is when we find a good individual that can grow with us hand in hand and continue to work with an existing customer base and expand that.”

The success of any acquisition also hinges on the ability of the merged companies to blend cultures and learn from one another.

“We’re not so married to our way that we think we have everything right,” says Wiborg. “When you’re aligning with an excellent organization like Everett or like Bassett, the imperative is to say the best idea wins.”

Managers demonstrated their belief in that approach when Stellar acquired Everett Industrial Supply in 2002. Recognizing that Everett had better medical insurance coverage, including short-term disability insurance, Stellar adopted the Everett insurance plan.

Similarly, while both companies used Prophet 21 distribution software, Everett was on the Commerce Center platform while Stellar used the Acclaim software system. Stellar opted to migrate to Commerce Center (now called P21), even though it meant training employees in the new technology.

“We spent about four months analyzing which direction to go,” says chief technology officer Rene Savage. “It would have been easier for us to stay on Acclaim, but we weren’t going to be able to offer some of the value-added services that customers were requiring without upgrading our technology.”

Adding Bassett into the fold will present the information technology department with the challenge of integrating remote data into P21. It’s a process they’re familiar with, because the IT staff recently completed a project to develop an online system enabling customers to manage consigned inventory and enter new orders. End-users can either use bar code scanners to track inventory in tool cribs or can access a secure Web site to enter new orders and track orders. The system ties directly into Stellar’s P21 back office system.

“I look forward to every acquisition because it gives me a chance to learn. It give us a chance to figure out how to do something better,” says Savage.

This willingness to adapt has helped drive Stellar’s growth. Some changes occur in response to external events in the marketplace such as vendor consolidation or new competition. Other changes stem from new business practices resulting from acquisitions or adopting new technologies. Wiborg is certain that his company benefits when employees embrace growth and welcome fresh approaches to doing business.

“I think we have really good ideas. But I don’t see how we lose if somebody comes along with a better one for our organization,” says Wiborg. “All we have to do is create an environment where they can be forthright with one another if they disagree. At the end of the day I want to do what’s right for our organization.”

This article originally appeared in the January/February 2008 issue of Progressive Distributor. Copyright 2008.

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