HVACRDB

Doing It Right with Malco

An HVACR contractor is only as good as his tools. He might have the technical expertise and the backing of an HVACR dealer who supplies him with the products that he needs, but it takes the right tools to do the job right.

That's what makes Malco Products Inc. so valuable — and not just for contractors. Sure, the company makes tools that are custom-designed for the HVACR contractor. But the Annandale, MN-based company also works closely with wholesaler distributors, helping them effectively market Malco's product line with industry manufacturers and ensuring they are developing the tools to meet the requirements of new HVACR products. Malco is a company that provides value for all of the players in the supply chain.

As the HVACR industry continues to evolve, so, too, does Malco. In fact, that's how Malco came into being. Founder Mark Keymer was working as a steel supply salesman in 1950 when he saw contractors trying to make alterations to sheet metal on job sites without the proper tools. Keymer saw the need for sheet metal tools that contractors could use on-site, and he began to supply them with the tools as well as the sheet metal.

When the industry began to move to forced-air systems, flex duct and duct board became popular; Keymer was nimble enough to develop the tools and accessories for those products. More recently, radiant heat has become a popular alternative, and Malco is there with the tools and accessories for those systems as well. “We're evolving with the different types of heating systems that come into the marketplace,” says Donald Schmidt, Malco's executive vice president.

Malco began as a regional company and quickly became a national presence in the HVACR tool market, according to Schmidt. Through a national network of manufacturer reps, Malco had the U.S. market covered by the end of the 1960s. The introduction of a comprehensive and innovative fastener program, branded as Zip-In® products (which became a signature line for Malco), brought the company to greater prominence in the HVACR industry. “That really helped to catapult us to be thought of as both a tools and fastener supplier,” Schmidt says.

The company today has about 170 associates, who are, in fact, the owners. Malco converted to an ESOP, or Employee Stock Ownership Plan, in 1999. “That helped us organizationally to engage our associates,” says Paul Hansen, Malco's president. As owners, the associates (Hansen points out that they are called associates and not employees) know the financials of the company, which helps them to understand what they need to do to remain successful.

While the Zip-In products stand on their own, Malco has the ability to personalize the packaging with a distributor's logo through digital printing. The co-branding is part of Malco's goal to provide Custom Crafted Solutions for its customers. “HARDI members realize the benefits of the co-branding on this different type of packaging,” Schmidt says.

In addition to making quality tools, Malco works hard to help its distributor customers sell those tools. Malco has helped its distributor customers think more like a retailer than an industrial supply house.

The customization program is one way to make Malco products stand out. Three years ago, Malco redesigned its packaging system, replacing the skin packaging with clamshell packaging, which allows distributors an opportunity to customize the labels with their logos. “We gain loyalty with distributor customers because of our merchandising program,” Schmidt says.

The company also works closely with distributors to literally get the products into the hands of contractors. “We want to make sure that the products can be touched and felt,” Schmidt says. Tools are not the primary reason why a contractor will visit a distributor, he notes. Tools are often impulse purchases. “They're probably going there to get fittings or equipment, and they'll remember, ‘Oh, I lost my crimper,’” Schmidt says. “Our job, in conjunction with the wholesaler, is to create that impulse for the customer to buy.”

With this in mind, Malco makes sure that its products are in a customer's sight when they visit a distributor. Early on, Keymer recognized the value of retail displays, what he called the “silent salesman,” recalls Schmidt. Today, a good portion of Malco's marketing budget goes to merchandising display systems and packaging.

Manufacturer reps play a major role in Malco's work with distributors. Schimdt says the reps never hesitate to roll up their sleeves and do whatever it takes to help its customers. Some of the reps have been with Malco for 35 years, while others represent the second generation of reps working for the company. “They show their commitment to help our customers be successful,” Schmidt says.

What tools do contractors need? Because Malco focuses solely on producing tools for professional contractors, they have forged close relationships with them — asking questions, watching how they use the tools and then making changes to the products, says Hansen. “Our customer is a contractor and a professional user, and our products are designed, performance-wise and quality-wise, to fit the needs of that user,” he says.

Underscoring the importance of keeping current with industry trends and the needs of the contractors, Malco has a self-contained group that focuses solely on new product development. This group of eight to 10 associates conducts the research, goes out to customers and will do the design, development and initial production of the products.

“New products are very important to our growth,” says Hansen. Malco introduces between six and 10 new products a year. The company recently launched Redline, a redesign of some of its most popular products. “It was the first major redesign of these products in 20 years,” Hansen says. “We wanted to make sure that the image of Malco was of a company that utilizes latest technologies.”

Malco also works closely with HVACR manufacturers to understand new equipment and new materials that they may be bringing to market. “For us, it's important not only to go to the user, but for the people that are dreaming up the new materials,” Schmidt says. The relationship between equipment and tool manufacturers is a critical one: The manufacturers don't want to get into the tool business, so they rely on Malco to come up with the right tools that will make it easier for the contractor to use their new products. “We have a good relationship with the material suppliers,” he adds.

Malco continues to put its efforts into the wholesaler distribution channel and encourages its customers to look at selling its products over the Internet. “Look at the value of the Internet and the opportunities associated with selling tools over the Internet,” Schmidt says.

Malco is utilizing its website (www.malcotools.com) as a marketing tool. The site features bold and easy-to-read graphics that take the user where he or she wants to go quickly and easily. New products, catalogs, photos and videos are all part of the website. Schmidt says the design of the website, which is continually evolving, allows it to push the products through to the user. “A lot of people use websites for information-gathering, so we try to use that to create sales for our distribution partners,” he says. The site provides links to distributors. “We want to help facilitate that sale as much as possible.”

Facilitating more sales means getting Malco's products to the distributors and onto their merchandising displays as quickly as possible. Most of Malco's large customers are set up with EDI to ensure that the distributors have the right products at the ready. EDI was a natural evolution for Malco that began 20 years ago when it made a pledge to ship products on the same or next day after taking an order whenever possible. “We decided that from a service-level standpoint we were going to get to 95 percent next day or same day,” Schmidt says. “That was our battle cry.”

Malco produces and ships all of its tools from its distribution center in Minnesota. “We're really set up from a distribution standpoint,” Schmidt says. Distributor customers don't worry about getting Malco products — they know the tools will be there.

When customers think about the problems they face, Malco isn't even on their radar screens, say Schmidt and Hansen. “That's the highest compliment you can get,” Schmidt says. “We like nothing more than to hear that they don't have any problems with Malco.”

Distributors also like Malco's guaranteed sales policy, which allows them to return any current inventory back to Malco without restocking fees. Such a policy is a testament to Malco's ability to not only provide quality products but the right products for its customers. Combined with EDI and its same-day/next-day shipping, that's a pretty good guarantee that there will be few, if any, empty hooks. “We try to have policies in place that reduce the chances that we'll have empty hooks,” Hansen says.

Malco stepped up its efforts toward international distribution in 1995, producing catalogs and packaging in five languages and exhibiting at international HVACR shows. “International is a journey and is something that we're still at the beginning with, but it's something that we need to do to minimize our geographical risk and because it's a growth opportunity,” Schmidt says. As part of its international distribution, the website features French and Spanish versions as well an English version.

Reflecting the increasing globalization within the industry, he notes that European HVACR tool manufacturers are beginning to make inroads in the U.S. market. “You'll continue to see more globalization with the marketplace,” he adds.

As Keymer built Malco, he recognized early on that wholesale distribution would be key to the success of the business. The contacts that Keymer and his people have made over the years through HARDI have been important in solidifying the relationships. “For the company, we see that as a chance not only to meet with our very best customers, but it's a chance to meet with our sales force and get updated on industry trends,” Schmidt says. “We always find the seminars and the meetings at HARDI conventions to be quite worthwhile.”

Malco has been around for almost 60 years, but its people understand that there's always more to learn, new tools to create and new customers to satisfy. “We're not sitting on our laurels,” Schmidt says. “We're delivering for our customers, personalizing services for them, and providing them with Custom Crafted Solutions.”


Tom Peric' is the editor of HVACR Distribution Business. Contact him at 856/874-0049 or at [email protected].

Malco Products Inc. at a Glance
President: Paul Hansen
Vice Presidents: Don Schmidt, Bruce Berhow
Headquarters and Distribution: Annandale, MN
Employees: 170
Major Trademarks: Malco, Redline, TurboShear, Max 2000, Andy's, Zip-Ins, Bit-Tips, FasGroov, BiMetal by Malco
Website: www.malcotools.com
Year Founded: 1950

Best Practice

Custom Crafted Solutions

Definition: Provide customized packaging and co-branding for popular tools and our Zip-In® and Bit-Tip® fastener lines.

Example: Dunphey & Associates of New Jersey has elected to combine our two strong brand names to promote sheet metal fasteners by customizing the label on the Zip-Ins packages to include both company logos.

Significance: This allows the promotion of both the distribution customer brand and the Malco® brand.

Benefits: This helps develop loyalty and a sense of partnership between Malco and our distribution customer and, in turn, helps our distribution customer develop loyalty with their contractor customers.

Procedure: We have modified the order entry process and integrated the needed transactions such that a customized order will flow through artwork creation, then shop floor production and out to shipping.

Timing: We ship our customized orders within three working days from receipt.

Cost: We have added digital color printing capabilities and continue to add other capabilities on-site to increase our flexibility and ability to customize to meet customer requests.

Other considerations: This program has expanded to include customized product promotions, display headers and plan-o-grams.

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