A Whole New Game

Adapting to change is the name of the game for Ewing-Foley Inc., a Cupertino, Calif.-based manufacturers' rep. Over its 40-year history, Ewing-Foley has been fast to adapt to the needs of a changing marketplace and to the evolving sales strategies of its principals. For instance, the manufacturers' rep was quick to respond when one of its key principals for its northern California territory, Hoffman Engineering, Anoka, Minn., wanted to convert from a direct sales force in Washington to an independent rep agency. Gary Lessing, Ewing-Foley's president, saw an opportunity to establish a footprint for the agency in the Pacific Northwest, and in 2000 the firm acquired the existing Hoffman rep in Oregon and combined it with the best assets from Hoffman's direct sales efforts in Washington, including personnel and facilities.

Within two years, Ewing-Foley was able to demonstrate its value proposition to two other large principals, Panduit Corp., Tinley Park, Ill., and EGS Electrical Group, Rosemont, Ill. Like Hoffman, the two companies wanted to convert from direct sales organizations to independent reps in their Pacific Northwest territories. “We were in a unique position to be able to pull together the individual strengths of each of these complementary principals so the sum of the pieces was greater than the parts,” says Lessing. “The customer base responded favorably to this ‘solution set’ approach.”

Peter Ewing and Richard Foley founded Ewing-Foley in Los Altos, Calif., in 1967 to serve the needs of emerging high-tech businesses in Silicon Valley and other northern California markets. The agency is now organized into three independent divisions servicing the markets for electronic components (semiconductor and passive electromechanical product); electrical market (commercial and industrial products); and networking (enterprise and data center infrastructure products). Ewing-Foley operates from four company-owned facilities in Cupertino and Auburn, Calif.; Kirkland, Wash.; and Tigard, Ore. Its 68 associates now own a portion of the company in an Employee Share Ownership Trust (ESOT).

A recent challenge for the company has been figuring out how to continue serving key OEM accounts when they move their manufacturing to Asia. “In addition to the obvious expansions geographically, the globalization of our economy has been the real game changer,” says Lessing. “As a Silicon Valley-based company that also operates in the electronics business, we have been watching this change over the past 15 years, especially as it relates to the exodus of our large OEM manufacturing base to Asia. This has put tremendous pressure on us to change our thinking and business processes, so we get paid for our services that are still required at the customers' corporate and engineering locations that remain in our territory.”

The biggest change for Ewing-Foley from this more global emphasis is that the company now must communicate with its principals' sales forces, as well as customers' manufacturing locations outside of its geographically assigned territory. “Resources that were once spent for traditional inside and outside sales roles have shifted to more of an overall program management role that coordinates activities in many different geographic regions,” Lessing says.

The agency will have a much larger Asia presence in the very near future because it will provide some differentiated services abroad for its existing customers to assist them in their globalization efforts. “We do not see the average U.S. representatives doing this today,” he says.

Ewing-Foley is in the process of becoming a founding member of Advance Technology Source (ATS), which provides supply chain services to companies in its existing OEM base that now manufacture offshore.

“We have learned a lot over the past 15 years from our electronic business and we feel we can greatly assist those new to the process,” says Lessing. “It's not as easy as saying, “‘We're moving manufacturing to China,’ selecting a contract manufacturer and pushing a button. There are real issues, including keeping the OEM's design locations in the U.S. visible to the manufacturers (when no orders are being placed from those locations), managing ongoing engineering changes, facilitating design to production, and ensuring integrity to the bill of materials.”

Lessing says while some of these functions have been handled by reps in the past, because of “archaic compensation models,” Ewing-Foley has found it increasingly difficult to get paid appropriately for these services.

Ewing-Foley is on the cutting edge of marketing and operations in other ways. “The agency has set up systems and infrastructure that is quite scaleable,” says Lessing. “This allows us to adapt quickly to both the needs of our principals and market opportunities. Over the past six years, we have acquired four agencies and merged five direct-sales organizations into our company. We have expertise in assimilating disparate groups and forming a more cohesive and synergistic sales organization.”

Ewing-Foley is also looking at ways to help reps, distributors and manufacturers cut waste by sharing data more efficiently. Lack of system integrations was one of the major contributors to waste as cited in the white paper published by the National Electrical Manufacturers Representatives Association (NEMRA), Tarrytown, N.Y. (See “Eliminating Waste,” p. 38). While trying to solve this problem internally, Ewing-Foley saw a larger opportunity to solve the problem industrywide and has since helped launch an independent software service company, RepConcert, that helps reps and manufacturers “stay on the same system to facilitate the communications that currently go between them,” says Lessing. “We believe we can make a contribution to our industry by allowing other firms that may never have the time, money or resources to solve the problem benefit from our experience in this area,” he says.

Challenges down the road

In addition to utilizing technology to run the business as efficiently as possible, Lessing says market consolidation and declining commission rates will be two of Ewing-Foley's biggest challenges.

“Market consolidation is a fact of life on all fronts, so we have gotten used to it,” says Lessing. “In some instances, we have benefited from it. We have to articulate our value proposition to our customers and principals so we can continue to be relevant in any changes that are occurring. We focus heavily on end-users, as we believe there will always be a place for people who understand the needs and strategies of end customers.”

A decline in manufacturers' commission rates is also a major concern. “Commission rates have continually declined over the years,” says Lessing. “Manufacturers and reps will need to have some open and honest dialog as to what is being paid for the services provided. This will need to be done on a case-by-case basis, as each relationship is unique and there are many variables that will need to be considered in order to come to a equitable solution.”

Lessing says one of the keys to Ewing-Foley's future success is its philosophy to be more important to fewer manufacturers. “We have been able to do this by attracting and retaining significant manufacturers within their categories and creating strategies to grow with them in both new product areas as well as geographically,” he says. “We have been very flexible in molding our organization around their specific needs.”