by James Tost

ST. THOMAS, ON – In a market where many industrial distributors across the province are struggling to adapt to continuing weakness in the manufacturing sector in 2008, Canadian IPG is aggressively moving forward on its own innovative strategy. Using advanced technology to frame its growth, the St. Thomas-based company is building an innovative franchise network across Southern Ontario.

Following its startup in May 2005, the Canadian-owned distributor opened its first franchise in Stratford the following year. This was quickly followed by openings in Niagara, Kingston and Woodstock in 2007. The opening of its Woodstock branch last November positioned the company’s fifth location in a strategic growth area. The company has an established Tier 2 automotive supplier customer base and also services other industrial and institutional sectors.

President Rod Malloy, who started the company with VP Sales Gord Pellett, attributes the company’s rapid growth to its commitment to find innovative solutions for its customers, employ experienced personnel, invest in new technology and equipment and provide a financial incentive through franchise ownership.

GROWTH FROM WITHIN: Using his own experience working at other distribution operations, Malloy decided to take the franchise route to build the company. “Our approach has been to develop (branch) owners from within so that they can see the value and participate in driving the company’s business.”

Malloy, now 47, entered the distribution business immediately after completing high school and observed the experience of other companies that have introduced new ownership and have grown through mergers and acquisitions. “The spark of entrepreneurship is often lost. It’s not that they become lazy but there often isn’t enough strength and commitment at the helm in place at each location. You just can’t manage a local business effectively from a distance.”

He explains that business managers can be designated for local markets but the head office owner can more effectively manage the overall business with some ownership presence at each location. Although Canadian IPG has a profit-sharing plan in place for its employees, Malloy says profit-sharing by itself doesn’t typically provide long-term motivation for branch managers. “You need someone inside who has a vested interest in driving growth at the individual location. If the branch leader isn’t motivated, that is felt by the employees and the local business suffers.”
Canadian IPG’s approach has been to find the right people on the inside and help them with the financing of their own franchise operations. Kingston franchise owner Paul Heddle, for example, previously worked at the St. Thomas main operation before taking an ownership stake in the eastern Ontario region. For potential franchise candidates from outside the company, Canadian IPG will provide a business plan and help in setup of the franchise.

The company will itself also bring in experienced people from the outside - like VP Pellett - who can bring a lot to the table with their experience and management skills. Pellett brought 20 years of experience and an extensive knowledge of vendor managed inventory to the company. Malloy, with 29 years of industrial distribution experience, had previously owned a distribution operation in the St. Thomas area before starting Canadian IPG with Pellett.
In addition to ownership of the St. Thomas head office location, he has ownership stakes in other franchise locations. He also has outside interests in residential and commercial real estate properties in the London-St. Thomas region.

VENDOR LOYALTY: Canadian IPG is committed to supporting a large core of its key vendors but also has the flexibility to provide cost-effective procurement solutions for its customers with a wide range of products that may fall outside the scope of the preferred vendor. The company inventories commodities that include maintenance, repair, operating and production (MROP) products, cutting tools, hand tools, abrasives, material handling, fluid power, health & safety, lubricants, fasteners, automated vending equipment, janitorial, measuring equipment, packaging and variety of other industrial goods.

“We are loyal to our vendors and that’s why we can call on them when needed to help out our customers with training on the proper use of products,” says Malloy. “If you aren’t loyal to your vendors, they won’t work with you in the same way.”
Canadian IPG will also work with competitors by managing their products through a cost plus arrangement, discount-off selling or buying direct from the original manufacturer. It asks its commodity managers to assist in handling the cost of vending equipment, replenishing inventories and consignment arrangements.

SERVICES: The company also supplies a variety of services that include automated solutions, vendor managed inventory (VMI), integrated supply and onsite storeroom management. These four services can work together, depending on the individual customer’s requirements.

Automated solutions allow Canadian IPG to manage the customer’s inventory or consigned inventory through a wide range of automated machines that include Scroll Vending, RoboCrib, VacuVend, Accu-Cab and Accu-Port. The company manages products using RFID technology to help control customer costs and improve onsite management of inventories.

Vendor managed inventory is a process in which Canadian IPG manages the customer’s inventory onsite using the customer’s current stock storage locations. It labels the inventory with bar codes and manages the inventory on a determined cycle period with its own VMI personnel. Canadian IPG has found onsite store management to be particularly effective in the niche market of mid-sized to smaller companies of 150 employees.

Integrated supply allows customers to place requisition orders using Canadian IPG software for the process. The person making the requisition has predetermined limits and orders that exceed the limit will move upward to higher management level to digitally sign off on the order. This unique software application allows the customer’s personnel to look at all previous orders, invoices, shipping documents and other items in real time. Onsite storeroom management was created to allow Canadian IPG to supply full-time personnel and inventory at the customer’s location. This allows the customer to reduce inventory requirements and increase service levels. From that location, Canadian IPG also ship products to other customers in the immediate area.

Canadian IPG’s program utilizes the CribMaster network for a total vendor managed inventory (VMI) solution which includes vending equipment with consignment inventory, bar-coded inventory, future internet ordering for spot purchases and repackaging capability.

The company’s cost savings program allows opportunities for cost sharing on documented savings to the customer in the first year. Typically there is a five-year inventory management solutions agreement that includes dollar volume schedules and consignment opportunities.

Pellett says the clear advantages to customers in implementing a total VMI solution include consigned inventory, reduction of stockouts, vendor responsibility and onsite availability of trained professionals to manage inventory as well as the customer benefit of reduced paperwork and solicitation by dealing with one vendor. In managing its own inventory, the customer would typically be faced with reduced cash flow, increased manpower requirements and loss of focus in its operations.

RFID TECHNOLOGY: The company has been a leader in applying Radio Frequency Identification (RFID) technology to the industrial distribution industry in Canada. The technology relies on storing and remotely retrieving data using devices called RFID tags or transponders. An RFID tag is applied to a product for the purpose of identification using radiowaves. A growth area for RFID use is supply chain management, improving the efficiency of inventory tracking and management. Customers use it in the stockrooms and at point of use in the plants. Canadian IPG has more than 10 units already in place in Ontario. “It involves a massive amount of database work, tags, labelling and training for us up front in setting up a project for the customer,” says Jason Richardson, VP-Business Development. “You really have to understand your customer’s inventory needs and buying habits. RFID is leading edge technology that allows for a much broader range of products than can be provided by vending machines.”

Malloy says his company is committed to aggressivesly searching out and keeping on top of technology applications such as Audiovox handheld devices, a total integrated business system provided by software supplier PdMAIN, wireless office environment and automated vending technology.

“If you are leader in technology your customers will follow you,” he says. “If you have the same technology as your customers, you may succeed. But if you fall behind they will leave you behind.”

The company has adopted the tagline “Today’s Solutions for Your Tomorrow” as part of its operating mission. “Our vision is clear on this,” Malloy says. “We want to be recognized as the best distributor by our customers, vendors, employees and peers. Our mission is to provide value to our customers, vendors and employees by supplying superior service, quality products and innovative technology.”

NEW PRODUCTS: The company avoids the pitfall of selling the same products year after year by focusing on finding and bringing innovative solutions to the market. “We try to make our customer so competitive that they won’t be beat out by their counterpart in Asia. We’re in the same position as our customer because our real competitor in the industrial distribution business today is a distributor in Asia.”
Although there is a cost to that approach, Malloy says profits will come over a period of time. “Every channel of distribution should be this way – HVAC, welding, electrical and other areas.” CIPG invests time in attending trade shows to source new products. “A lot of products that we carry today are high quality and from established companies but if we see something interesting we bring it into the mix. There are a lot of new innovative companies. If we see something that will help our customer generate cost savings, or address environmental or safety issues, we’ll take a shot at it. That’s how our customers are going to stay alive.”

INDICA MEMBERSHIP: Canadian IPG is a member of Indica, a buying group focused on generating volume rebates for industrial supply distributors while increasing market share for its supplier partners. By combining the purchasing volumes of Indica distributors, the buying group creates significant volume rebates to enhance their profitability. Suppliers also participate in Canadian IPG’s annual customer appreciation and trade show event. The 2008 event will be held in Woodstock on April 9-10.

SOLUTION SELLING AND TRAINING: All staff are encouraged to become product specialists and receive training on all commodities available at Canadian IPG on a weekly basis during the September through May period. Employees also attend offsite vendor training programs when required. This training prepares employees to answer the standard questions that are asked by customers. When more involved answers or new solutions are required, vendor technical representatives visit customer facilities.

For Malloy, the commitment to product knowledge is simply good business. “If you don’t fully understand what you are selling, how can you hope to find a new solution for the customer.” Based on the first stages of aggressive growth strategy that envisions a growing presence across the province, customers and employees seem to agree.