Private labeling, selling through a force of independent sales reps and investing in high-tech equipment give this distributor the edge as an MRO supplier.
Lawson Products is an interesting company for electrical distributors to study for several reasons. The 45-year-old industrial distributor private-labels most of the products it sells; it uses independent sales reps instead of company-employed salespeople; and it arms its sales force with laptops loaded with a CD-ROM product catalog and the communications software and hardware necessary to send in orders from the field.
What makes Lawson's innovative sales, management and marketing strategies of even more interest to electrical distributors is that its salespeople call on the same types of customers as many electrical distributors do, and the company has fought and won the battle of adding value to what are essentially MRO product commodities.
Lawson sells approximately 30,000 industrial MRO components such as screws, nuts, rivets, hoses and hose fittings, lubricants, cleansers, adhesives and other shop supplies. The company had $250.2 million in 1996 sales, an increase of 12% over the previous year, and it sells to approximately 210,000 customers.
Two major product areas account for the majority of the company's sales: fasteners and fittings (45% of sales) and industrial supplies (50% of sales). The industrial supplies that the company sells include lubricants, cleansers, adhesives, drills, welding products, chemicals and other shop supplies. Automotive and equipment maintenance parts such as primary wiring, connectors and other electrical wiring, exhaust systems and other automotive parts account for the other 5% of sales.
Lawson sells these products nationwide with a distinctly different flair. It private labels 90% of the products it sells with the Lawson name. One investment analyst who followed the company for several years says Lawson executives believe the company's name is stronger than the brand equity offered by many of the commodity-type products it sells, particularly with fasteners such as screws, nuts and rivets.
If some of the products Lawson sells could be considered run-of-the-mill commodities, the strategies the 1,057-employee company uses to sell them decidedly are not. Along with private labeling, the company has taken the unusual path of hitting the street with a sales force made up of 1,841 independent reps. While Lawson executives declined interview requests to explain why they preferred independent reps, according to the "Foundations of Wholesaling" study published in 1996 by the National Association of Wholesale-Distributors (NAW), Washington, D.C., Lawson uses independent reps because it wants sales reps who are "independent, risk-takers, stable, hard-working and ambitious." These independent reps reportedly do not exclusively carry the product lines that Lawson distributes, but they don't carry specific competing lines, according to that publication.
These reps now rely heavily on a new electronic catalog that recently replaced a huge printed catalog. They have the electronic catalog loaded on their laptops and can print out color catalog pages, technical specifications and submit orders from the field. The computers also are equipped with electronic brochures on specific products or lines.
Lawson invests heavily in state-of-the-art materials-handling equipment as well. For instance, although the company was already averaging 99.5% fill rates, it wanted to improve on them in its Addison, Ill., distribution center. To manage that facility's 33,000 stockkeeping units (SKUs), it installed a five-pod carousel system back in 1995 at a cost of about $1 million.
With its high-tech approach to selling a package of basic MRO supplies, Lawson Products has proven that if a distributor adds enough value to commodity products, customers will respect the company as a valuable supply source.
Top executive: Peter G. Smith, president Founded: 1952, by Sidney L. Port, chairman of the company's executive committee. 1996 sales: $250.2 million, a 12% improvement over 1995. Employees: 1,057 company employees and 1,841 independent sales reps. Headquarters: Des Plaines, Ill. Products: The company distributes about 33,000 expendable maintenance, repair and replacement parts, as well as 12,000 production components (mostly fasteners) to the OEM market. Primary markets: Heavy-duty equipment maintenance (42%)-Operators of trucks, buses, agricultural implements, construction and road building equipment, mining, logging and drilling equipment and other off-the-road equipment; In-plant and building maintenance (39%)-Manufacturing and processing plants, as well as schools, universities, hospitals and government facilities; Passenger car maintenance (10%)-Auto service center chains, independent garages, auto dealerships, car rental agencies and other fleet operators; and Original equipment manufacturers (7%)-Industrial plants engaged in processing or manufacturing activities.