As industry itself reaches into more and more areas of the world, getting the equipment needed to run that industry to the locations and projects where it’s needed when it’s needed has taken on increased importance. Valves, actuators and related equipment today are very much dependent on the distribution network.
The network has changed tremendously over the years, but the future looks rosy and promising for distributors, according to Sheldon Marstine, owner of Zenith Supply, Pittsburgh, PA. Marstine has been witness to what has happened through a long career that stretches back to working for the plumbing supply business his father started in 1946 with $7,000.
One of the most profound changes is that: “In my early days, the business had many small, independent supply houses, which you just don’t see much of today. Between buyouts and mergers, the distribution network has evolved to include some giants and not very many small companies,” he says.
It’s also changed its face, he says.
“Supply houses used to be like a department store, carrying everything from pipe fittings, valves and ball bearings to scotch tape, ladders and paint. After World War II, the industry began to specialize so that one company would offer a line of ball bearings or pumps or valves, but nothing else,” he explains.
“Then in the 90s, the mergers and buyouts began and now we have distributors with hundreds of branch offices stretched throughout the world often based on where end users are,” he says.
His own company has a different kind of specialization. Zenith Supply serves as a master distributor to other distributors of one manufacturer’s products (Velan)—it never sells directly to end users. Marstine explains how that business model evolved.
Up until the 80s, Zenith was a traditional distributor. The recession of the time made him rethink his setup.
“As a supply house, I had always been plagued by one problem in particular: finding that esoteric valve—one special product that was in short supply such as pressure seal valves or other high-pressure valves, but that a user needed right then,” he says.
Knowing that he wasn’t the only distributor going through that scenario, Marstine decided to look for a way to offer a product that might not otherwise be readily accessible and began partnering with Velan.
The model that results requires holding a huge inventory, which for Zenith includes just about any valve in the product line that isn’t custom-made.
“We have valves here that no other company on the planet probably has on its shelves,” Sheldon jokes.
Running a business with this model requires a formula a bit different than the traditional distributor: Price always falls to third in priority, after quality and delivery.
“However, price is also important so we try to be as competitive as possible, and still retain a reasonable return on our investment. Clients usually know what they want and are willing to pay to get it in time. These distributors already know that it won’t do them any good to go to someplace in Asia where they could get a better price if the result is a product that is going to fail,” he says.
MAKING THE MODEL WORK
According to Marstine, two of the key ingredients for success as a master distributor are having space for the widest range of inventory possible and having staff that can be productive.
“When my father started his plumbing business, we worked out of an office, my mother was the bookkeeper and our inventory was kept in a small storage room,” Marstine recalls.
In comparison, today’s Zenith Supply has more than 55,000 square feet of warehouse and a staff of 10, most of whom have many years on the job.
“With an inventory as big as ours, you might expect more people would be working for us. But I have a staff that does incredible things because they know what’s required, and they know they’ll be rewarded well,” he says. His second-in-command has 30 years, his bookkeeper 40 years and his office personnel 20 to 30 years.
He pays well, provides 100% health care coverage, encourages time off in a family crisis, and the staff socializes at the end of many work days.
As a result, “we have tremendous productivity. We’ll get an order in at 3 p.m. in the afternoon that’s a fairly good-size order, have it pulled and ready to ship the next day. Because of what we do, we face emergencies a lot and have many last-minute air freight orders, but we have learned how to react quickly,” he says.
Marstine says he doesn’t see many companies set up as master distributors, and he doesn’t think that situation will change anytime soon because of the cost of stocking such a huge supply. However, he says the distribution industry in general is bound for some excellent times.
“It’s a world market now. Just 40 or 50 years ago, nobody really considered exporting a valve or a fitting. That’s changed because so much of the world is now going through an industrial revolution, which is creating tremendous demand in many places,” he says.
Because exporting is part of everyday life, shipping has taken on a significant role in success, but shipping also has changed over the years, Marstine says.
“Back before trucking became deregulated, it used to take maybe a week to 10 days just for us to send something from Pennsylvania down to Houston,” he gives as an example. “Today, it take two days at the most, and it’s very rare for anything to get lost or misplaced in transport,” he says.
Another vital ingredient today is technology, which with an inventory as large as Zenith’s, has to be top-notch.
“We know where every single one of our valves are at all times, and we do quotes by Internet and turn those quotes into orders over the Internet,” he says.
The one thing that technology cannot do with a business model like his, however, is predict what will be needed on the shelf—one of the greatest challenges in distribution.
“If we were a drug store, we might order 200 tubes of a particular toothpaste during one month of the year, then when the month rolled around the next year, we might increase that by 2% or so. With us, we might have 100 of a particular valve product on the shelf, and that feels like a lot, but a distributor might be called to a special project that requires all 100 of those items at once. When you’re dealing with emergency situations, there is just no way to predict,” he says.
So how do they handle restocking?
“My second in command does some of it, but I do most of it myself. With so many years in the business, we’ve just developed a sense for estimating what we’ll need,” he says.
Marstine says his company is also not afraid to say “no” should something run out.
“If we can’t make a delivery need, we tell our customer so. We would much rather lose a sale than get into trouble with late deliveries because the most important thing in being a master distributor is building up trust with other distributors that we’ll do what we say,” he says.