Just as no man is an island, no industry today stands alone. The integration of such specialties as plumbing, electrical, metering, waterworks and HVACR is much more common than in years past, as so-called “smart” technologies require that all these seemingly separate parts fit together. Dakota Supply Group, or DSG, is a wholesale distributor that recognized early on that they could use their years of experience in the distribution business to better service the customers in those industries.
After all, this is a company that traces its roots to 1898 when it began in the “icebox business,” says DSG CEO Todd Kumm from the company's headquarters in Fargo, ND. From those roots, the company has since built its reputation as a full-line distributor of products for the plumbing, electrical, mechanical, communications, utility, automation, waterworks, filtration, metering and, most recently, the HVACR industries. “We're not necessarily a specific type of distributor,” Kumm says. “We try to use our distribution techniques across multiple lines of products and provide a total solution to customers.” And that, says Kumm and his management team, is what DSG is all about: putting the customer first.
DSG's current management purchased the company in 1991 when it had two locations in Fargo and Grand Forks, ND. Since then, it has expanded to 17 locations in three states — North Dakota, Minnesota and South Dakota — and approximately 380 employees. It is also an ESOP, or Employee Stock-Ownership Plan, company that has been beneficial for all involved, according to Kumm.
Virtually all of the growth has come through acquisitions of existing businesses, Kumm says. Such acquisitions allowed DSG to gain a wealth of knowledge in industries that complemented its existing businesses while continuing the relationships between the local branches and their customers. “Our sales philosophy doesn't change — it's helping our customers be successful in their business,” says Tom Rosendahl, president of DSG.
One piece of the business that DSG did not have in its stable of wholesaler distributors was HVACR. They wanted a distributor that could complement the products and services that DSG already provided in other industries, and they found it in Shelter Supply. The Burnsville, MN, business had a 30-year history of providing customers with products and services for ventilation, filtration and dehumidification systems that created energy-efficient and healthy homes and buildings. Like DSG, Shelter Supply created a reputation for working with customers to develop solutions.
“Shelter had a good history and a fantastic reputation in their industry,” says Kumm on DSG's decision to acquire Shelter Supply and move the business to its St. Paul, MN, location. “They bring more expertise in the products that we needed and they are the leader in the upper Midwest.”
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Dan Miller, formerly the CEO of Shelter Supply and now branch manager for DSG in St. Paul, says the “cross-pollination” between Shelter Supply's expertise and the distribution excellence of DSG has benefited all DSG customers. “We've been able to bring the ventilation core components to the branches, and on the other side, we're seeing great benefits with additional products and distribution capabilities that we didn't have before.”
Moving from a small specialty wholesaler into a regional distribution organization has had immediate benefits for Shelter Supply customers, says Miller. Out-of-stock items are no longer an issue since Shelter Supply now has a warehouse about five times the size of its previous facility. Shipping is no longer as complicated, as Shelter Supply takes advantage of DSG's software that can route and ship products quickly. Customers can now order a wider variety of products, since Shelter Supply now has access to merchandise in any of the DSG branches. “The distribution excellence is something that we can provide to our customers,” Miller says. “We can serve them much better.”
Geothermal heating systems are an example of the cross-pollination that has made the acquisition of Shelter Supply a win-win proposition for all sides. “We weren't in that business as Shelter, but we are as DSG,” Miller says. “We're now packaging it and selling it.” Shelter Supply customers who are interested in geothermal systems can tap DSG's expertise — its Aberdeen branch has developed about 200 geothermal systems for customers. “We'll take the experts there and put them on the phone with our customer and develop a geothermal application for their needs.”
Shelter Supply was long known as a “green” company — a company that focused on energy efficiency — before “green” became popular. “Shelter has been in that green market for 30 years, and we see that as a real positive for our business,” Miller says. Being part of DSG has allowed Shelter to expand this expertise throughout the company.
With such a wide array of expertise in the branches across DSG, customers have come to expect that they can find a solution — even if the customer is in Pierre, SD, and the expert is in Grand Forks, ND. “The branches are not going to be the same, but that's where we can use technology and get our customers to the person who can help,” says Rosendahl.
Selling a product becomes secondary to helping the customer, says Ryan Tracy, the mechanical group manager for DSG in Aberdeen, SD. “It doesn't do us any good to sell a customer a product that he doesn't need,” he says. Put the customers' needs first, and the sales will follow, goes the DSG sales philosophy.
This relentless focus on the customer extends to the needs of their customers' businesses and families. This is something that Miller noticed early on as he worked with DSG. “And it's something that in this industry is very unique,” he says. “I hadn't seen that in the HVAC distribution world.” From DSG's Connections magazine to its website (www.dsginc.biz), which features photos of customers' recent hunting trips and football picks as well as its various seminars and training, DSG has its pulse on its customers and their needs.
The DSG Kids Club, for example, is open to the relatives of DSG customers between the ages of five and 12. Kids sign up on the DSG website to become a member and receive a membership kit and other goodies. “The Kids Club idea stemmed from the fact that I have six kids and the influence that our kids all have on us daily,” says Rosendahl. “It's a different way of connecting with customers.” While it may be difficult to quantify the success of such a program, Rosendahl has heard that members of the Kids Club may scold their parent for doing business with a competitor. “You can't have too many connections with customers,” he adds.
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Recognizing that many of their customers are interested in learning how to better manage their business, DSG established the Better Business Boot Camp. Intensive three-day sessions are held three times yearly at different locations in the DSG market area. DSG designs the sessions for those customers that it believes have the potential to become stronger business partners with them. At these boot camps, which an outside firm runs, DSG customers review everything from finance and marketing to payroll and human resources. “They all say it's the best three days they've ever spent,” Rosendahl says. He acknowledges that DSG has to push some customers into the course, but “we push because we know that once they go, they're going to be ecstatic that they went.”
Employee training remains an important component of DSG's business, Tracy says. “We keep training in the forefront,” he says, with a full-time director of training to develop and implement programs throughout the organization. Because DSG has such a deep bench throughout its branches, employees will often spend time at other branches to learn from their peers. As Kumm notes, “Our society is moving toward one that is knowledge based. Our customers will be paying us for our knowledge.”
Customers also appreciate the service they get from DSG employees — those intangibles that you can't learn in a classroom. Kumm says this customer service is part of the culture that employees learn to embrace when they join DSG. Knowing how valuable their employees are to the company, DSG management worked hard not to lay off employees during the economic downturn. “We know it's not the best economy, but we also know that we can't find these kinds of people that easily, so we're not going to let them go. By not having the layoffs, we'll have these talented people here when the economy comes back.”
Rosendahl is quick to point out that branch managers have the ability to run their branches as they see fit — “to do what they think is right,” he says. “We encourage them to do quarterly state of the branch meetings.” Empowering the branches is part of DSG's belief that customers want to work with the people who know them best — and what works in St. Paul might not work in Pierre, SD. “We still believe that distribution and wholesale supply is a local thing,” says Kumm. DSG centralizes and consolidates services that customers will never see — such things as purchasing and accounts payable, for example.
DSG became an ESOP company in 1996 — about five years after the current management took over the company — and the leaders say this is an important element in DSG's success. “That helps the motivation of our employees; they take things to heart and all of that helps to better serve the customer,” Kumm says. DSG's financials are open to all of its employee-owners. To help keep employees motivated and engaged, an ESOP committee — with no management input — works closely with the management and the board of directors on a variety of issues.
Miller says Shelter Supply has been very involved with HARDI, and plans to continue that relationship now that they are part of DSG. “HARDI is focused on distributor excellence for its members,” Miller says. He cites HARDI's benchmarking, networking and best practices as among the most valuable tools that continue to help the business.
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Shelter Supply customers continue to learn — happily — that being part of DSG means that they get the best of both worlds — the local service that they have come to rely on as well as the knowledge of a regional wholesaler distributor with employee-owners who have an expertise in a variety of industries.
Michael Maynard is a business writer based in Providence, RI. He writes frequently on HVACR, construction and architecture issues. Contact him at [email protected]
PROs KNOW… LET A PRO DO IT.org
Definition: DSG is sponsoring a campaign — complete with a website, brochures and more — to help consumers understand why hiring a professional is a faster, safer and all-around better idea than D.I.Y (do-it-yourselfers).
Significance: With an increasing number of home improvement shows and a vast number of big box stores around the corner, more and more homeowners are considering tackling HVACR, plumbing and electrical projects themselves.
Benefits: According to the U.S. Census Bureau, fellow industry professionals say that between 25 percent to 30 percent of work comes from fixing D.I.Y disasters. Even though many D.I.Y jobs lead to work for contractors, everyone would benefit if they involved a professional from the start.
Procedure: The marketing campaign creates awareness through the website www.letaprodoit.org. In addition to the website, DSG has created handy brochures for contractors to hand out to their customers. These brochures also include a convenient spot for contractors to attach their business cards.
People involved: Sales, marketing and website developers.
Timing: Three months to develop materials and website.
Contact: Arne Breikjern, DSG marketing manager at 651/224-5781 or [email protected].
DSG at a Glance
CEO: Todd Kumm
President: Tom Rosendahl
Ownership: 100 percent employee-owned (ESOP)
Headquarters: Fargo, ND
Operations: 17 branches in North Dakota, South Dakota, Minnesota
Major Product Lines: American Standard, AO Smith, Broan, Fantech, First Company, Fujitsu, General Electric, Hallowell (Acadia), Hart & Cooley, Honeywell, Hydro-Heat Geothermal, LG, Marathon, Nordyne, Panasonic, Samsung, Thermo-Stor, Venmar
Year Founded: 1898
Overview: Dakota Supply Group (DSG) is a full-line distributor of products for the electrical, mechanical, communications, utility, automation, waterworks, filtration and metering industries. Our diversified company is known for innovative products, experienced employees, outstanding service and a total quality management approach to every transaction from beginning to end. As an employee-owned business, we have that unique personal quality which is often hard to find in today's business world. You're always dealing with the owner when you work with DSG, and that means better service, higher standards and quicker decisions.