Contractor/Distributor Partnering Breaks New Ground

Feb. 1, 2008
It all started with one man and one truck. My father was a professional fire fighter in Chicago. Because they work 24-hour shifts, sleeping at the firehouse, firefighters have a lot of extra time on their hands. Most find secondary sources of income. In 1971, my dad opened his own HVAC contracting business — one man with one truck.

By Dave Musial

Dave Musial is CEO of Four Seasons Heating and Air Conditioning, Chicago, IL. He can be reached at 773/577-2709.

It all started with one man and one truck.

My father was a professional fire fighter in Chicago. Because they work 24-hour shifts, sleeping at the firehouse, firefighters have a lot of extra time on their hands. Most find secondary sources of income. In 1971, my dad opened his own HVAC contracting business — one man with one truck.

I joined the company after high school and it became one man, one teenager, and one truck. When dad retired in 1995, it was back to one man (me), and one truck. But not for long.

Over the past 12 years, Four Seasons Heating and Air Conditioning has grown to a $60 million business that employs more than 400. At a certain point, this tremendous growth gave birth to the unique idea of having a distributor onsite at our main facility, with the sole mission of supplying our business.

A New Concept in Distribution
We were running the wheels off our wholesaler’s trucks and it was creating a lot of errors and waste, so we decided to create our own in-house solution.

We wanted a way to reduce the inventory on our technicians’ trucks and, at the same time, simplify their control of their overall inventory. The idea was to have a distributor open a permanent warehouse at our main facility and directly service each technician on a daily basis so the technician would have only the materials on his truck that he would need for that day’s work.

It worked well for a while, but eventually the wholesaler was unable to keep up with the volume. The key man we were dealing with left the business and the system was deteriorating. It was time to get another wholesaler, one who was able to keep up with our needs and grow with us.

As one of the largest privately owned residential and light commercial HVAC contractors in the country, we initially had no trouble finding distributors who wanted our business. However, we eliminated some because they were too small. Others didn’t want to invest the time in coming to see how our operation worked. They just assured us that they could handle it. We eliminated them, too. In the end, it came down to who was willing to invest the time and effort to understand our concept and come up with creative solutions to get the parts to the technicians and maintain our inventory — Sid Harvey Industries.

Sid Harvey’s is a major distributor of HVAC parts and equipment with 75 locations in 18 states.

Sid Harvey’s had been calling on me for some time, even though I gave them very little business. When it came time to change distributors, they were one of the companies I asked to visit our facility. Not only did they visit, they sent in a team from their New York headquarters to study our operation for a week.

Sid Harvey’s Guy Mendolia saw a lot of potential in us, and promised to do whatever it took to solve our distribution dilemma. That included bringing in John Rynecki, senior vice president of sales and marketing.

According to Rynecki, Sid Harvey’s has its own inventory program, called Custom Inventory Solutions, which they had been refining for decades. They wanted to see if their experience in inventory management could contribute to our company’s needs. Custom Inventory Soutions customizes Sid Harvey’s inventory program with large customers, so it works with each client’s unique way of doing business. As Rynecki explained it, just-in-time shipments reduce inventory, provide improved control over supplies, and reduce the stock each technician has to carry in his van. In addition, Sid Harvey’s works with contractors to create mobile computerized systems in their vans that interact with contractors’ existing parts inventory programs. Their bridge programs work with all kinds of software, so they can track usage directly, and ship anywhere.

Still, this idea of having a warehouse at our site was new to them, and they wanted to see how they could meld their experience with this new idea.

Distributor/Contractor Synergy
The first thing the Sid Harvey’s team did was observe how our previous parts contractor handled the business.

Jack DeCotiis, Sid Harvey’s senior vice president of operations and business development, said it looked like our old vendor’s employees “needed track shoes.” It’s true that they were picking each order on the day it was needed, and with our large number of technicians it was a lot of work. We work 24/7/365, so we have a very big peak early in the morning for the day crew then another in the early afternoon for the evening crew, without much to do in between. Our night crew picks their own parts, which created more inventory problems. We knew there had to be a better idea.

During that week, the Sid Harvey’s team did more than observe. They discussed their observations with our management and brainstormed with us. The result was elegant in its simplicity.

In the end, they decided to determine what the maximum parts package would be for each kind of job, depending on the unit being installed or serviced. Then, they prepackaged everything the technician could possibly need and gave each of the packages a part number. Now, when a boiler or any other unit goes onto a van, the right kit goes right on with it. Then, when the technician comes back at the end of his shift, he or she returns the unused parts of the kit, and those items are entered back into inventory.

Inventory Reduced and Controlled
Today, we have zero inventory on our trucks. When our guys leave the building, they have everything they need to complete the job down to the last nut. Then, when the job’s over, I have a detailed list on what the job cost me down to the last sheet metal screw. Inventory is a snap. In the seven months since we started this program, we’ve saved about a half a million dollars in waste, shrinkage, loss, whatever you want to call it. An interesting side benefit is that we’ve improved the gas mileage on our trucks, because we’re not driving around with 200 pounds of fittings on them.

According to DeCotiis, the logistics of the initial setup were important to the success of the program. Our site is 120,000 sq.ft., and we would be occupying 20,000 sq.ft., so Sid Harvey’s had to put the products in the most convenient locations to facilitate picking parts and creating the packages. They made diagrams and manipulated them until they had the most efficient layout. Sid Harvey’s team completed the actual racking and stocking in about two weeks, then they experimented with staffing to make sure they could optimize efficiency. Ultimately, it was determined that a staff of six was optimal for the first two shifts. They also tapped carefully selected members of our staff to pull the packages for the third shift, and it’s worked out well.

The new program is working well for both companies. Sid Harvey himself hopped on a plane and came down to see us. He said he looked at our relationship as a partnership and he was in it for the long term. Then, he put a million dollars of product in my building on a handshake.

My plans are to expand into other cities and Sid Harvey’s will be a part of that expansion. The new system that the two management teams developed has a 99.6% fill rate. I would have gladly given it an A+ for a 90% fill rate.