As a distributor, Grainger faces heavy competition. Its customers can buy much of what it sells from other companies. But Grainger has created a legacy of success by building strong customer relationships thanks to a team of highly engaged employees who believe in providing exceptional service.
Founded in 1927 in Chicago, Grainger has grown to be North America’s leading broad line supplier of maintenance, repair and operating (MRO) products serving businesses and institutions. Its catalog offerings include everything from motors, lighting, material handling and fasteners to plumbing, tools and safety supplies. The company’s revenue mostly comes through business-to-business sales rather than consumer sales.
Today, the company has more than 22,000 global employees and a presence around the globe that includes 400 U.S. facilities. It also has operations in Asia, Europe and Latin America. In 2013, the company had sales of $9.4 billion. Additionally, Grainger is the 15th-largest e-retailer in North America, according to Internet Retailer, with approximately $3 billion in online sales.
Grainger is refining its approach to its existing customer base in ways that will save customers time, money and space, while keeping them safe. The company has found that 20 to 40 cents of every dollar is wasted when customers purchase MRO products. This is primarily because of inefficient purchasing processes, incorrect products ordered or more of the product is purchased than required and is never used, resulting in wasted space full of dead inventory.
“Grainger is focused on helping customers streamline their entire inventory management process – from finding and purchasing to stocking and replenishment,” says Michael DuBose, vice president of corporate and major account business for the United States. “No matter how customers prefer to do business with us, Grainger has a solution, including stores, phone, web and onsite account managers. Many customers prefer the ease of our e-commerce offer, which not only provides simple search and ordering functions, but also tools to manage and approve orders and create reports on purchase frequency and costs.”
In addition to its stores – where customers can pick up and shop for products – and its nationwide-same day shipping promise, Grainger offers inventory management services. Through this service, Grainger helps customers control inventory and ensure they have what they need when and where they need it, with no stock-outs and no excess.
2013 was certainly a year of milestones for Grainger. During 2013, its e-commerce sales surpassed $3 billion, representing 33 percent of total company sales. In the United States, Grainger added 180 new sales representatives in 2013. Grainger.com added more than 300,000 new products, bringing the total number of online products to more than 1.2 million. The company also enhanced its North America distribution center network to accommodate growth and increase scale.
Although the economic environment has remained slow, Grainger has continued to experience growth. Its 2013 sales of $9.4 billion represented a 5 percent increase, while its operating cash flow of $986 million was up 21 percent vs. 2012. The company plans to continue to make aggressive investments in growth and infrastructure to increase its scale and accelerate share gains in the large and highly fragmented MRO market.
“Most of our growth was attributable to the six percentage points of volume growth for the total company,” DuBose says. “Notably, the U.S. was the strongest in volume sales growth. In the U.S., daily sales for the U.S. segment increased seven percent, consisting of six percentage points from volume and five percentage points from several acquisitions, partially offset by a three percentage point decline from sales of hurricane-related products in 2012 and a one percentage point decline from price.”
Several customer markets in the United States were critical to driving sales growth. Light and heavy manufacturing were up in the high single digits, while retail and commercial were up in the mid-single digits. The natural resources market was up in the low single digits.
Another key part of Grainger’s growth is its ability to be an excellent home for its employees. The company puts a great deal of effort into building a great team, and those efforts have not gone unnoticed. In 2013, Fortune named Grainger to its 100 Best Companies to Work For List. In 2014, the Chicago Tribune honored Grainger by naming the company to its Top Workplaces list for the fourth consecutive year, ranked as the 11th-best large employer in the Chicago area.
Many other honors have come Grainger’s way in the last few years. In 2013, Institutional Investor Magazine recognized Grainger as having the top IR team in the capital goods/industrials sector and recognized the company’s Senior Director of Investor Relations William Chapman as the top IR professional in the capital goods/industrials sector.
In 2012, Modern Distribution Management ranked Grainger as No. 2 on its list of Industrial Distributors Market Leaders, No. 9 on its list of Electrical Distributors Market Leaders and No. 8 on its Power Transmission & Bearing Distributors Market Leaders list. 2012 also saw Grainger recognized by Computerworld as No. 61 on its Best Places to Work in IT list, while CIO Magazine honored Grainger with a 2012 CIO 100 Award. These honors represent the tip of the iceberg for Grainger from a recognition perspective in recent years.
Change is Good
Recently, Grainger has modified its structure for greater focus and consistency. The company also made some changes to its executive team. Structurally, its newly formed Americas business will include Canada, the United States, Mexico, Panama, Puerto Rico, Dominican Republic, Costa Rica, Colombia and Peru. Leading the America’s business is Court Carruthers, senior vice president and group president, Americas. Carruthers previously served as senior vice president and president, Grainger, U.S.
The company also tapped DG Macpherson as senior vice president and group president, global supply chain and international. Macpherson will lead Grainger’s emerging operations in the large economies of Brazil, Europe and Asia, as well as its supply chain, company strategy and the single-channel online business model the company currently operates in Japan and the United States and plans to expand globally. Previously, Macpherson served as senior vice president and president, global supply chain and company strategy.
Another change at the executive level was hiring Dr. Michael Ali as senior vice president and CIO. All of these moves are helping to bring greater focus to Grainger’s company strategy, clarifying how and where it will compete, as well as helping it to continue to pursue improvement.
“We have two models: multi-channel with a salesforce, branches, phone and web, and a single-channel online-only model designed specifically for smaller customers,” DuBose says. “We have a physical presence in a majority of the global market that offers high MRO potential, and we run our multi-channel business model in all geographies except Japan.”
Grainger is seeing good success with its single channel online models in both Japan with MonataRO, and in the United States with Zoro Tools. Its focus going forward is to drive marketshare growth where it currently has a presence. The company now has two proven and effective models to apply in its geographic markets.
Out in Front
Grainger strives to stay ahead with its technological developments and understanding the trends that impact its customers. During the past 12 months, the company launched a new feature for its iPhone app, LiveChat with Photo. This addition allows customers to send a photo of a product to a Grainger customer service representative during a live chat. Grainger iPhone app users can engage a customer service representative in a real-time chat and attach one or more product photos to the conversation. That helps the customer service rep locate the product and provide the customer with a direct link to the product.
In addition to LiveChat with Photo, Grainger’s mobile app allows customers to search for products using bar code scanning, voice-activated searching or browsing. Customers can use real-time product availability based on current location to learn when a product will ship or if it is available for pickup at a nearby Grainger branch.
They can also use the app to get driving directions to the nearest Grainger branch, manage purchase order workflow, receive notifications when orders ship or are pending approval, access frequently purchased items through lists, access order history and check out using existing shipping addresses and payment preferences from Grainger.com.
The company’s e-commerce activities in the last year also included the launch of a new iPad app. The app’s key features include detailed product pages designed to provide customers key information to select a product that meets their needs. It includes real-time product availability that shows the nearest branch that has the product in stock or date the product is expected to arrive, if shipped.
It also has an easy single-page checkout that displays the customer’s account information, including the payment method, shipping address and default branch, eliminating steps in the process. Additionally, its order history functionality helps customers track recently placed orders or search within past orders, and it provides access to personal and shared lists so customers can quickly find and order regularly purchased items.
In 2013, Grainger also moved to a new web platform to offer a consistent purchase experience for customers across multiple purchase channels, including branches, mobile, website and KeepStock, its inventory management solution. Moving to the new web platform allows customers to begin a purchase transaction in one channel and complete it in another, order products in a branch and view order history online, and track KeepStock orders on the website or through a mobile device. Additional platform enhancements include easier search and navigation, a new workflow management system, simplified account registration, enhanced account management capabilities and seamless integration with all orders.
“Every channel within Grainger’s online offering, including the new platform for Grainger.com, the mobile app or the iPad app, is designed to make our customers’ lives easier,” DuBose says. “We believe that web orders will grow to 40 percent or 50 percent of our business within the next few years. To truly deliver a successful multichannel offering that will drive sales, it is important that the customer has a consistent experience from desktop through mobile device.”
All of these moves came after Grainger introduced its free mobile app for iPhone and Android smart phones in August 2012. The purpose of the app was to provided instant access to Grainger’s products, making it easier for maintenance, repair and operations professionals to search for products, see account pricing, check product availability and quickly order products anywhere. Grainger’s mobile technology helps its customers work more efficiently by leveraging mobile to help companies manage their workflow rather than just using mobile for information gathering.
Grainger also has a mobile website that includes many of the features of its grainger.com site. Visitors search or browse the site in a number of ways, such as by brand name or category, and they have easy access to product accessories and choices in shipping. The mobile website is also integrated with the company’s order management system. Users can create personal lists for frequently ordered items, check real-time product availability and get information on real-time shipping and pickup availability. Clearly, Grainger has gone to great lengths to take its e-commerce strategy to a higher level.
As for its ability to respond to trends, Grainger showcased its ability to understand issues facing its customers when it offered support and tools for customers impacted by the new Globally Harmonized System (GHS) standard. The Occupational Safety and Health Administration’s (OSHA) Hazard Communication Standard (HCS) adopted GHS to provide a single set of criteria for classifying chemicals according to their health and physical hazards, and to bring consistency to the labels and data sheets designed to communicate those hazards. OSHA required that all U.S. workers who produce or handle hazardous chemicals be trained on the new label elements and format by Dec. 1, 2013.
Grainger worked with its customers to help ensure their employees were trained to understand the changes. It had the tools and resources to assist organizations in the process toward overall compliance. It provided GHS Hazard Communication Training and Grainger MSDS Complete, which provided on-demand access to a suite of tools to help build and maintain a compliant electronic Material Safety Data Sheet (MSDS) library with more than 4.5 million data sheets.
Another trend Grainger has responded to in recent years is the effort by customers to conserve energy and save money. The company is helping building owners, building managers and facilities engineers find areas of improvement by providing tips to identify potential energy losses. With HVAC systems, the company suggests scanning ductwork and registers, fans and blowers, and electrical connections because duct-sealing and insulation remedies can help achieve savings.
With motors and generators, the company recommends scanning airflow, electrical unbalance, bearings, insulation and electrical connections to ensure that motors are sized appropriately, well maintained and operating at constant speeds and maximum efficiency. In addition, the company says scanning electrical systems and their distribution panels, transformers and lighting control circuits can help ensure that lighting controls are operating properly and will help save energy. That is outside of lighting system retrofits, which the company says can see a considerable return on investment.
All of this is in line with the company’s effort to develop its sustainability support in energy management, waste reduction, water conservation and air quality improvement. The company believes it can offer important consultation services that will facilitate sustainability management. Grainger says it can help companies achieve energy reductions of up to 50 percent, water reductions of 40 percent, waste reductions through recycling of 70 percent and CO2 reductions of up to 50 percent.
Grainger has also worked to enhance its public safety offering so it can serve as a one-stop shop for public safety professionals in the fire, law and emergency medical services fields. When the company launched its new public safety catalog in 2012, it featured more than 11,000 products relevant to public safety professionals, ranging from station supplies and extrication equipment to apparel and uniforms. The catalog was double the size of the 2011 catalog.
In addition, Grainger has expanded its hospitality product lines in recent years. When it released the second edition of its hospitality catalog in 2012, it had 4,000 new product additions, bringing its total to 12,000 listed products in hospitality-specific categories. From housekeeping and security to food and beverage, Grainger has worked to make it easier and more efficient for its hospitality customers – ranging from large chains to franchised operations – to find what they need.
Growing and Growing
Over the past year, Grainger has continued to pursue strategic growth through everything from acquisitions and expansion of existing operations to the opening of new locations and targeted divestments of assets. Last May, Grainger announced it was expanding its presence in Chicago at The Citigroup Center to support the company’s expected growth of around 300 IT and e-commerce new hires over the next several years.
In July 2013, the company hosted the grand opening at its new distribution center in Minooka, Ill. It is a 1-million-square-foot facility that features a state-of-the-art automated system and will serve as Grainger’s new central stocking distribution center.
One of the world’s largest LEED-certified platinum-rated facilities for commercial interiors, the distribution center includes a 2,200-square-foot solar wall, energy-efficient lighting, electric automobile charger stations and a recycling program initiated to collect cardboard and shrink wrap from operations.
“Sustainability at Grainger means doing business the right way, and we are always looking for opportunities to reduce our environmental impact and our operating costs at the same time,” DuBose says. “In 2012, we became the first industrial distributor to disclose our carbon emissions through the Carbon Disclosure Project.”
The addition of the Minooka distribution center expanded Grainger’s footprint to include 16 LEED-certified facilities in the United States, Canada and Mexico.
“Energy usage is a key component to Grainger’s overall sustainability strategy, and in the last several years we have invested in upgraded lighting systems as well as a highly efficient cooling system for the company’s new data center,” DuBose says. “Grainger was also the first industrial distributor to have LEED-certified facilities.”
Opened as the company’s most technologically advanced distribution center, the Minooka facility was designed to enhance Grainger’s ability to get customers what they need, when they need it. It will help Grainger deliver products same-day or next-day to customers nationwide.
Grainger followed that up with another expansion last August when the company announced the opening of a new branch in Williston, N.D., to support customers in the Bakken oilfields. It is a 12,000-square-foot facility that will stock thousands of products and will have an inventory tailored to businesses operating in the Bakken oilfields. Opening in Williston allows Grainger to increase its support and service levels to all of its customers operating in the Bakken.
These additions came after Grainger opened new distribution centers in Patterson, Calif., and Saskatoon, Saskatchewan, Canada in 2012. By investing in the company’s logistics network, Grainger put more products closer to its customers. The Patterson distribution center stocks up to 350,000 industrial products and provides next-day service to Grainger’s West Coast customers. It is an 820,000-square-foot LEED Gold-certified building designed for sustainable energy use and limited environmental impact. As for the Acklands-Grainger facility in Saskatoon, the 122,000-square-foot facility includes a 102,000-square-foot warehouse and a branch showroom and regional support center to service its expanding product lines and customer base.
Acquisitions have also been supplementing Grainger’s organic growth efforts. In August 2013, the company acquired E&R Industrial Sales, a Michigan-based distributor of metalworking, production supplies and MRO materials to manufacturers and industrial customers across the Midwest and Eastern United States. It provides more than 100,000 products to 4,000 customers across the aerospace, automotive and general industrial sectors. The acquisition allowed Grainger to add an industry-leading team of metalworking experts and extend its capabilities for serving customers in the manufacturing space.
That wasn’t the only acquisition for Grainger in the last 12 months. In December, the company announced the acquisition of Safety Solutions Inc., a Dublin, Ohio-based distributor of safety footwear, supplies and services with a strong focus on the manufacturing sector. The acquisition was designed to enhance Grainger’s position in safety with a leading on-site safety footwear service and a benefit management program that tracks purchasing and compliance for customers.
These acquisitions came on the heels of a number of acquisitions made in 2012. In April 2012, the company acquired 100 percent of the shares of AnFreixo S.A., a leading broad line distributor of MRO supplies in Brazil and a subsidiary in the Votorantim Group. The acquisition gave Grainger a solid entry point for physical operations in Brazil, the largest MRO market in Latin America. This acquisition built on Grainger’s South American, Latin American and Caribbean footprint, which includes physical operations in Colombia, Costa Rica, Dominican Republic, Mexico, Panama, Puerto Rico and Trinidad, as well as representatives in Brazil, Chile, El Salvador, Peru and Venezuela.
Then, in December 2012, the company announced its acquisition of Techni-Tool Inc., leading specialist distributors serving manufacturing customers. Based in Worcester, Pa., Techni-Tool provides nearly 25,000 products and related services to manufacturers in the electronics, telecommunications and medical services industries.
Not all of Grainger’s strategic moves have been focused on acquisition. Some have been aimed at realigning its specialty brands portfolio. To complete this realignment, late last year Grainger announced it would sell all assets associated with Gempler’s, Ben Meadows and AW Direct, which were previously maintained under its specialty brands portfolio, to Ariens Company. The divestiture was consistent with Grainger’s effort to maintain a specialty brands portfolio that fits the company’s long-term focus.
All of its growth efforts have not dampened Grainger’s desire to be a socially responsible corporation and support charitable endeavors. One of its most important relationships in this regard is with the American Red Cross. The company began its relationship with the American Red Cross in 2005 when it became the national founding sponsor of Ready When the Time Comes, a corporate employee volunteer program. The program has trained more than 15,000 volunteers from 500 organizations in the United States, Canada and Puerto Rico. More than 1,500 Grainger team members are trained disaster volunteers for the American Red Cross.
Grainger built on the relationship in 2012 when it donated $3 million to the American Red Cross to support the launch of a next-generation volunteer management system. The online system, Volunteer Connection, allows new volunteers to sign up online and match their skills and areas of interest to needs across the Red Cross. In addition, it allows the Red Cross to better recruit and screen volunteers, ensuring that it has more volunteers trained and ready when needed.
Automating and centralizing many of the activities that are required to bring new volunteers into the organization reduces the back-office burden on local Red Cross chapters so volunteer managers can focus on programs and services.
Looking ahead, Grainger’s focus includes continued investment in areas such as inventory management solutions, distribution centers, salesforce expansion and e-commerce.
“E-commerce has been very important to the company’s growth, with one-third of sales now coming from the web,” DuBose says. “Our recent expansion of the downtown Chicago office puts Grainger in a position to better recruit and retain exceptional talent in the e-commerce space. Grainger will continue to develop all of our e-commerce channels and invest in new technologies where it makes sense.”