Graybar Electric's move to increase its share of the automation business has hit the industrial automation market like a big rock in a small pond, one that's dominated by a handful of large distributors and dozens of niche players.

When you are already the largest electrical distributor in North America, with 9,100 employees, 275 locations and $4.8 billion in 2001 sales, and you move into a new market, the electrical industry takes notice.

Although Graybar has sold automation products for years, its strategy to build major market share in the automation game has really taken root over the past three years. Since 1999, the St. Louis-headquartered distributor acquired two automation distributors, bolstered its automation product offering and began leveraging its focus on logistics and national accounts to provide automation customers with customized service and product packages.

Graybar acquired Frank A. Blesso Co., Hartford, Conn., in 1999 and Commonwealth Controls Corp., Richmond, Va., last year. The Commonwealth Controls acquisition exemplified one of the key drivers in Graybar's move in the automation market — its desire to provide industrial customers with a complete package of electrical, communications and automation products. At the time of the acquisition, Phil Evans, Commonwealth's owner said, “We will now be able to better serve our customers with our automation and instrumentation product lines along with the complete electrical package, including power, control, drives and data communication products. We can now truly supply customers with a complete package.”

Dennis DeSousa, Graybar's senior vice president of sales and marketing, says the desire of industrial customers to give front-office managers information about and control of manufacturing processes on the factory floor is an important trend in the automation market. It plays to Graybar's strengths, he says, because of the company's focus on the communications cabling and networking products that carry this information.

“The resulting converging technologies have led to the need for a single-source provider of electrical, comm/data and automation solutions and products,” he says. “Graybar's single-source vision has become a reality because of the implementation of our national automation program with coast-to-coast and border-to-border product availability. In addition, we are implementing regional centers of elevated automation competence for assistance and support to our customers and staff.”

Graybar has been a Square D/Schneider distributor for many years, and its relationship with that company is core to its strategy in the automation market. Getting authorization to sell the manufacturer's Modicon and Telemecanique automation lines along with Square D automation products nationally and earning Schneider's HTAD designation (High-Tech Authorized Distributor) showed the market that the company had made a serious investment in automation and that it had automation engineers and specialists on staff to work with customers.

Bruce Judkins, the company's vice president of electrical products, says the Schneider/Graybar partnership brings “powerful brand recognition and respect to our automation offering.” He says the company is continually evaluating its offering and will be adding additional suppliers to its product offering so that it can provide integrated solutions to customers. The company has already added some new industrial automation manufacturers to its line card, including Phoenix Contact Inc., Harrisburg, Pa., and SST Connectivity Products (Woodhead Industries), Northbrook, Ill. Graybar has also used the relationships its has with other electrical vendors, such as Hoffman Engineering, Anoka, Minn., and Belden, Richmond, Ind., to support its automation offering.

Graybar is bundling these products with complementary services to differentiate itself from other automation distributors, says Rob Bezjak, the company's vice president of market development. “One of our core competencies is bundling services,” he says. “We can pull in the pieces that one of our salespeople might need. It may be integrated supply or electronic ordering. We want to listen to our customers and deliver the services that they need.”

Another element that will determine the company's future in the automation market will be its ability to field a trained sales force and to provide a high level of technical training to customers. When Ken Hall came to Graybar's corporate office last year after six years in the field (most recently in New England) to take on the role of national product manager, automation, one of his first tasks was to help develop the company's business plan for automation. A big part of that plan was developing “centers of competency” in key geographic areas that Graybar salespeople and customers can depend on for training and support.

In addition to the automation specialists that the company has in place, Graybar has trained salespeople in its other market segments to recognize automation sales opportunities. Bezjak, who has spent much of his career in Graybar's comm/data business, says 150 of the company's salespeople for those products recently underwent training to apply their comm/data knowledge to potential sales opportunities on the factory floor.

On the electrical side, salespeople selling power-monitoring systems to factories or utilities that remotely analyze electrical systems are learning to ask customers what other types of facility data they may want to access remotely. An affirmative answer may lead to a sale of comm/data networking equipment to help the customer collect manufacturing production-run data via an Ethernet network, and then transmit this information by modem to offices around the globe.

When completed, two of the company's biggest internal initiatives in recent years will also support the automation initiative: the construction of a network of regional distribution centers and the installation of an enterprise resource planning (ERP) system. (See sidebar on page 30.)

With his 30 years of experience with Graybar, Pete Roettinger has a good feel for how to best utilize the company's national strengths on a local basis. As a district sales manager and branch manager in the field, he saw Graybar's efforts in the automation market grow over the years. In his present position as director, industrial market, he focuses on adapting Graybar's core competencies in other parts of the business to its automation efforts, and on using the company's broad package and solutions to increase its market share in the automation business. A big part of his job will be developing automation business at existing customers.

“Ultimately, our success will come from these relationships,” said Roettinger. “Our company understands that this is not a short-term task.”

GRAYBAR BY THE NUMBERS

Employees: 9,100
Locations: 275 branches
2001 sales: $4.8 billion
Senior leader: Robert A. Reynolds Jr., chairman, president and CEO

INVESTMENTS FOR THE FUTURE

To support its plans for market expansion, Graybar has embarked on some prodigious internal expansion projects — the construction of a national network of regional distribution centers and the installation of a new ERP system. Graybar operates 14 zone warehouses located in Lewisville, Texas; Austell, Ga.; Joliet, Ill.; Fresno, Calif; Cranbury, N.J.; Stafford, Texas; Taunton, Mass.; Youngstown, Ohio; Puyallup, Wash.; Rogers, Minn.; Charlotte, N.C.; Springfield, Mo; Hamilton, Ohio; and Riverview (Tampa), Fla. When the rollout of the logistics network is complete, Graybar will have 16 regional warehouses strategically placed nationwide enabling the company to ship orders to 98 percent of its customers within 24 hours.

The company's installation of a mySAP.com ERP system running on IBM servers and storage hardware will replace Graybar's Legacy technology with a comprehensive system for more effective collaboration and complete integration. The rollout of mySAP.com for Graybar's U.S. locations will be done in phases and will be completed by late 2004. When announcing its plans to replace its Legacy system, Robert A. Reynolds Jr., Graybar's chairman, president and CEO said, “Graybar has made a significant investment in our physical infrastructure over the last few years with our zone initiative. This is an investment in our knowledge infrastructure that will complement that investment and provide functionality and capabilities to run our business that we have never had before.”