Customer Focused
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By Alan Dorich   
Sunday, 15 May 2005
smc Ferguson Enterprises Inc. focuses on attracting and developing quality associates to provide top-quality service to its customers.
Ferguson Enterprises Inc. focuses on attracting and developing quality associates to provide top-quality service to its customers.
Claude “Chip” Hornsby, president and CEO of Ferguson Enterprises Inc., says that his company is committed to its associates.

“By investing in their personal and professional development, we're able to provide our customers with solutions and services beyond what anyone else in the industry does today,” he explains. “We have a simple philosophy that we live by in our organization – take care of your associates and they will take care of your customers.”

According to Hornsby, Ferguson works “to provide additional services beyond what anyone else in the industry does.”

Staffing its organization with quality associates is a top priority, Ferguson says. The company adds that it invests a tremendous amount of resources on recruiting, developing and training its associates.

“At Ferguson, we know that the quality of our people is the most valuable asset we can offer,” Hornsby explains about Ferguson’s staff. “That's why we recruit them carefully, train them well and back them up 100 percent in their efforts to provide the best service possible.”

The company, based in Newport News, Va., is one of three North American companies that operate under the umbrella of Wolseley North America. Under Wolseley, Ferguson operates with Stock Building Supply and Wolseley Canada. The company is a coast-to-coast wholesale distributor that supplies residential and commercial plumbing products, as well as builder products, such as lighting and appliances, and industrial pipe, valves and fittings. It also supplies heating and cooling equipment, waterworks products, and tool and safety products.

Through its showrooms, trade counters and sales force, Ferguson serves a diverse mix of customers in businesses and industries. These customers include plumbing, mechanical and waterworks contractors, kitchen and bath dealers, builders, large industrial businesses, manufacturers and municipalities, as well as homeowners.

Helping the Customer
Ferguson believes it has built an impeccable reputation with its customers by stocking an inventory of parts and supplies, as well as locating and delivering hard-to-find specialty items. “At Ferguson, we continually look for opportunities where our excellence in distribution can contribute to our customers' bottom line,” the company states.

According to Ferguson, a great example of this is its Integrated Systems Division, which was created as a result of trying to meet the needs of one of its customers. This division takes on the task of procuring and warehousing supplies for entire manufacturing facilities. This way, the manufacturing facilities are able to focus on its primary products.

Ferguson says it must remain open and receptive to meeting the changing needs of customers. “At Ferguson, we realize change is inevitable,” the company states. “That's why adaptability is such an important part of our corporate culture.” Wolseley North America is part of Wolseley plc, which, the company says, is recognized as “the world's No. 1 distributor of heating and plumbing products” and a “leading supplier of building materials to the professional market.” Wolseley is an international business operating more than 3,600 branches in 13 countries, including the United States and Canada in North America.

According to Wolseley, its strength involves operating strong national businesses in home markets, retaining local brand superiority and continually exceeding customer expectations through its product offering and service. Based on an entrepreneurial foundation, Ferguson was founded in 1953 by Charlie Ferguson, Ralph Lenz and Johnny Smithers, conducting business under individual names – Lenz Supply and Smithers Supply. The company started with two locations in Washington, D.C., and Birmingham, Ala., with the purpose of servicing small plumbing contractors.

In 1954, a third location, Crossroads Supply, opened in Alexandria, Va. Crossroads served as the operating company for all three locations. In 1959, the Peebles Supply division was opened in Newport News by David Peebles. Peebles would eventually become the second president of Ferguson, focusing on expanding the geographical footprint of the company. Under the leadership of Peebles, Ferguson says it achieved the status of an industry leader by “idealizing the American dream of owning and operating a business.”

Managers were recruited and hired with the opportunity to open branch locations under their own names, structuring their businesses by basing them on the demands of local markets. Anticipating the need to provide well-trained resources to support continued growth, Peebles instituted a management-training program, that was designed to “attract the best and brightest the work force had to offer.”

In 1969, Peebles became president, changed the name of the managing company to Ferguson Enterprises Inc., and discontinued the practice of naming locations after the managers that opened them.

Peebles’ first official trainee would be Charlie Banks, who now serves as group chief executive of Wolseley, headquartered in the United Kingdom. Peebles continued the philosophy of aggressive expansion.

John Stegeman, COO of Ferguson, says Peebles also recognized the need to bring “entrepreneurial-type individuals” to the company. “The biggest limiting factor is finding quality people,” Stegeman admits. “The need for quality trained people is paramount.”

In 1982, Ferguson was acquired by Wolseley plc. At this time, the company was a $142 million business with 76 locations in 11 states. With Wolseley's financial strength, the company continued to grow under the leader ship of Peebles. In 1989, Banks became president of Ferguson, while Peebles was appointed chairman, before ultimately retiring in 1994. Ferguson believes that Banks is a testament to Peebles' foresight. According to the company, Banks' vision has served Ferguson well during its growth.

Under the direction of Banks, Ferguson grew from $600 million in sales to more than $3.3 billion, with 500 locations in 38 states, as well as the District of Columbia, Puerto Rico and Mexico. Under Banks' leadership, the company embarked on a re-engineering program.

With Banks as president, Ferguson was fast approaching a billion dollars in annual revenue. Banks realized that in order to leverage this ever-growing organization and provide unique services and capabilities to the customer, Ferguson was going to have to restructure its current model.

As a result, a supply chain model was developed that utilized distribution centers to improve service levels and fill rates to customers, and created efficiencies for its vendors. Along with restructuring the company, Ferguson says that Banks set a standard for continual improvement and change.

In 2001, Banks became group chief executive of Wolseley, while Hornsby moved into the positions of president and chief executive officer at Ferguson. According to the company, Hornsby presides with a philosophy of “settling for nothing less than the best – in products offered, in customer service provided and in the people who are members of the Ferguson team.” The company says this philosophy continues to be its competitive advantage today.

Currently, Ferguson's network covers more than 926 locations, and has an inventory investment of $1.2 billion. “We operate an internal delivery service, which moves material from nine major distribution hubs to Ferguson branch locations and customers,” the company explains.

Ferguson has more than 16,000 associates and a delivery fleet of more than 3,000 vehicles. It also has locations in Barbados and Trinidad. In North America, Hornsby says that all three Wolseley companies did slightly more than $10 billion dollars in 2004.

“We announced that in the United States, Ferguson grew at a rate of nearly 21 percent for the first half of this fiscal year,” Hornsby states. In terms of its growth, on average, the company says that it has grown at a compound rate in excess of 17 percent per year for the past 25 years. At this rate, Ferguson states that it doubles in size every 4.5 years. The company says that its entire management approach is geared towards using this growth “to attract, motivate and retain some of the best management talent in the business.” Ferguson says that its mission includes such principles as continually improving its performance, partnering with vendors that will help the company meet its customers' needs and becoming the premier customer-oriented supplier of value-added services.

Other important aspects of this mission include the company striving to provide its associates with a work environment that promotes opportunities for personal growth and career development; to make a contribution to its communities as individuals and as a company; to succeed as a business; to provide a return to its shareholders and to operate with integrity and achieve its mission in an ethical manner.

A Strong Company
Stegeman says Ferguson is the largest wholesale plumbing distributor in the United States, as well as the “second- or third-largest waterworks and HVAC distributor.” The heating and air conditioning business, still highly fragmented, provides the greatest opportunity for future growth, Ferguson says. An additional asset for the company, Stegeman says, is Wolseley, the parent company of Ferguson. “They're in 13 countries and exclusively in the distribution industry,” Stegeman declares. “Ferguson happens to be the largest company Wolseley owns, in terms of revenues.

He also credits the company's work force, saying that Ferguson has people with a great deal of experience. “We have associates who have grown up in this industry,” Stegeman explains, adding that these are individuals who have created and defined the company's culture.

He doesn't believe that any of the company's national competitors spend as much time, energy or money on recruiting such talented people. “We devote a significant amount of time to hiring and training the right people,” he says. “You don't just grow at the rate that we're growing without making significant investments in recruiting and training.”

Stegeman is especially proud of the company's management team, describing it as “extremely proactive.”

“It's a focused group of individuals working in a unified direction,” Stegeman explains. “I consider that a huge strength.” He cites the company's geographical platform as an asset for Ferguson, as well.

“With a new location scheduled to open in Maine, we'll have a presence in all 50 states,” Stegeman explains. “The opportunity for us to grow market share – regardless of whether the market is growing or not – is dramatic,” he explains.

Core Businesses
John Wilcox, Wolseley North America senior vice president of alignment, explains how the concept of core businesses was developed. “When Chip Hornsby became president and chief executive officer of Ferguson, his executive team agreed it was time to segment the business by the four major customers it was serving at that time,” Wilcox says, adding that these businesses were residential, waterworks, commercial/industrial, and heating and air conditioning.

“Executive vice presidents were assigned responsibility for each area, which has resulted in greater focus to developing programs for our customers and vendors,” he states. Wilcox notes that it has also allowed the company to better leverage talent and resources.

“The residential group contributes 40 percent of our sales,” Wilcox says. “We provide our building, remodeling and plumbing contracting customers with products and services for the entire residential spectrum – from customer luxury to competitive track homes.”

“Our role is to serve as a liaison between contractor and end-customer by guiding homeowners through the selection process, while keeping in mind budgets and ease-of-installation,” the company says. “Products sold to this group are what we call 'inside-the-wall' rough products like pipe, valves and fittings, as well as ‘finished products’ like bath tubs, sinks and faucets.”

As it has grown, Ferguson says it has had to move away from cities in order to acquire larger facilities and yards. “Ferguson Xpress is our vehicle for returning to the city to get back in touch with the small repair contractor,” the company explains. “Our strategy is to saturate high-population markets with multiple locations, with 50 stores opening in fiscal year 2005 and an additional 100 planned for fiscal year 2006.”

“Ferguson Xpress stores are stocked with frequently used items with an emphasis on repair,” Ferguson says. “Daily replenishment allows us to reduce inventory dollars and store size, and also gives customers next-day access to any product stocked at the main distribution facility in that market.”

“Offering convenience, as well as consistent inventory and pricing throughout the city, positions us as the preferred wholesale supplier for counter picks-ups for the small plumbing contractor,” the company adds.

More than 85 percent of Ferguson's showroom business comes from referrals of customers by the plumbing and building trades. “To assist our contractor's customers in the selection of products, we have created a network of showrooms called Bath, Kitchen and Lighting Galleries,” the company explains. “Depending on the size of the market, showrooms can range in size from 1,000 to 13,000 square feet,” Ferguson states. “Our showrooms are staffed with professionally trained consultants, who guide and assist contractors and designers and their customers in the selection of plumbing fixtures, lighting and appliances.”

“Frequently serving as extensions of the contractor's business, [the showrooms] offer a wide range of faucets, fixtures, lighting, appliances, fireplaces and accessories,” the company says. “But the real plus is product-knowledgeable associates who have the capability to work with the homeowner and contractor to take the guesswork out of building and remodeling.”

Ferguson adds that roughly 25 percent of its sales are derived from contractors or public institutions that fall into the commercial, industrial or mechanical group. The company specializes in product services like end-finishing, fabrication or actuation.

The company's actuation capabilities include pneumatic, hydraulic and electronic automation of a majority of quarter-turn valves in the market. Ferguson says it accommodates multi-turn automation and maintains an inventory of pre-assembled valves for quick delivery.

The company adds it is also capable of valve modification and a stock of accessories that include positioners, limit switches, bracketry and linkage. “Our state-of-the-art end-finishing facilities operate 16 hours a day, five days a week to maintain a large stock of cut, grooved, beveled or threaded stainless, carbon or copper for immediate delivery,” Ferguson says. “Custom-end finishing services are also available.”

Seventeen percent of Ferguson's business is contributed by waterworks contractors, land developers and municipalities. These customers purchase underground pipe, valves and fittings that are used for storm water management and water and sewer systems that ultimately support the infrastructure of the country.

Ferguson says it has been in the waterworks business since the mid-1980s. “Ferguson's resources and financial stability are critical factors to success when dealing with the vast scope of products typical for the industry,” the company states. With annual sales in excess of $1 billion, waterworks is one of Ferguson's fastest growing businesses.

Ferguson says that 10 percent of the company's business also comprises HVAC equipment, parts, installation supplies and accessories. “Our customers in this group are heating and air conditioning contractors, mechanical contractors and builders.”

In HVAC, Ferguson says it is the third-largest HVAC supply house in the nation. The company says it has territorial arrangements with heating and cooling equipment companies that include Goodman, Rheem-Rudd, Trane and York.

Specialty Businesses
The company has also established businesses that don't fall into designated categories. “One of these is a division that serves the role as a master distributor, where the company utilizes its depth and breath of inventory to fulfill orders from bath and kitchen dealers and other wholesale distributors,” Ferguson explains.

Ferguson adds that Ferguson Fire & Fabrication is the largest distributor of material and fabricated pipe to sprinkler contractors in the United States. The company has 47 locations coast-to-coast in the fire sprinkler business. More than 15 are fabrication shops devoted exclusively to this business.

In other areas of Ferguson's businesses, the company's commitment to associate training, new branch openings and strategic acquisitions drive exceptional growth in this market.

In Ferguson's tool and safety products program, the company says it offers more than 120 product lines of power tools, hand tools, safety products and accessories.

“Our Integrated Systems Division manages the procurement of MRO, leaving our customers free to focus on their core competency,” Ferguson says. “The procurement of everything required to run a plant, from toilet paper and cleaning products to lab instruments and office supplies, is left to a Ferguson associate, usually on the premises.

“Our customers in this segment are primarily manufacturers in the aerospace/aircraft, automotive, power generation, medical, mineral refining, locomotive and semiconductor industries,” the company states. “However, the concept is filtering down to large contractor customers that fall into other business groups,” the company explains.

This division has a record of “documented, bottom-line business impacting cost savings.” The company says it is able to customize solutions for its customers' requirements.

Integrated Services
According to Ferguson, its Integrated Systems Division has provided customized MRO/indirect material supply integration and inventory management solutions to Fortune 100 companies since 1989. Through these services, Ferguson offers Web ordering, sourcing and procurement. It also offers inventory management, electronic auctions and e-commerce solutions.

Ferguson offers three basic service models under its Integrated Systems Division, depending on the customer's size, infrastructure and indirect material needs.

In 1989, the company decided to form a separate business unit within Ferguson, under the direction of Doug Kieninger, which would be independent of the company's traditional distribution. Ferguson says this has allowed it to align more closely with its customers in one-on-one relationships.

“Our locations are dedicated to a particular customer in each case,” Ferguson says. “The flexibility and customization this allows is extremely important in designing an ongoing, successful, continuously improving program for our customers.”

“With customers utilizing our resources in sourcing, procurement, inventory management, electronic commerce installation, catalog content management and conversion, auctions and reverse auctions, logistics and remote e-commerce solutions, Ferguson has something to offer to anyone considering streamlining their operations to reduce expenses and increase efficiencies,” the company states.

Focus on Logistics
While still under Charlie Banks' leadership in 2001, the company says it recognized the need to undertake a massive re-engineering initiative. With its rate of growth during its first 47 years of operation, coupled with an optimistic outlook for the future, the company's senior management was aware that re-structuring was a high priority – particularly in the way it managed inventory and delivered product to its customers.

Ferguson's major impetus and driving force behind this decision was its goal of delivering exceptional customer service. The company’s ultimate goal was to develop a phenomenal competitive advantage.

John Garrett, senior vice president, played an instrumental role in the early development of the successful distribution network enjoyed by Ferguson today. He says, “To begin the process of evaluation and restructuring, an extensive survey was conducted in 1996 to assess the needs of our customers and vendors. The survey results were very clear and very consistent.”

Hundreds of customers had responded to let Ferguson know that they wanted better fill-rates; accurate orders and billing; on-time deliveries; reliable service; and competitive pricing. All of these were areas Ferguson believed it could improve upon and deliver what its customers wanted. Ferguson says its senior management team had the ammunition it needed to develop a better, more efficient way to structure the company's logistics and supply chain programs.

As it embarked on its new plan, Ferguson paid careful attention to its first 40 years in the business to determine what had worked and what had not. The company felt it was important to retain the best features from its past success while incorporating new technology and improvements made in the distribution industry. As explained by Al Byrd, Wolseley North America's senior vice president of supply chain, “Up until this point, individual branches had been responsible for the implementation and execution of their own supply chain functions.” This system required that each order had to be negotiated on an individual basis. Byrd continues, “This localized focus meant that we were not optimizing cost to serve as effectively as we should have been.”

Ferguson says it recognized that in its early years, the company hadn't capitalized on the idea of coordinating and working with its vendors to anticipate demands as well as it could have. In the previous system, branches placed orders directly with a long list of vendors and managed their own local inventory. Stocking massive amounts of inventory was costly, both in terms of space to warehouse a wide variety of products and in terms of money invested in this inventory. Another down side of this process was that vendors were left to deal with different Ferguson branches on an individual basis.

According to Hornsby, “We began to realize that although branches were able to establish a solid base of relationships within their local markets, as an organization, we were not effectively optimizing the supply chain based on national volume. Building strong relationships with our customers has been a mainstay of our success, but we needed to find a way to do both.”

From the 1999 survey, Ferguson also learned something about its vendors. According to the company, it learned that its vendors were much more interested in developing large volume customers and that committed partnerships were very important to them. Vendors wanted to be able to focus on manufacturers and not on distribution.

Developing New Systems
Armed with the valuable perspectives of both customers and vendors, Ferguson began to make radical changes. Instead of leaving the responsibility for fill rates, accuracy and on-time delivery in the hands of individual branches, it began to focus on an entirely new model.

With the creation of a national distribution center/logistics network, Ferguson said it had an opportunity to leverage the best of the old and the new. Local business relationships could now be extrapolated into relationships with national vendors to deliver the best value proposition.

After extensive planning and research, Ferguson was ready to take action. As its initial foray into automated distribution centers, the first site chosen was an existing 225,000-square-foot facility located in Elkin, N.C. Although at the time, Elkin was considered a national distribution center, it would be the smallest of its future facilities, the company declares.

But, Ferguson says that it proved to be a valuable learning experience. Byrd continues, “As a pilot, the Elkin Distribution Center provided Ferguson with an opportunity to see what would work and what wouldn't. In the earliest stages, we were able to identify some of the changes that we would need to make as other regional DCs were brought online, not only in the physical plant and layout, but also operationally.”

At the opening of Elkin, Garrett said, “One of the reasons behind Ferguson's success is that we are able to get our customers the right products at the right time at the right price.” Ferguson says that it remains true to its devotion to providing excellence to customer service, though it is focused and committed to using the latest technology and methods available.

Within a few years, Ferguson expanded its distribution network to include additional facilities in Pomona, Calif.; McGregor, Texas; Front Royal, Va.; and Fort Payne, Ala. To give large national customers the opportunity to walk into any Ferguson location and buy the products they need to conduct their business, these regional distribution centers were able to make product available with a one-or-two-day delivery.

Ferguson says two of these facilities are currently undergoing significant construction projects to increase the square footage of the locations. This is to enable business to grow.

According to Steve David, director of distribution centers at Ferguson, “Building a logistics model comprised of national and regional distribution centers has established a replenishment path which ensures maximum fill rates.”

With the opening in May 2005 of Ferguson's newest and largest distribution center, the growing network now includes eight strategically placed facilities. The company believes that this geographical placement provides it with a national presence, while also providing room for growth and expansion.

“Opening the newest and – to date – Ferguson's largest distribution center is a 609,000-square-foot facility located in Waterloo, Iowa,” David explains. “After conducting an extensive search throughout a seven-state region, this 134-acre location was carefully selected to provide optimum service to clients throughout the Midwest.”

The company also says the property's size provides it with room for additional growth. Hornsby adds, “A future expansion is part of the company's mission to expand its market share in the Midwest.”

Ferguson says it takes great pride in the development of its distribution network, which it also believes has raised the bar for its competitors. It is also proud of the hardworking and dedicated group of associates who work in a very different environment than Ferguson's normal sales locations.

“If associates at any of Ferguson's distribution centers were asked about what makes their operations successful, they would be quick to tell you that they are now able to move much greater volumes of materials more efficiently and more accurately than ever before,” the company declares.

“They understand that their mission is to provide quality customer service while reducing the cost-to-serve for branches,” Ferguson explains. “Using sophisticated warehouse management technology allows the centers to operate with consistency and accuracy.”

Today's distribution network includes locations that are equipped with pipe yards, copper buildings and fabrication shops. These enable Ferguson to land some very big jobs including car plants, new stadiums, commercial buildings and other industrial plants.

Ferguson says these facilities operate in highly automated, high-technology and highly structured environments. “Just touring one of these massive facilities has been enough to encourage some customers to increase their business with Ferguson,” the company states.

The company says that the branches have benefited tremendously from this progressive plan.

“They are now able to stay focused on selling within their local markets and can offer a wider variety of inventory without committing financial or warehouse resources,” Ferguson explains. “In many cases, they can sell based on same-day shipment. Procurement is now done electronically and inventory replenishment calculated nightly.”

Ferguson says its logistics network provides a great competitive advantage through enhanced customer service, higher fill rates, broader product offering, quicker response time, product reliability and competitive pricing.

“Our distribution network plays an increasingly important role in satisfying our customers' need for just-in-time delivery,” Byrd says. “Our logistics strategy is designed to position us on the cutting edge of distribution excellence, using the best available technology to ensure quick, efficient movement of product, accurate inventory controls and effective inventory management.”

“We feel strongly that our dedication to staying in tune with the needs of our customers will continue to differentiate Ferguson in our markets,” Byrd adds. Ferguson says that as interest rates go up, the volume of its business in new construction has the potential to slow down, but the repair and re-model work typically increases. Stegeman says residential construction influences the level of commercial construction performed, and that the business climates are extremely good right now.

Stegeman sums up the positive and optimistic attitude of Ferguson's work force, “Regardless of market fluctuations, we're adaptable. We've got a track record of doubling our size and earnings,” he explains. “We'll find a way to grow.” Stegeman describes the working environment at Ferguson as “vibrant and exciting,” adding that there are “growth plans built into every operation to expand our business.” “We count on local management throughout our network to expand our strategy,” he states. “We also have an understanding [of] where the fastest growing business opportunities are in the United States.”

He also believes the attitudes in the company's branches are as good as they could be: “We have a culture that grows from the bottom up.”

Stegeman emphasizes the company's need for talented branch managers. “Headquarters can come up with many initiatives, ” he explains. “We have great talent in the field, capable of not only great execution, but also expanding these initiatives.

Consolidation of Services
In March 2005, Wolseley announced that the three entities in North American would be put under the umbrella of Wolseley North America. According to Hornsby, Wolseley acquired Stock Building Supply in the mid-1980s, while Wolseley's Canadian operation was acquired in 2001. Larry Stoddard, senior vice president of business development for Wolseley North America, calls this a “consolidation of services.”

Wolseley North America will have its headquarters within Ferguson's corporate offices in Newport News.

Although Hornsby retains his role as president and chief executive officer of Ferguson, he also is the chief executive of Wolseley North America. From this position, Hornsby oversees all three companies, works with the executives of the three organizations and identifies opportunities to leverage the talents and resources in the three entities to create unique solutions for customers. Banks expressed confidence in the change. “Wolseley has made enormous progress in developing the North American businesses over the years through acquisition and organic growth,” Banks said in a statement.

“We have a market-leading presence in our business areas which provides a unique foundation on which to build an integrated North American business,” Banks stated. “Chip has done a fantastic job growing Ferguson and he now has the opportunity to combine the strengths and resources of our three businesses to drive our growth going forward.”

The group also reported it saw opportunities for leveraging resources and the infrastructure, achieving significant growth objectives and improving trading margins. The North American management team will be focused on strategic planning, managing the assets and growing the business organically and through acquisitions. Stoddard stresses, however, that this is not a merger. “We're going to be an operating company that looks to develop synergies between the different companies,” he declares. “All the while keeping separate interfaces with the customer.” Hornsby says though Ferguson will still operate as a separate entity, it will be able to provide extra services. “We want to combine beneficial operations,” he states. “We can supply (customers) with the entire package.”

Fenton Hord, CEO of Stock Building Supply, also believes that the consolidation will provide benefits. “It's an opportunity to take North American resources and get more bang for our buck out of combined efforts of our organizations, but allow the organizations to remain independent of one another,” he says.

“We plan to use all three organizations in a combined format and cater to homebuilders or homeowners who are building a home,” Hornsby told the local newspaper, The Daily Press. “The homeowner would make the selection and the contractor would buy the materials to install it.”

Hornsby explains that while Stock Building Supply sells most of its products to homebuilders, Ferguson sells most of its products to subcontractors. With this consolidation of services, processes are made easier for its customers. “It's all going into the same house,” Hornsby states. “We're able to go in with separate identities and work together to package and streamline the whole supply chain.”

“It really does make it easier for homeowners to go to one place and coordinate their selections,” Natalie Miller-More, marketing director for Wayne Harbin Builders, told The Daily Press. “The selection process can be very time-consuming.”

“Consumers want the convenience of buying as much as they can from one place,” Stegeman commented. “That's why Wal-Mart has been successful.” Although the three components of the North American structure will continue to sell the same items they sell today, there will also be new store openings and acquisitions, with a senior vice president responsible for each area. There will also be an individual responsible for the supply chain for the continent, as well as strategy.

Hord says that it will be incorporating Ferguson Xpress stores in 17 of its Stock Building Supply locations. It also has developed a joint showroom with Ferguson in North Carolina, as well as a joint repairing and remodeling showroom in Alexandria, Va. He adds that the company is pleased with the performance of the Ferguson Express stores in joint locations.

“Many of the construction components needed for your home may be purchased from Stock,” Stegeman explains, adding that the customer can then come into Ferguson, to buy plumbing and air conditioning products, as well as appliances and lighting.

This is exciting for the contractor because instead of having to go to two places, he can now go to one.

Hord says this consolidation has also allowed the companies to come together to leverage volume purchasing on indirect-spend items, such as uniforms, cell phones, trucks, gasoline and tires.

“We're also now able to capitalize on massive purchasing power for health plan administration by doubling the number of associates and dependents participating in our plans,” the company adds.

Hord does not feel, however, that many jobs have been affected by these changes. Although neither Ferguson nor Stock Building Supply sells wet concrete or electrical supplies, he feels these are areas the company may expand its sales into later. With these changes, one could expect some culture differences.

“There's a great degree of pride in the different companies,” Stoddard admits. “We recognize that this isn't about competing. This is about providing better value for our customers.”

“You've got to put your egos aside and develop a new model that becomes more productive and efficient,” he explains. “If we do it right, we're going to provide great value for our customers, shareholders and associates. We'll begin to set the bar for our industry.” Stoddard says the management groups for the companies have gotten together at meetings and social events. He now believes that the companies are at stages where they are beginning to understand each other, as well as their goals.

A Strong Company
Ferguson has a tremendous commitment to customer service, Hornsby says. “In our situation, we don't have anything unique in our warehouse, no exclusive products,” he explains. “We've got to be able to distinguish ourselves by delivering exceptional customer service.”

In order to find the areas where it can improve its customer service, Hornsby says that Ferguson spends a lot of time surveying its customers. “We can enhance the value that we bring to our customers' businesses,” he explains. “It's primarily in the logistics and the supply chain part of the business.”

According to Hornsby, the company interviewed thousands of its customers, as well as used outside sources. In this process, the company asked its customers what it did well and where Ferguson needed to improve.

Where Ferguson needed to improve was the area where the company put most of its emphasis, Hornsby states. Ferguson found that it needed to work on its ability to make jobs run more smoothly and offer a wider variety of products. “The more products we can provide to them in a coordinated fashion,” Hornsby notes, “the easier it is for the contractor.”

It was because of these surveys that Wolseley considered consolidating its services. “We discussed it over the last couple years,” Hornsby explains. “It made sense after going out and analyzing the business for ourselves.”

The company also strives to provide top-notch service, Stoddard says. “We're about [creating] value for our customers and associates,” he explains. “Customers are rewarding us with their business. We wouldn't be growing at this pace if they didn't believe we were providing them with good value.”

Pride and Camaraderie
Ferguson believes that its associates “are known for their energy, enthusiasm and great attitudes.” According to the company, their associates develop friendships with each other and build camaraderie at its branches, which it feels is a key to its success and its unique culture.

The company also feels that a strong cultural component for Ferguson is the way it is organized in autonomous branches, which empowers associates at local levels to meet the needs of their customers. Ferguson feels that this structure provides the best balance, as well as incorporates the advantages of a small business within a large corporation.

“Advancement is based on merit, and the company's tradition of unprecedented and unwavering growth creates great opportunity for each associate while promoting an air of optimism,” the company explains. “It all adds up to a work environment that is rewarding in every sense of the word.”

“The success of our company hinges upon our ability to maintain a strong relationship with our customers and our associates, and we take our responsibility to both very personally,” Hornsby said in a statement.

Stoddard says that the associates at Ferguson also have pride in their work. “People believe in what we do,” he states. “There's a lot of individual and collective pride in what we do for our customers,” he adds. “That's an important component for why we're able to grow and be successful.” “It's more of a commitment to the people you work with,” Stoddard states. “We're very proud of the culture and the commitment within our companies.”

Important Initiatives
In January, Ferguson started an advisory council with the Association of Independent Manufacturers Representatives (AIM/R). The new council will address a variety of the issues facing supply chain participants and include concerns related to customer promotions and loyalty programs, the rebate/commission program structure, the distribution centers' effects on wholesaler rep relationships and private labeling initiatives.

Ferguson hopes through its initiatives to encourage joint solutions to common problems. It also hopes to identify ways for the company and the representatives to expand business opportunities while reducing costs and increasing value in the supply chain. The council includes members of AIM/R and Ferguson management.

Jim Feltman, senior vice president of strategic planning for Wolseley North America, says that many leaders in Ferguson were enthusiastic about strengthening a partnership with representatives across America.

“We view the independent rep as an essential member of the supply chain, as well as a vital element of Ferguson's overall success,” Feltman said in a statement. “Our goal is to be easier to do business with, and this forum provides us with the opportunity to listen closely to ways that we might improve in that area.”

According to Stegeman, Feltman is also responsible for Ferguson's customer loyalty initiative, adding that Feltman's job includes developing related training modules that are used at all of the branches.

Through this initiative, Ferguson trainers go into their branches and train delivery, warehouse and sales personnel to provide memorable service for the customers.

Though Ferguson has never been a company big on mandating, Stegeman says that the time has come for the company to take action. The company has started to implement programs to ensure it is providing a consistent experience in all its locations.

“We just feel that training is so important,” Stegeman declares. “We live in a world where customer service is not at the level it should be.”

Over many years, Hornsby says, Ferguson has developed an extensive campus recruiting system, starting its training at the ground floor in the company's warehouses.

“We've been bringing 400 to 500 young men and women into our organization each year,” he explains. “This year, Ferguson will hire over 1,000 college graduates into their management training program.”

Hornsby feels that through the company's investment in people and leadership, Ferguson can perpetuate growth. “We've found by recruiting and hiring college graduates, as well as experienced industry candidates and those with prior military experience, we're positioned to grow at a rapid rate,” he says. “We're also focusing on local hire initiatives and working with branch managers to boost hiring in this area.”

Although the graduates aren't on the warehouse floor for very long, he notes that they receive a great deal of experience, learning the company's distribution system, having face-to-face contact with customers and developing an understanding of the business.

Hornsby says that he has been with Ferguson for 27 years. “I graduated from Virginia Tech with a major in education on a Sunday and started [at Ferguson] on a Monday,” he explains. Hornsby says that at the time, he had a lot of offers, some from Fortune 500 companies, but he has obviously found Ferguson to be an opportunity worth trying.

“Ferguson devotes a great deal of time and resources to recruiting and training quality people,” the company states. “After all, the long-term success of the company hinges upon these efforts. A commitment to recognizing and cultivating individual talent has been a primary reason for the company's success over the past 50-plus years.”

Stoddard, a graduate of Auburn University, feels that the company has a “very efficient” recruitment program. He says that Ferguson has utilized this process for a long time: “We've been doing this for so long, it's almost institutionalized within our company.”

Like Hornsby, Stoddard is also a product of this program. He compares the environment of Ferguson to that of a fraternity or a sorority. “The people that I met, I liked a lot and connected well with them,” he states. “We stay because we enjoy the people we work with so much and they keep us focused and challenged.

“The reason they're here is to learn the industry,” he explains about the recruits. “These men and women have come to work for us because they believe in the growth model of the company.”

Stoddard also believes that if the company does not make any effort to grow, then its associates will seek work elsewhere. “If we aren't able to offer advancement opportunities through continual growth, we will not only lose those associates, we will also lose the time and money we've invested in their development.”

In addition to their impressive training program, Hornsby also acknowledges the emphasis placed on executive development. On an annual basis the company also participates in advanced educational programs at various universities, including Duke, Virginia Tech, University of Virginia and The Darden School of Business.

Hiring
Stoddard says Ferguson’s hiring process is broken into two phases, recruitment and training. “Over the years, we've developed relationships with a lot of college placement offices,” he notes, adding that the company depends having on a diversified work force.

Ferguson begins by taking its candidates through its customized interview process, with a set of preliminary on-campus interviews leading up to another interview where recruits visit one of its regional branches.

The company will bring in management from the geographic area it is recruiting from, and each of the managers will have three different meals with the students, sitting with them in a social environment.

This provides a great opportunity for the students, Stoddard feels. “You're talking to the people who run [the company],” he explains. “They get to meet the person who's possibly going to hire them.”

In its training program, the company familiarizes students with company products and procedures. It's during this process that trainees also develop contacts and friendships that Ferguson says will be invaluable.

The training can take new hires into numerous directions, Ferguson says. These can be based on individual interests, skill sets and opportunities. For example, within the sales training schedule, the trainee receives warehouse, counter sales and inside sales training.

Some of the training at Ferguson is learned on the job, while some of it is learned through computer modules or through self-study programs, Stoddard says. But usually, after 18 months, the trainees have learned about the company and its industry, he believes.

Stoddard says the fact that the program starts them out on the ground level is a good thing. “Your first day at work, you're loading trucks,” Stoddard explains. “You've got to learn the business from the base up.

“It's important to respect people who work in all aspects of the business,” he states, adding that this “from-the-ground-up” experience instills a better understanding if the trainees later manage those departments.

“By working alongside other associates, you develop a great degree of empathy and respect for what that job is and what that person does,” he asserts. “You've got to have that flexibility. The kind of person who has that flexibility is the kind of person we look for.”

In 1985, after graduation from Virginia Tech, Stegeman also started with Ferguson as a management trainee. “Eventually, to become the manager of a location, you would have worked in all the positions you're typically responsible for managing,” he explains. “It has really driven our culture since our inception.” Stegeman also believes that it is the foundation for the company.

“As you grow, certainly there [are] incredible challenges in terms of recruiting that many people and getting them trained,” he says, adding that the company gives its trainees experience so that they can be more productive and efficient. “Initially, most of the people we hire have limited knowledge of the construction industry.

“An awful lot of work is required to learn the product knowledge to effectively service customers,” he explains. “We have a lot of initiatives in-house that focus on product knowledge to service customers.”

Stoddard feels that this sort of recruitment is very distinctive in Ferguson's industry. He feels that if people were to talk to the competitors of Ferguson, they would receive kind words for its efforts.

“They would say Ferguson has the best training program in the country,” he explains. He also believes the companies would add that Ferguson recruits and retains the highest-quality people.

New Views
The addition of the college recruits also brings Ferguson new perspectives. “They think differently,” Stoddard says about the recruits. “They bring new ideas and challenge the traditional ways of doing business.

He also believes that these recruits, in combination with many local hires, are the future of the company. “These are the people we're hiring today to run the company 15 years from now, or at least, portions of it,” Stoddard declares. In terms of the caliber of associates Stoddard says Ferguson looks for, he says the company seeks out “aggressive, competitive, focused individuals,” as well as those with experience.

Stoddard believes that the trainee's situation isn't easy, because they know that they're not going to be working long term in the departments that they rotate through, while many of the people they work with side-by-side will remain. “Ideally, you want to be accepted by everyone,” Stoddard states. “With our program, I think we all learn to develop extraordinarily humble roots right from the beginning.”

Ethical and Charitable Behaviors
Hornsby describes the company's stance on ethics as being “at the forefront,” and says that its staff “supports ethical behavior as part of its mission statement.”

He also adds that the company has a solid tradition of community involvement, particularly in the areas of financial support and associate involvement.

“Corporately, we are far and away one of the most predominant or charitable givers in the lower peninsula of Virginia,” Hornsby adds, noting that the company has had significant involvement in numerous community organizations including the American Red Cross, The United Way, Boy Scouts, and The Children's Hospital of the Kings Daughters.

Ferguson associates across the United States are also very involved in Relay for Life, supporting cancer research, and numerous other community related projects. Ferguson is also recognized as a national sponsor of Habitat for Humanity. In 2002, the Red Cross also gave special recognition to Ferguson for its sponsorship, while several associates also donated blood platelets for cancer patients in its Red Cross Blood Drop.

The company supports the Ferguson Center for the Arts at Christopher Newport University in Virginia. Hornsby describes the center as being similar to Carnegie Hall, and says that singer Tony Bennett recently performed there. For several years, the company has participated in the Rock 'N Roll Half Marathon in Virginia Beach, Va. The annual marathon raises money towards cancer research for the Leukemia and Lymphoma Society. The company has been responsive to providing aid and assistance to deployed military personnel and for such tragedies as the terrorist attack in New York, the recent tsunami disaster, and sending supplies to south Texas to help more than 48,000 families affected by floods. Ferguson associates also participate in Newport News' annual Clean the Bay Day project,which focuses on cleaning a 205-square-mile area around the Chesapeake Bay.

Recognition of Responsibility
Awards that Ferguson has received have included the 1999 General Motors Information Technology award, which recognized the company's implementation of a Web-based procurement system. The company also received the 2002 First Energy Corporation Award for Excellence, for its support during a refueling outage at a nuclear power facility in Beaver Valley, Pa.

Ferguson later received the 2002 Industrial Supply Manufacturers Association Award for patriotism, recognizing the company's effort in aiding search and rescue teams at the World Trade Center in New York City, after the Sept. 11 attacks. A year later, the company was awarded with the 2003 Industrial Distributors Association American Eagle Award for community and corporate education, recognizing the company's education and training program. The company also has been a three-time award winner as the Wholesaler of the Year from Supply House Times and has received a Corporate Distinguished Citizen Award from the Virginia Peninsula Chamber of Commerce.

In addition, the company received an Appreciation of Outstanding Support Award from ASA Education Foundation Inc., the 2000 Excellence in Warehouse Management Systems Award from Material Handling Management magazine and a Humanitarian Award in 2004 from the National Conference for Community and Justice.

In terms of the future, Stoddard says he'd like to see Wolseley capitalize on the sources of the individual companies and develop a path forward to more effective and efficient services and greater value to its customers. He also hopes it will provide a framework for future expansion and growth for the company's associates.

Stegeman would like Ferguson to continue to grow its sales. “Our marching orders are to be able to continue to double our size every five years,” he says. But he doesn't think the company has much of a need to change its offering. “Some people might think we'd want to diversify,” he says. “You've got to be the best at the business you are in. We would be more apt to pursue additional acquisitions and opportunities in the businesses we are already focused on.”

Company Growth
Ferguson says that growth in the company occurs in two ways – organically and through acquisitions. According to the company, acquisitions play a key role in allowing it to expand in existing or new markets. Besides bringing additional sales and market share, acquisitions also provide it with tremendously talented associates that contribute greatly to the success of the organization.

Recently, Ferguson purchased the assets of Full Service Supply (FSS) Inc., of Latrobe, Pa., an integrated supplier that was a subsidiary of J&L America Inc. FSS focused on delivering MRO supplies to customers in the manufacturing sectors. Ferguson says that FSS will be operating as part of its Integrated System division and perform business as Ferguson Full Service Supply. According to Ferguson, the company will be able to add value to FSS' value proposition by being a recognized company that offers a business model based on expertise in technical products, application solutions and cost savings to customers.

“With our sole service procurement solutions, we should be able to expand our combined product and service offerings to both our current and potential customers, providing outstanding customer service,” the company explains. In February, the company also acquired the Meckco Supply Co. Inc. in Charlotte, N.C. Meckco is a wholesale plumbing distributor that is focused primarily on the residential and construction markets. When it was purchased, the company had annual sales of $7 million and more than 15 full-time associates.

According to Ferguson, Meckco's Charlotte headquarters and its Watermark and Bath Hardware Solutions location in Matthews, N.C., will become locations reporting to Ferguson's Charlotte branch. Watermark, a retailer of high-end plumbing and designer accessories, will provide Ferguson with a destination showroom in the Charlotte area.

This past February, Ferguson also purchased J.D. Daddario Co. Inc., a wholesaler of plumbing, hydraulics, appliances, lighting, electrical supplies and fixtures. Daddario is headquartered in Franklin, Mass., and employs 180 full-time associates.

Ferguson Integrated Systems Division also recently signed a contract with Williams International for a new, on-site operation in Ogden, Utah. Ferguson says Williams is “a world leader in the development, manufacture and support of small gas turbine engines for the aviation and industrial markets.”
 
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