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Moving the Cooperative forward

Moving the Cooperative forward

As president and CEO of Johnstone Supply, the nation's leading cooperative wholesaler distributor in the HVACR industry, DeWight Wallace says his role is similar to herding cats — persuading successful, independent business owners to move in the same direction. “We have talented business owners who are operating in their own markets, and it's herding them in a way to leverage the power of the cooperative and making sure the cooperative is providing them with what they need,” he says.

The cooperative continues to grow in both size and scope. With more than $1 billion in annual sales, Johnstone Supply now has more than 350 independently owned stores across the United States and five regional distribution centers. According to Wallace, Johnstone Supply is investing heavily for growth as it explores new opportunities while continuing to provide customers with its breadth of products and outstanding service.

Wallace, who took over the top job at Johnstone Supply in December 2009, is spending lots of time on the road to get a better idea about those opportunities, which have become part of a strategic plan to guide the cooperative into the future. The goal of the plan, Wallace says, is to build on its strengths of locally owned stores with the backing and power of a national cooperative. “We leverage the fact that we're a cooperative; we leverage those touch points with the customers through our store owners nationally,” he says.

Five regional meetings across the country with store owners helped give him a better sense of customer needs and how those needs could translate into an improved value proposition for their customers. Johnstone owners know their local markets, and they're passionate about the products and service they provide to their customers. “The owners own those customer relationships as opposed to a franchise where you own it nationally and hire a store manager,” Wallace says. “We have people that actually drive these businesses aggressively. I think that's the core strength.”

That core strength — the local owner — magnifies what the national cooperative brings to the equation. In Johnstone's case, it is national buying power and the ability to offer specialized regional distribution so local stores can order what they need and receive it — usually by the next day. The distribution centers are set up to meet the specific needs of the stores within their individual regions.

Johnstone's product offering, encapsulated in its annual product supply catalog, continues to grow. The company's aim, Wallace says, is to be the “one-stop shop for our customers.” Johnstone has a product management team focused on sourcing the right products and working with its vendors to build strong relationships to negotiate the best deals for its members.

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Wallace is keeping his focus on Johnstone's main target — the contractors who buy from the member stores. "At the end of the day, it's all about leveraging all of these things for the end customers, and that's our vision," he says. Johnstone continually keeps its pulse on the end customers to assess their needs and make sure that their product offerings and service proposition are on target. The team does this through a variety of methods, including e-mail surveys and in-store surveys.

To bolster its efforts, the cooperative created a new position, vice president of sales and marketing, to work directly with the end customers. Andrew Verey, who is new to HVACR but brings 30 years of experience in distribution, "wakes up in the morning focused on delivering a great value proposition for our end customers and growing our member sales," Wallace says. "Andrew has a high energy level, solid knowledge of distribution and a real thirst for learning about the industry. I think it's going to be a real win for us.Johnstone's previous marketing efforts were more about working with the vendors and rolling out the programs that they had to its member stores. With Verey on board, Johnstone has developed a new approach that focuses more on understanding the needs of the different segments of its customer base and then matching the sales and marketing propositions to those areas. In addition, Wallace says, Johnstone will be looking at expanding its products to encompass refrigeration and light commercial.

As Johnstone expands into these segments, however, it will make sure that it has the correct value proposition and then develop integrated marketing plans around them. Verey is “jumping in with both feet” to his new role, Wallace says. In the same way that Wallace has been going out to stores around the country, Verey has been working directly with contractors, holding round tables and going on service calls with them. The answers to the questions that he's asking — “What do you guys need from us? How can we help you grow your business?” — are being built into Johnstone's marketing and sales planning to help build its value proposition.

While Wallace brought a wide range of experience to Johnstone, most recently as president of an electronics distribution business, he is new to HVACR distribution. He quickly came to understand that it is a stable, close-knit industry where relationships matter.

Wallace also understands the role that HARDI plays as an advocate and resource for the HVACR industry. At Johnstone's annual meeting last year, Johnstone and HARDI announced a strategic partnership that establishes HARDI membership status for all Johnstone stores, increases accurate tracking of industry performance between the two organizations and involves Johnstone in HARDI committees and advocacy leadership positions.

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“I think that's a win-win,” Wallace says. “That's a win for HARDI to get all of the Johnstone members participating, and it's a win for us to be able to tap into learning about the industry, sharing ideas and getting more tightly aligned with customer needs.” Since joining Johnstone, Wallace has already attended several HARDI meetings, and he plans to participate in the HARDI Washington, D.C., Fly-In.

As part of the partnership agreement, Johnstone executives and owners will take on HARDI leadership positions on key committees to help drive issues such as government relations, professional development and training, management methods and the HARDI Foundation. In announcing the partnership last fall, Wallace noted that its foundation is based on a range of shared strategic objectives such as maximizing industry (distributor) profitability and growth, maintaining the viability of independent distributors such as those in the Johnstone Cooperative and advocating for issues important to HVACR contractors and distributors alike.

While the HVACR industry may be stable and close-knit, Wallace notes that the industry as a whole hasn't really grasped the power of technology, particularly the Internet, to better connect to customer needs. “The Internet is happening to all of us,” he says. “I think the HVACR industry will see that wave much like other industries. It just hasn't been on the forefront of it.”

That provides Johnstone with an opportunity to leverage technology and become a leader in e-commerce. He also sees a role for technology at the counter to strengthen the relationship with customers. Wallace understands the value of the person behind the counter knowing his or her customers. “I think we can leverage technology to get better at it,” he says. “At the touch of a button, our person at the counter will have that rich information that the contractor is looking for.”

The company is looking to leverage technology by expanding Johnstone University, its online training resource for contractors, to provide more courses and opportunities for contractors. Wallace says it will also invest heavily in data and online tools for its contractor customers.

Becoming part of the HVACR industry also means forging closer ties with manufacturers. Because his experience is also in manufacturing — he's worked for Texas Instruments, General Motors and General Electric — Wallace has a deeper understanding of their needs and is better able to understand what they're looking for from distributor partners such as Johnstone.

Despite firmly establishing his role at Johnstone, Wallace intends to stay in continuous contact with store owners around the country. In fact, another series of round tables with owners is underway. Johnstone's strategic plan, he notes, is a “living, breathing document.”

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In this second sequence of round table discussions, Wallace has tapped a different set of Johnstone owners. He wants to know how they're doing and how the corporate office is doing as well. What's working? What's not? And what areas should he and his team focus on? “We'll again bring all of that information back and make tweaks to the plan,” he says. Wallace will also continue to reach out to contractor customers to assess their needs.

“What gets me excited about coming into work every day is learning,” he says. “Learning about our customer base, learning about our opportunities and trying to exploit those opportunities.” The biggest lessons, he says, have been navigating the needs and desires of his two customers — the member store owners and their customers. “I continue to learn all the time how to best do that.”

Johnstone is investing to grow the cooperative, Wallace says. Even during the recent economic downturn, Johnstone has kept its focus on the future. “We haven't cut into our employee base. We've tried to retain the talent,” he says. “Like any of our competitors, we've had to minimize costs, but we've invested for growth. I'm excited about the initiatives that we're driving. It's going to position us very well as the market recovers.”

Michael Maynard is a business writer in Providence, RI, who writes on issues related to HVACR, construction and architecture. Contact him at [email protected].

Best Practice

Johnstone Supply — a Cooperative Business Model

Definition: A commitment to foster the best combination of local ownership service and customer relationships coupled with the product selection, buying power, marketing and distribution network capabilities of a national HVACR company. In short — local owners with national resources.

Significance: The unique strengths of Johnstone's cooperative business model mean independent distributors, with all their personalized service and knowledge of local contractor's needs and concerns, can operate without the typical disadvantages faced by privately owned, independent stores.

Benefits: The cooperative's resources provide members with expanded product availability, fast delivery times, enhanced services for their customers such as training and extensive product information, competitively negotiated prices from vendors, and access to top-notch marketing, business management and training.

Process: A central corporate office staffed with highly experienced marketing and distribution professionals acts on the independent local owners' behalf to seek out new products, develop marketing tools and negotiate programs to provide a corporation-strong level of support. A state-of-the-art national network of five regionally based Distribution Centers provides local stores with rapid delivery times (usually next day), and benefits customers with enhanced inventory specific to local climate needs, improved product availability, shipping accuracy and timely deliveries. Local store employees get access to specialized training and Johnstone's proprietary cross-reference system.

People: The cooperative model means every independent owner has a voice in directing the Cooperative and sharing in its success. A board of directors, made up mostly of local owners, sets the vision of the company. CEO DeWight Wallace leads the Corporate and Distribution Center teams.

Purpose: The Johnstone Cooperative's purpose is to consistently deliver profitable growth for its members and leverage its collective strengths to exceed customer expectations as the source for product, knowledge and solutions in the HVACR distribution industry.

Contact: Mark Askew, director of Membership, 503/256-3663, [email protected]

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