Progressive Distributor

A new look

Gooding Rubber Company has made significant changes in the past several years to help the company take advantage of an uncertain economy

by Rich Vurva

The recent mass media coverage about a possible recession makes Dean Goldbeck a bit nervous. He remembers all too well the negative impact the last major economic downturn had on Gooding Rubber Company beginning in 2001. Fortunately, thanks to prudent management decisions made early in the decade, the Chicago area company is positioned for growth if the economy rebounds, but ready to weather any potential economic storms that may loom on the horizon.

Left to right: Gooding Rubber Co. vice president of sales Randy Wagner, president Dean Goldbeck and vice president of operations and purchasing Kim Heis are part of the management team positioning the company for growth in an uncertain economy.

Now president of this Woodridge, Ill.-based distributor of rubber hose, belting and related accessories, Goldbeck was a vice president of the employee-owned company during the last recession. Like other distributors that supply the U.S. manufacturing industry, Gooding’s sales took a big hit when the economy turned sour following the 9/11 terrorist attacks in 2001. To make matters worse, the company was also a supplier to major steel and coal companies. That was the year companies such as Bethlehem Steel, Acme Steel, Northwestern Steel and Wire and Lodestar Energy filed for bankruptcy in quick succession.

Goldbeck remembers shipping a $135,000 conveyor belt to one steelmaker in 2001. The next day, the company filed for bankruptcy, and Gooding never received payment.

At the time, the steel and coal industries represented more than a third of Gooding Rubber’s $23 million in annual sales. The untimely bankruptcies toppled major customers like falling dominoes. By 2003, sales had fallen to $18 million.

“If there was a steel mill that went bankrupt, we were serving them,” recalls Goldbeck.

The management team made the difficult decisions required to keep the company afloat, from laying off employees and closing a branch in southern Illinois, to changing relationships with its bank, attorney, accounting firm and even the copy machine supplier to cut costs. No stone went unturned during those unpleasant days.

“Those are the things you have to do. There can’t be any sacred cows when you’re bleeding. Otherwise you’ll become a statistic,” says Goldbeck.

Today, the company’s annual sales have rebounded to $32 million, but it employs just 56 people compared to a 95-person staff in 2001. Many employees wear multiple hats and managers typically put in 70-hour work weeks. But throughout the rebuilding period, the company maintained its relationships with product suppliers.

“Every vendor appreciates our relationship because in the bad times, even when customers didn’t pay us, we paid them. Every invoice that we didn’t get paid for, we paid our vendor. It’s the right thing to do,” says vice president of sales Randy Wagner.

The steel business today represents a much smaller percentage of sales.

“At one time, we had four salespeople serving the steel industry. I’m the only salesperson calling on the major integrated steel mills at the present time. We made a decision not to go after that business because of what happened in 2001,” Goldbeck says.

New beginnings
The company is in the process of terminating its employee stock ownership plan (ESOP), a lengthy process that will revert ownership to Goldbeck, Wagner and Dennis Monarch, vice president of branch sales.

“ESOPs look good on paper, but employees don’t appreciate any ownership benefits until they leave the company,” says Wagner. “When you leave the company, it becomes real money. 401(k) matches and raises offer quicker gratification.”

Sales are fairly evenly divided between serving coal mining companies in the Illinois basin in southern Illinois, southern Indiana, western Kentucky and the St. Louis area, and MRO customers and OEM manufacturers in the Chicago area.

In addition to the 52,000 square foot Chicago headquarters, the company operates branches in Henderson, Ky., and St. Louis, and opened a satellite location in Marion, Ill., in 2007. It maintains about $3.6 million in inventory scattered throughout the four locations to match customer needs. The branches serving the coal industry stock more conveyor belts, idlers, frames and belt structures than the Chicago location, which is more heavily slanted toward hydraulic hose, flexible metal hose and accessories.

In addition to hose and fittings assembly, Gooding crews offer other services such as designing conveyor systems and installing belt scrapers, the blades on conveyor belts that remove material from the conveying surface.

“Today, you have to sell your services. As markets change and as vendors change, your services become more important,” says Kim Heis, vice president of operations and purchasing.

New marketplace realities
Gooding recently began sourcing low-cost hose from overseas suppliers. The decision to source product from foreign manufacturers didn’t come easy.

“We didn’t call that shot. The market called it. The market knows what the price of a product is,” says Wagner.

Pricing has eroded on certain products in the industry, making buying foreign products essential to staying in specific markets, says Goldbeck.

“It doesn’t take a rocket scientist to realize buying foreign-made products is here to stay. We just have to give our sources enough time to handle the shipping time for container loads,” says Goldbeck. “If we want to be a viable player in the market, we have to continue to pursue that business.”

Imports currently account for less than 10 percent of total sales, but Goldbeck expects those sales to climb.

The vast majority of the company’s product sales still come from major suppliers such as Parker Hannifin for hose products and Fenner Dunlop for belting. Conveyor belt customers in the coal mining industry still demand trusted brand name products, as do manufacturing customers who need high-pressure hydraulic hose and fittings. It’s also important to some customers that Gooding follows ISO-certified assembly procedures. But when quote requests start to use the phrase “brand name or equal,” it’s a signal that brand loyalty is becoming less important in some product groups.

“Customers tell us the direction they need us to go in. They tell us when a particular commodity is price sensitive,” says Goldbeck.

New sales approaches
A new will-call center and a revamped Web site offer efficiencies for customers who prefer the self-serve approach to doing business. The will-call center is within easy access of several major Chicago area interstates.

“One of the things that gives us an advantage in the Chicago area is that we are a full-line house. We offer metal hose, hydraulic hose, industrial hose, gaskets and belts,” says Wagner.

Gooding’s Web site has already resulted in new business. An online quote request form makes it easy for customers to narrow down their requirements, such as inside and outside hose diameter, working pressure, temperature and how the hose is being used.

While it lowers Gooding’s cost of sales to have customers pick up their own orders or place orders online, Wagner doesn’t believe person-to-person sales contact will ever become obsolete. Often, customers who make an initial contact via the Web end up speaking to a salesperson on the phone.

“We had a situation this morning where a customer found us on the Web and wanted a four-inch steam hose,” Wagner says. “I realized he didn’t know what he needed. You still have to get a dialog going and understand what they’re trying to accomplish. We ended up saving him a lot of money by giving him options.”

Wagner says it’s still important to have an experienced, knowledgeable staff of people who can provide personalized service and know how to help customers solve problems.

“We know our products and know what’s available in the industry and we try to best fit our customers’ needs. That takes knowledge and experience,” he says.