Gustave A. Larson – additional values in the supply chain

Max in conversation with Andrew Larson, CEO Gustave A. Larson

On the occasion of a US visit to the MDM award ceremony for Ludwig Meister, Max Meister took the opportunity to arrange a podcast with Andrew Larson, the family entrepreneur in the third generation.

Less the circumstance of parallelism in matters of family business 3rd generation, but the exciting and stringently implemented management methods of this HVAC and refrigeration distributor from Minnesota are the subject of this podcast.

And the fact that Andrew Larson and his team have found techniques to generate additional value in the supply chain. It goes so far that they offer active and above all successful strategy and digitalisation consulting for their customers.

In another podcast, which we will release shortly, Andrew Larson and Max discuss the topic of Traction and EOS. The fascination About the book of the same name and the topic is another common feature of the two. In the case of Gustave A. Larson, Traction or EOS is concretely anchored in the management of the company. How? More about this in our next podcast episode.

But for now enjoy listening to today’s podcast episode. Transcript and links can be found below. And as always: your opinion please. We welcome comments, suggestions, criticism at max@supplychain-heroes.com.

Transskript

MAX: Welcome to Max and the Supply Chain Heroes. Your entrepreneurial podcast about challenges and changes in procurement and distribution in the context of digitization. Thoughts, experiences and above all findings by experts in supply chain management. Completely free of any consultancy mission, easy understandable, just plained business prospected. I am Max Meister and I hope you enjoy this episode.

So this is a new episode of Max and the Supply Chain Heroes. My todays guest is Andrew Larson from Gustave A. Larson and we are talking about the structure of his company. We want to get an impression, how the supply chain within his company is looking like. And it is an HVAC and Refrigeration distributor from Wisconsin. And what I think is very interesting is, how they add value in the supply chain. So they really do consultant work for their customers, how to run their business and how to digitalize it. So I think, a very well run company. I really like Andrew a lot and I wish you a great episode. So have fun and as always, if you have feedback just write me an E-Mail to max@supplychainheroes.com. Thank you, have fun.

Yeah, so welcome to a new episode, today I am sitting in the beautiful city of Boulder and next to me is Andrew Larson. He is a CEO of Gustave A. Larson and I think it is a very interesting company and an interesting history. And before I start telling everything, maybe you introduce yourself, Andrew. Who are you and what are you doing?

Andrew Larson: Well, thank you for having me. It is a pleasure. And happy to share it, it is so wonderful to have you in Colorado visiting us. I am just going to talk a little bit more about myself. I actually grew up in Wisconsin, actually grew up working in our business in High School. So, had a little taste of it then, although I then at that time in my life I wanted to be a doctor. So, I went through our university system thinking I wanted to be a doctor, I grew up in doing work in a lot of internship and watching a lot of surgeries with my neighbours who were orthopaedic surgeons. And even got into med school but at the last second, I decided to go almost to a gap year and I worked in investment banking in New York City and loved business and so I ended up staying and working in business. And then I then went to business school after working in New York City. And met my wife there which was wonderful. Went to North Western University to the Kellogg Graduate School of Management and as that has a strong focus on marketing, I then worked as a Product Manager for a medical device company in the Bay Area. It was the division of Eli Lilly and it was interesting for me to have those two experiences working in investment banking in New York City, where the culture was all about the deal. There was no organizational development, it was all about getting the deal done, there was high pressure and tactics. And not very good management, frankly. Learned how not to you know lead a team. And a company. But by comparison, when I worked for Eli Lilly, they, at their medical device company that I worked for, called Advanced Cardiovascular Systems, they made sure that if you wanted to be promoted, you had to go through human resources. It was all about the people. They were a company with 1,000 engineers and they made sure that every engineer went through communications skill training, presentation skill training where they were videotaped. They realized the engineers who had this reputation for maybe being more introverted not being able to communicate, they wanted to focus on this so they also sent them to something from a company here in the US called Wilson Learning which is called VSP, stands for Versatile Sales Person. They would make sure that that person and especially the engineers knew their personality style but also how to identify what someone else’s personality style is like and how to interact with that person if they are an expressive or a driver or an amiable. So that was super interesting.

MAX: Okay. So, I see why you have now very well-organized company because you combine maybe the best of two different worlds, so.

Andrew Larson: Yeah, I think it really shapes who I am today. I think all of ours are experiences growing up. And it has helped us to make sure we’re focussed in having a high performing culture with the right people in the right seats in the organization. But having managers that care, having strong middle management and making sure that we are creating team leaders. And that is what our process is about and I will talk more about that later.

MAX: Okay. So, you are now CEO of your family owned business. So, how did you come to this? How did it work and when did you start?

Andrew Larson: Well, after my experience working for the medical device company, we actually, my wife and I were about to have children and there was an opportunity at the business. Growing up wanting to be a doctor, I never thought I would want to be involved in the business. But I was worked outside the industry now for almost nine years. Nine years, almost ten years and I realized that our family business is a tremendous opportunity. And it is, you know, we are based in Wisconsin in the US in the Mid-West and there is something we say in the US about Mid-West values and being close to the earth. And I really felt like it was a great place to raise kids, so my wife and I said let us go try working for the business and see what it is like. If we do not like it, we can all go somewhere else. We have worked somewhere else for the past almost ten years. And we went back and the industry that we are in, HVAC, Heating Ventilation Air Conditioning and also refrigeration, primarily commercial refrigeration has kind of a reputation for being a little more mature in our country. And you know I really was not sure what to expect. It does not have the most dynamic image. But I must say coming into the industry, it has been fascinating, it has been fun, there is tons of change, it has been super interesting and it has kept me engaged and I love it frankly. And so that, and so it allowed me to kind of turn into the role, turn it into the role that I have today as CEO. But I started off working in marketing and sales and from there went to being a VP and then being promoted to president and chief operating officer. And then in approximately 2006, I became CEO. And so, I have been that for the last 13 years. And it is interesting, I work with my brother and so the two of us, our father passed, he was you know a legend in our industry, but he passed about seven years ago in 2012. My brother and I run the business and it is interesting with our roles today, in 2006, we named him president and chief operating officer, so he is responsible for our leadership team and everyone that used to report to me historically reports to him. He is responsible for running the day-to-day business of the company and making sure we execute our annual plans and our quarterly racks. He reports up to me as CEO. But we use a process which we can talk about later called EOS. It is called the entrepreneurial operating system and there is a book written about it called Traction. So, some people say EOS, some people say Traction, so we can use it interchangeably later on. But in what our process, he really is what is called our integrator, responsible for executing our plans. I am what is known as a visionary. Although my formal title is CEO, I am really more the visionary. And my role in the business really is to make sure that we are focused, that I am focused on what is happening five to ten years in the future. Are we headed in the right direction. I want to make sure that we bring new ideas and innovation to the business, very focussed obviously as a result then on our strategic planning and our board of directors which is a whole different topic which we love, having an independent board of directors. But for me also it is about accountability, it is about execution, it is about new acquisitions, new opportunities, new ideas and so for me, that really is more my role.

MAX: Okay, to get a better understanding, maybe we have to describe your company. You are a HVSC distributor and also refrigeration. Can you say something about the figures or maybe we start what kind of turnover you make and how many employees do you have.

Andrew Larson: Sure. Well, our business today, we have just under 300 million dollars in revenue as we call it in turnover. We have got about 450 employees approximately. That number is fluctuating all the time. We have 53 locations and we serve about 20 different states throughout the Mid-West and western part of the United States.

MAX: How many distribution centres do you have?

Andrew Larson: So, we have three distribution centres. We’ve got our own fleet of trucks that distribute product between the DCs, we also though have daily delivery trucks at all of our locations as well. We also have education centres, we call them learning centres for training at all the locations as well. And to give a little more statistics in the business too, we have probably about you know 700 manufacturers we work with and about 60,000 SKUs. That being the case, you know, we still have probably 20 suppliers that are the majority of the business, that we really focus very strongly on, although we focus on many of them. We actually do something for our suppliers which is interesting, a little side note. We do a program called PEAQ which stands for Partners in Excellence and Quality. And we rate all of our top 50 suppliers and have conversations with them how we can better serve in a win-win fashion to our customers. Then we also have in our local branches, we have realistically, most of those SKUs are kept in the DCs for quick delivery, overnight delivery to the locations if they need it. We probably have twelve to 15,000 SKUs in a branch location.

MAX: Okay, this would be my next question. So, you have 12,000 in your branches, about 60,000 in total. And what service can you deliver and if it is needed. So, a customer orders today somewhere close to a branch, when does he get his products.

Andrew Larson: Well, it depends on the business. It is interesting, refrigeration because a commercial refrigeration system at a grocery store, supermarket or convenience store is made up of many different parts and pieces. When there is a failure, they need that system up and running. They do not want the food to go down in a grocery store overnight. And so, as a result, we have many locations where the original philosophy was so that we are located no more than four hours away from any grocery store if you will. So, when a case goes down, our customers can get product immediately. In that situation, oftentimes in refrigeration, that customer is coming to our branch and picking up that product. And so they can get it same day and they need to get back to that site and fix the product. We also though on the HVSC side of the business, it depends if there is a customer. Customers oftentimes plan their installations throughout the week so we will then deliver to them. If they have an emergency service, they will come to the branch often or will have expedited delivery one hour, two hours, same day. But oftentimes, it is delivery you know on a weekly basis on our own trucks to that customer as well. And some branches may have 70 percent pick up and 30 percent delivery, some have just the opposite, 70 percent delivery and 30 percent pick up. Depends, because we have locations in maybe Chicago or Denver or Salt Lake City in a metro or Minneapolis where you are in a city and they also expect delivery because there is more competition that delivers. Where as when you have locations maybe in the Dakotas, where there is miles and miles, hundreds of miles between locations. And those customers surprisingly, even if you think they want more delivery, often times will come pick it up a lot of the time as well.

MAX: Okay, you mentioned different customer segments. So, to understand your business model a little bit better, can you describe these customer segments and maybe how much percentage of your revenue you have in these segments?

Andrew Larson: Sure. So, little history again as well. My grandfather founded the business, his name was Gus Larson, back in 1936. And our business was founded in commercial refrigeration. That really was most of the business and we started, he started doing joint ventures back in the forties with motor shops. That got us involved in rewinding of motors and into the HVAC parts business. That turned into HVAC equipment in the 1960’s. We had two other segments then which was residential HVAC and also commercial HVAC.

MAX: Residential HVAC means for private housing?

Andrew Larson: Correct, so we do anything in a residential private house from radiant systems to solar thermal systems to water heaters for heating and cooling. But then we will also do four stairs systems, so furnace and air conditioner along with all the sheet metal, the thermostats, the zone control systems. In addition, we will do many split systems, we also do-. That is on the residential side. Really anything that will heat or cool a house. And then on the commercial HVAC side, we will call on the mechanical contractor, they typically are many times a larger company, have engineered systems. They not just do replacements of rooftops as an example. But we also do installs there with plan and spec as they call it or design build projects with a customer. We will do, again, rooftops, building automation systems, VRF systems, VRV systems (- What does this mean?) which is variable refrigerant flow systems. They are basically new systems that have come out of Asia. They are all throughout Europe as well, just coming to the US where you have simultaneous heating and cooling. So, they are much more efficient. And instead of running a VAV box which was a variable air volume box with air to a location in a commercial building, you are running a line set. And heating and cooling through the refrigerant flowing through that line set. So, it is a new product. We represent a company called Mitsubishi and they have a product called City Multi to get a feel for you know what they do, that is their VRF system.

MAX: Okay. When we go one step backwards, when we talk about the SKUs, how big of a size are these SKUs?

Andrew Larson: Yeah, it is interesting because we have a variety of products. If you go in the refrigeration segment which we mentioned earlier, we will work with supermarkets, convenience stores, cold storage facilities. There you have very heavy compressors that run a system so the compressors are very large and big and heavy and then you have got a lot of smaller things from TXVs or thermostatic expansion valves. You have got piping and installation. We may have 20-foot long length of copper pipe that has refrigeration that goes through that to cool the refrigeration system. So, you have small parts to long pieces of pipe to big, heavy compressors. If you go to the commercial HVAC system, you have got big, huge tonnage rooftops from three ton rooftops to 25 ton rooftops that you know can be, it is hard for me to convert in my brain to meters I suppose, but probably you know four metres by three metres. I mean, pretty large.

MAX: This was one thing I, when we were talking last year when we went to the conference, I was thinking about how difficult the logistics all around the different product would be. Because there are not so many companies that really have logistics from very small to very huge, big parts.

Andrew Larson: And we are going to talk about some of the value we offer maybe with some of that as a result. But that is why you know we cannot ship everything maybe through in the US through UPS or FedEx or DHL because they are not all small parts. We have to have our own trucks and our own ways of handling those. And then on the residential HVAC, there is furnices and air conditioners and then there is other smaller parts from air filters to pads and line sets and whips and disconnects and other things that are part of a residential HVAC system.

MAX: So, before we come to the services you add in the supply chain, maybe a couple of sentences more about your company. So, I think that you have very well executed all in all the planning things and how to describe your people and you have one thing that it is called our Larson values. And I think it would be interesting if you can describe it a little bit more.

Andrew Larson: I would be happy to. You know, for us, again, we will discuss it later with EOS and traction, but for us, it is all about you know it starts with why for us and why are we doing this. And we have a core purpose in our business and we want to make sure that our people understand that we are doing something that is larger than us. And so, for us, we got a couple different things. I mean, our corporate business is we are in the heating and cooling and refrigeration business. We like to say we are actually in the comfort and clean air business or in the food preservation business. Everyone needs some of that, every single person, so our business touches everyone, it is much larger than simply selling a box across the counter, that is very important. And so, we want to make sure that our purpose is to help you know all the people in our local communities. And that really is where our core purpose comes from. But then, stemming from that is our mission and our vision: And our vision really is to make sure that we are the most respected partner. We are going to aspire to that really serve our customers with extraordinary service and innovative solutions. But then what we are doing today is our mission. And that is we contribute to our customer’s success. We want to make sure we are carrying the absolute best products and partners in the industry. Want to make sure that we offer valued business solutions, we will talk more about that shortly. And through that providing a win-win opportunity for all the stakeholders. Not just us as shareholders, but our customers and our suppliers and our team members. And so that really is what our mission is and how we operate is we want to make sure everyone lives our company values. And our values kind of spell Larson. So, everyone understand that, we have taken some liberty here with the last couple of ones. But our values are to spell Larson or Learning, Attitude, Results, Service, Collaboration, we used the O with the CO to spell Larson and then Integrity we kind of say for the N to spell Larson -L-A-R-S-O-N. But then to make sure that we are, that everyone understands these, we give everyone a wallet card, you are looking at a copy right now. Everyone carries it with them, they have this, we kind of call it a, I do not know, a get out of jail card but we want to empower you to do the right things for our customers that live our values. And if you do something, you know, we have done many things in the business and they have always been done that way because that is the way we have done them. But we want you to think for yourself, if you see something where we are maybe taking an extra step or being inefficient or making a mistake, we want you to do the right thing for the customer. And we are going to later on as long as you are living your values, fine. It is fine that you are making mistakes. We want to embrace mistakes and challenge you to learn from them and we can see if we need to do something differently in the future. But our values each have three core principles behind them. And so, we actually have in the business, we look at everyone with how they live our values. And how we define each of these, I will not read all of them but as an example, under attitude. We will say is someone positive, are they humble, because it is not about us, it is about our customer and are they friendly. That to us is how we define our value of attitude. Under yeah-.

MAX: So, I will share a link in the description because you have the most on your homepage I think. How do you assure that the people you have really live up to these values and the leaders of these people really talk to all the employees and being in contact and really have a feeling for this.

Andrew Larson: So, we talk more about that later I think, when we talk about traction and EOS. But when we hire someone today, every single person in the company, whether it is a prospective employee or an existing employee, we use something called culture index, and it is as more of a personality profile to understand what you know, what is your personality like and how do you fit in our culture. And so that is the first step to make sure that they are the right fit in the organization in terms of on the hiring process. In addition to obviously all the other regular interview questions and process. But once they are part of our organization, we want to make sure that we have the right person in the right seat. So, we have an analysis we call RPRS – Right Person Right Seat, we actually look and analyse everyone in the business. EOS calls it the people analyser as part of our process. We look at and grade them, do they live up to our values. And it is a very simple tool where if the live up to our values, that particular value, each one of the Larson values, we rate them for each one, they get a plus, a plus minus or a minus. And a plus says do they live this value all the time. They get a plus. Do they live the value most of the time is a plus minus. And you know do they seldom rarely exhibit the value that is a minus. We have a grade and a level for all of these. And if someone has two plus minuses, they are below the bar. If they have more than two plus minuses. If they have one minus, they are below the bar and we have to have a discussion. We have quarterly conversation with everyone as well about this. And then we put an action plan in place based on this. In addition to looking at all the values we look at three other things. Which to our process is called GWC but it is that does that employee get it, do they want it and do they have the capacity to do it. That is simply a yes or no and if anyone of those is a no, then it might be the wrong person in the right seat-.

MAX: Or the wrong seat.

Andrew Larson: Or the right person in the wrong seat. So, we will have another conversation about that. They may exhibit our values and we want them to be a part of the team, we may just have to move them to a different seat and there are a lot of things we do to make sure in a very simple way, that they are you know the right person in the right seat.

MAX: Mhm, so maybe we now discuss a little bit about the services you do and the value you add with your people to the supply chain for your customers and also maybe for your suppliers. When you go on your website, you see many, many services also listed up as value ad. So, what is maybe something that is making you unique or where you are very good in?

Andrew Larson: Let us take a step back first. I guess there is three things that we have in the business, we call them our three uniques. And so we actually, and you can see this on our website as well, but we have three uniques in our business and the first one really is we call it setting a new standard but really to keep it simple is we want to make sure that we are progressive, we are in the leading edge in our industry to our customers and bringing them new ideas, new opportunities and new value-add. So that really is the first thing with our first unique. Our second one is making it easy. And to make sure that we are making it easy for our customers and all the different things that we do from delivery to pick-up to the product to the information we provide to them, and the last one is our unique is as we say for us it is personal. We want to show our customers that we really care. We care about them as people, helping them develop, helping them grow, helping them make more money. We will talk about that with our values as well. But those are three uniques and some of our other competitors may have one or two of those but we do not think they have all three of those. And that is what is unique from our value perspective and who we talk about it and give examples for each one of those with our customers in terms of why we are unique in each of those areas. So.

MAX: Okay.

Andrew Larson: We can talk about each one of those. Why do not I do that maybe?

MAX: Yeah.

Andrew Larson: So, let us start with the first one in terms of setting a new standard. We are trying to make sure that we are the cutting edge with regard to helping our customers grow their business, we often, it depends what segment, but let us say with the residential HVAC customers, we will work with them and help them develop a business plan for the year. That way we can understand where they want to focus and also, we can help our team members be accountable helping our customers with their business throughout the year.

MAX: What kind of company would be such a customer?

Andrew Larson: Well, as a subset of our residential HVAC customers, we sell to customers, we also sell to dealers. And dealers, we have some key HVAC brands in the business from Training American Standard, to Ream, to Rude to Armstrong and so we set up dealers with these different organizations, they will wrap their business around this brand and as a result, we do additional things with them on the learning side and the education side to also on the business plan and business development side. So that is really what those dealers will take some of those extra steps to help them. As an example, we will also help them hire and train what we call RSPs or Retail Sales Reps, these are people on the selling organization for our dealer. That is a way we can help develop our existing customers and help them grow. That is something that is different from what other people do. In addition, there is other things. Let us go to some of the other uniques. If we go to making it easy, you know one example of one of our values and the commercial HVAC side is we have not everywhere, but in some key markets, we have crane trucks. So we will go to a customer, historically that mechanical contractor, if they wanted a commercial rooftop installed as a replacement, they would then have to schedule with us for the delivery of the rooftop, the job site, they would then schedule separately with the crane company to meet at that exact same time to crane and take of the old rooftop and put the new one on. We have now said listen, let us make it easy for you, we offer a crane truck delivery service, we will now you do not have to schedule and coordinate with two different companies, we will take care of it, we will meet you at the job site whenever you want, we will deliver that new rooftop. First though we will take off the old rooftop as long as the refrigurance has been taken out. We will then also put the new rooftop on for you and then we will take that old rooftop back to the you know to be recycled for you. So, that is an example of how we are trying to find new value to make it easy for the customer.

MAX: Good example.

Andrew Larson: And then the last one you know-.

MAX: Being unique?

Andrew Larson: No, no it is that for us, it is personal. We care. So, as part of that you know what those dealers as an example will offer educational sessions, oftentimes, sometimes with our internal people, many times with an external third-party consultant or educator that comes in. One company we partner with called BDR Business Development Resources has a great learning session for our customers and for us, it is about helping our customers make a double-digit net profit. This is a great reason why they want to learn more from us because if you go back to our industry, most of our contractors, 80 percent of them have probably 800,000 to one million dollars in revenues and they make a two percent net profit. Our job is how do we help you grow your business and get over certain walls and stages in your business. And how do we help you go from a two percent net profit to a double-digit ten percent net profit. So, you can reinvest back in your people and your company and yourselves. And so, this is a big part of how we add value. Many of our contractors grew up carrying a toolbox. And they are like I can start my own business and they do but they do not know how to run their own business and they are learning on the fly. We have tried to find ways to help our customers understand financial statements, how to do job costing, how to make a double-digit net profit, how to drive leads and growth in their business, how to add additional employees and be trained with RSPs. We have done different things like this along the way to add value. And so, there is a lot of different areas that we do it as well. We also are trying to be you know the consultant to our customers. And as this world is changing, we are adding new and different values and finding ways because we do not have expertise in this area, so we are also bringing third parties to help us. So, as we move to a digital world, we are bringing on additional partners as third parties that we bring on to help our customers in many different ways. So, we work with different companies.

MAX: If I understand right, all these logos we can also find on your homepage.

Andrew Larson: Yeah you can find some of these partners, we have some digital marketing partners we work with. But again, it is all about like how do we help our customers with the digital future together, that we consult them and say here are different ways those companies can help you. They can help you with different, with SEO, which is helping you know get their webpage search engine optimization be seen sooner or helping them with a company called Blue Wing as an example. Design their own website with other people they work with. And creating you know e-commerce stores, working with a company called intelligent business solutions to help really develop, the customers can actually sell at the kitchen table with easier and offer we call kind of a best, better, good strategy where we want to make sure we ask questions with the customer first to find out what that home owner may want and then we are designing a system for them that really meets their needs. So, as an example, if the customer and their family has allergies or has pets, they may want to have as a result air filters to filter out some of the cat dander or the dust or they may want to have if they do a lot of cooking they may want to have an ultraviolet system to help with the odour and the spurs and the bacteria. So, we want to make sure we are providing the right solution through things like this for our customers. Helping them present that with a you know e-commerce, digital proposal solution at the kitchen counter.

MAX: So, actually, you are helping your distribution or your contracting customers to digitalize their business model.

Andrew Larson: Right, we are helping them to sell more-.

MAX: On the one hand, you consult him try to run a business properly and then you help them digitize their business, that is very interesting.

Andrew Larson: Exactly and then also we work with something called, we have something called TechConnect, where we have actually, we have the principals of air customers, we have relationships with them, but we also have their mechanics, their installers, their service technicians that come do our ranch. So we also provide them different things, mobile apps, different programs to make sure they can buy, because oftentimes, they have to buy their own tools to use on the job. Not the company’s tools, we provide programs for them as well. But we also have a new interesting thing, we work with a company called Search Kings who is a partner of Google. So, Google has a new platform called GLS which is Google Local Services and in the US, we historically had the Yellow Pages and that was where people are found, where you did business with someone. In the future, you are going to the internet and googling where is that customer. So, it is the yellow pages of the future. So, we are helping, again, we are the digital consultant to our contractor and dealer customers on the HVAC side primarily today, to help them work with Google, GLS, be listed, so they get the most leads. We have a full you know presentation to them. Listen, if you can get this many leads a week, if you can convert this percent of leads. (- This means this revenue) This means this revenue for you and that is a way we can deliver leads to them and these are solutions that can help drive growth in their business. That is an example of some value we can deliver-.

MAX: I think it is very impressive because this is a personalized service. And it is not easy to do, you really need experts that go to the customer and talk with him, discuss where he is, where he wants to go and stuff like this. So, I think it is a very impressive example of value added services. Before we wrap up maybe, very important is how you educate your people. So, can you describe a little bit when you have services like this, how do you train your people that they are able to do stuff like this? Because I guess it is quite different to selling HVAC ten years ago.

Andrew Larson: It is quite different. You know, we like to say versus training, we like to say learning and education. We have learning centres in almost everyone of our locations. Because we have to have education sessions for our customers there, we also use them to you know teach our employees as well. So, we have a team on staff that helps teach our customers you know with regard to not just sales and training and business but also selling and servicing the product but then we also have the inside portion of educating our employees as well. So, we have a learning director on staff that helps with that and we have different processes in the business with how we convey that information to them. We have something called SP2 which is kind of a process we called Sales Process 2, where we are teaching our sales team members how to ask the right questions and how to, we have something called ISP, a lot of acronyms, intentional selling process that they use then these sales process SP2 tools in their intentional selling process. We also have something called SMX, another acronym, but it stands for Sales Management Excellence. It is kind of a customer pipeline tool we use to make sure all of our sales team members understand who they are calling on, which customers they are focusing on both from existing customers, new customers, how often they are calling them. We look at customers purchasing less, we want to focus on how we can bring them back. And what the relationship. And so, this process through it, we have different education sessions for them. They meet weekly, they meet monthly, we have quarterly sessions and through this, we are looking at not just the pipeline but also educational sessions for them too to get better at what they are doing.

MAX: Do you have an idea how many days a year an employee at Larson is learning or-, he is learning?

Andrew Larson: You know I think we have such a variety of people in our different stores. Form counter sales people to outside sales people to inside sales people to drivers in trucks. So, there is no one set number but and I do not have that number on my fingertips, I would be guessing with you. But it is got to be realistically you know it sure seems like 20 to 30 days depending on-.

MAX: Okay, that is a lot.

Andrew Larson: It is a lot, it is a lot. We often sometimes think it is too much because we need them in front of the customer, you know, selling, and so all of the days they take quarterly or weekly add up to a lot.

MAX: Yeah, they add up to a lot. But I think you have a very well-structured company and it only works if everybody is going into this direction.

Andrew Larson: Right. Ans part of it is all of our outside sales team members, also our store managers, they are also attending those learning sessions with our customers and that is where those dates add up to the 20 or 30 as well. So, it is the internal ones plus the customer ones that all add up. And it is all part of that education process.

MAX: Okay. So, very interesting, maybe as a last question: What do you see as a CEO of Gustave A. Larson for the next ten years as trends or as interesting topics.

Andrew Larson: Yeah, so that really is something that is super exciting because we are in a world that is changing dramatically and if I could steal a slogan from Elon Musk, it is something we look at and he says we have to focus on accelerating the inevitable. So, we look a lot at what are the market trends, what is happening, and we are seeing a trend obviously towards digital, towards prescriptive analytics and artificial intelligence. We are seeing trends with electronic buying preferences. So, as an example, you know, baby boomers were focused more on personal relationships and as we look towards these different groups of people coming forward with Gen X and Millenials and Gen Z, they are doing things more online. We have got to make sure we keep moving with that ourselves. We are seeing a lot of the Amazon effect, people know what Prime delivery is as an example in the US. And so, we are focused on making sure we can compete with one hour, two hours, same day delivery and having these opportunities for our customers. We will never be able to invest as much as an Amazon as an example. But we have to make sure we have a flawless of a customer experience as possible. And then we are using our value-add that we talked about before to build a trench around our business and our products and services to maintain that relationship with the customers. We are seeing, as we see the future with people doing things more electronically, all of us including our customers are doing more research on products online. Making decisions, what they are going to buy online and eventually, that will take cost out of the sales process so we are going to have to-, we will probably see lower pricing the future, as that component of cost is taken out. We have to be prepared for this to make sure we can sell things at a lower price and still make enough money to reinvest in our people and our business. And as part of that, I think we are also seeing in our surveys and from our industry consultant’s surveys, that the outside sales consultants that we have today, calling on our customers that their function is being valued less because people are looking more online. So, we are doing a lot of those things, we are looking at things right now to make sure, we implement changes. Right now, as an example, we are transforming our entire sales force to somewhat of a you can call it an inside out strategy, but you can also call it a team selling strategy. We have had customers today that ask us you know it is, we had a recent customer trip and they are like I cannot reach my outside sales consultant, how can I reach someone more. So, we are looking now at doing something we call team, but we are actually going to do segmentation between the different segments we have today from again commercial refrigeration to commercial HVAC, residential HVAC. We are also going to add a fourth component called services and solutions. And I will talk about that more in a second. But we certainly recognize that we have to make sure we are continually changing and adding value-add to our customers to make sure they want to continue to buy from us and that we are on that leading and progressive edge we discussed with one of our uniques. So, today, many of our existing sales consultants provide all the different functions of a sales rep. Both creating awareness with those customers to capturing or getting new customers to fulfilling orders as well as retaining customers. And so with this new team concept we are trying to make sure that we have our outside sales team members focussed on bringing in new customers, focusing on that relationship but then having their teammate on the inside as an account manager or a customer experience rep handling a lot of those transactions and the fulfillment and the awareness frankly and making sure that it allows our team members to focus you know in the right area of the business and be more efficient. And making sure that our customers always have someone they can reach as opposed to someone in a sales call.

MAX: I think this is a good development because you are very close to the customer. And the guy who is doing many, many things also knows the customer best and how it is changing and how the need of the customer is changing.

Andrew Larson: Right, yeah, and we call it omnichannel because there is the team, there is face to face selling. We will have specialists that help and support our outside team members as well. We will have inside support in addition for quoting and doing projects and engineering. Some of the engineering may spill over into services and solutions in the future. We have got help with lead generation on the inside as well. There is a lot of different components that will be you know part of this. And again, our customer is asking for this. We are moving in this direction to transform our sales force as a result.

MAX: And can you maybe, to summarize, say a little bit about what your goals are for the future?

Andrew Larson: Yeah. So, you know the goals of the future I think evolve around the last segment I talked about, services and solutions. We have set goals in the future to make sure that we have and are developing value-added to our customers. Today, the value we deliver is paid for by the customer in the form of the margin we get from that piece of product. We recognize in order to help be, to build the walls up if you will and build that trench around our business to make sure we can Amazon-proof the business to make sure that we can compete in this new world, that we have to sell value to our customers that they are willing to pay for outside of our existing products.

MAX: Transactional business.

Andrew Larson: Exactly, and so we are setting goals to make sure we are creating and developing value and that our customers, we have set goals, how much they need to-, we need our customers to be willing to pay for outside of our existing transaction business. We have already, we are looking right now to hire someone to lead up this team and we reckon that is something that is a really important part of our future as we go forward.

MAX: Okay. So. Last time we met I had a presentation on a conference here and you said to me that you are the third generation and you try not to screw it up. Or that is the plan. And I know that also at the same plan for Ludwig Meister and when I see all your organizational change and development, I am quite sure that this plan of yours will work. So, I would guess. Thank you, Andrew, it was very interesting a story.

Andrew Larson: You are very welcome. And we see ourselves, my brother and I, as custodians of the business and protecting the legacy that our father and grandfather put forward. And yeah I think we are really trying to make sure that we do not mess it up. And so, for us, that means how do we make sure we are accomplishing our goals. And so we look at you know how do we create a line in the organization to go forward and in the same direction? How do we make sure we have discipline and accountability so everyone is focussed on doing that which leads to executing our goals and making sure that we accomplish what we set out to do. So that is really how I think we are hopefully not mess it up, but we can accomplish that. And I think we will talk more about that in the future.

MAX: Yeah, okay, so thank you Andrew.

Andrew Larson: You are welcome, thank you.

. Your entrepreneurial podcast about challenges and changes in procurement and distribution in the context of digitization. Thoughts, experiences and above all findings by experts in supply chain management. Completely free of any consultancy mission, easy understandable, just plained business prospected. I am Max Meister and I hope you enjoy this episode.

Welcome to a new episode of Max and the Supply Chain Heroes. My todays guest is Tom Gale, CEO of Modern Distribution Management. They serve all people that are interested in information about Wholesale Distribution in the US. And I think this episode is very interesting, because you can get many insights in the actual state of distribution in the US and also have some insights about the situation for distributors in Germany. I think mdm.com is very share-worthy and I think it would be good if you checked out their homepage. I will put it in the description below. The have a so called „Premium Part“ and I think it is very interesting to get some insights there. I also attended a convention last year in Denver and yeah, I think they do a good job. I wish you interesting 30 minutes and as always, when you have feedback, just write me an e-mail to max@supplychainheroes.com. Have fun.

Okay, welcome to the second episode with Tom Gale from MDM. For everybody who was not able to listen to the first episode, maybe you can introduce yourself and your company.

 

Links:

Gustave A. Larson, Werte

Ludwig Meister