On track

With a new management team and vision in place, a reinvigorated Apache Hose & Belting regains its customer focus.

by Rich Vurva

Strange things can happen when business is booming. Flush with orders and cash, companies start to think the good times will last forever. They hire staff and invest in inventory. Then, when business begins to slow, they fail to adjust their staffing and inventory requirements and profitability soon suffers.

Apache Hose & Belting, a Cedar Rapids, Iowa, hose and belting distributor that specializes in custom fabrication for agricultural, mining, construction, manufacturing and retail customers, understands all too well the perils of doing business during boom times. During the pre-recession days of the roaring 1990s, the company’s cost structure slowly grew. By the end of the century, it became top-heavy, with multiple levels of management, including two regional vice presidents, plus a branch manager, sales manager and operations manager at each of six branch locations.

On top of all that, a new enterprise resource planning (ERP) system purchased in 1999 proved to be a nightmare to implement.

“That was a major struggle,” says Tom Pientok, executive vice president and chief financial officer. “Our customer service fell apart. We missed deliveries. We lost orders. It was the classic ERP system implementation and many people started hiding behind that. ‘Sorry we missed the order Mr. Customer, but it’s because we put in a new system.’”

With little or no accountability and poor communication, V.P.s with responsibility for sales often had no idea what their sales teams at the branch level were up to. Inventory levels soared and the company’s profitability started to erode.

“We lost the customer focus. We’d lost sight of why we’re here,” says Pientok.

By 2000, the company began making significant changes. It closed a Denver branch and relocated other branches to buildings better suited to the business they generated. It brought all inside sales responsibilities into a centralized call center in Cedar Rapids, reducing the headcount from 31 inside salespeople to 17.

When Steve Crain joined the company in January 2002 as senior vice president of sales and marketing, bringing with him a wealth of experience from more than two decades in manufacturing and distribution, the pace of change picked up dramatically.

“Employees looked at the company as a manufacturer. They had the mentality that we were a factory,” says Crain, who took over as president and chief executive officer in October 2002. “We’re not. We’re a distributor. I could see from the day I got here that we needed to change the culture.”

Almost immediately, Crain reorganized the call center into five separate pods so three or four people in each pod handle only calls from a specific geographic region.

“The centralized call center model has failed 85 percent of the time in this industry,” says Crain. “The mistake most people make is stopping once they’ve consolidated. If you don’t take it a step further, and get the familiarity that customers are already accustomed to, it won’t work.”

When a customer calls today, he or she talks to one of three or four people, rather than trying to get to know 17 people. It breeds familiarity between customers and the customer service staff.

It also breeds familiarity between the customer service staff and product specialists. Instead of having inside salespeople located in far-flung branches in Kansas City, Mo.; St. Louis; Minneapolis; and Chicago, the entire staff has access to belt and hose experts in the fabrication shop.

The centralized call center also enables Apache to retain more control over the activities of CSRs, which translates into greater control over inventory.

“We still carry inventory at the branch level, but the difference is we’re not carrying it just for the sake of carrying inventory,” says Pientok. “We have inventory that’s appropriate to serve that local customer base.” Customer service levels today top those of a few years ago, even though Apache now carries about 30 percent less inventory.

Pay for performance
Crain also began rewarding customer service reps (CSRs) for accuracy. If they accumulate more than a couple of errors in shipments that negatively affect a customer, they’re in danger of not receiving a commission check for the month.

“This system improved our accuracy rate,” says Crain. “By putting a portion of their pay at risk, it made our CSRs better. Our CSRs view it as a positive challenge. These are some of our most determined and efficient employees, and they accepted the challenge with no problem.”

Apache also started requiring salespeople to submit weekly call reports.

“A lot of people don’t believe in sales call reports but I believe it’s the only way I can communicate with these guys,” says Crain. “We use a very efficient format so it doesn’t take much time for the outside salespeople to fill out the report. It’s a great way to get field information into the hands of our support departments and a great way for me to stay in touch with the field on a weekly basis.”

Salespeople submit their call reports electronically using a simple spreadsheet format. In addition to top management, the reports circulate to other key department personnel, making them a valuable source of information throughout the company.

“Our call reports are not used to keep track of employees. We want to know what difficulties they’re encountering. Where do they need help? How can we help them? We’re not trying to see if they’ve made eight calls a day and where they spent their time. We want to know what they’ve dug up that we can help them with,” says Phil Giglio, vice president of the retail division.

When an inside salesperson enters a quote into the system, it automatically e-mails the quote to the corresponding outside salesperson. At day’s end, the field salesperson can log onto the company mainframe computer via laptop to check orders and quotes sent that day, allowing more timely customer follow-up.

“It used to be that each branch operated almost independently,” says Kyle Gingrich, general manager of the industrial division. “Today, we’re one company. Before, we were four or five companies operating independently.”

Coffee with Crain
To help cement a customer-driven attitude among employees, Crain began holding casual monthly information sessions in the warehouse to answer questions and keep them abreast of important company matters. Called “Coffee with Crain,” the sessions proved especially popular.

He also spends time in the fabrication shop and warehouse, talking to employees about their concerns and reminding them that their ultimate goal is customer satisfaction.

“Not long after I got here, I remember asking someone in the fabrication shop how it was going. ‘It’s crazy,’ he said. ‘Don’t these customers realize we have a 10-day lead time?’  I spent the next 30 minutes explaining to him that taking care of the customer is the only reason we’re here.”

About 90 days later, that same employee spotted Crain walking through the shop and pulled him aside. “You see all of that stuff?” he said, pointing to a pallet of products being readied for shipment. “It’s all going same-day. I got the order today and it’s going out today.”

Apache employees now embrace the company’s motto, “Customer focused, employee driven.”

“We tell everybody in the organization that they’re a member of the sales staff. Whether it’s receivables on the phone trying to collect money or a guy on the floor making sure the product goes out, every person is a sales rep,” says Pientok.

Expanded service offerings
The company recently expanded its field service offerings to customers. In addition to field crews providing belt splicing and installation of custom conveyor belts, the crews offer to perform on-site conveyor system audits and maintenance.

“We want our customers to know we can do more for them than simply install a belt,” says vice president of national sales Tom Weisenstine. “Apache can survey their conveyor system and make appropriate recommendations to both belt and conveyor performance, such as replacing worn idlers, repairing pulleys and scheduling regular maintenance.”

Crain says the company receives positive feedback from customers that lack the time or trained personnel to perform ongoing maintenance of their conveyor systems. Customers show a willingness to pay for such services. The more consultative approach doubled Apache’s field service business compared to last year.

“Getting paid for services depends on what you bring to the table,” he says. “If you bring services such as installing idlers, changing out cams and pulleys, laser-aligning the conveyor system, we believe customers will pay for it.”

Despite the economic downturn that greeted the turn of the century, Apache employees are invigorated by the changes that have taken place at their company.

This article originally appeared in the September/October 2003 issue of Progressive Distributor. Copyright 2003.