GSS-FFF establish strong foothold in
PVF master distribution
BY MARY JO MARTIN
Editorial director
Master distributor Global Stainless Supply Inc. was established by Sumitomo Corporation of America in April 2002 and began shipping steel pipe, fittings and flanges from their Houston warehouse a few months later. Initally, GSS’s core suppliers included Tubacex for seamless pipe, Metalfar and Bebitz for stainless steel flanges, IML for forged stainless fittings and Erne for seamless buttweld fittings. GSS still places regular orders with all of its original suppliers.
GSS continues to sell strictly through distribution — no fabricators, no contractors, no end users and no exceptions. Its sales staff initially consisted of industry veterans Keith Thomas, Charlotte Horton and Jeff Motley. This experienced trio had a distributor customer base that spanned North America.
The company was faced with a major turning point in its development shortly after the doors opened. Due to the effects caused by 9/11 and the collapse of Enron, demand for GSS’s core product — seamless stainless pipe — dropped by 40%. (The business plan for GSS was written in October 2001 and tentative approval was received November 16. At that time, the economic implications of the terrorist attack were not fully appreciated.) By August 2002, there was a critical oversupply of commodity grades of seamless stainless pipe. GSS management realized their initial business plan was inadequate so their product line was expanded to include welded buttweld fittings and a wider variety of material grades in seamless pipe. The first orders for new material grades were placed in September 2002. The process began with 347H in double random lengths. 317L and Duplex 2205 followed in three-month increments. Today, GSS carries a comprehensive range of stainless and nickel alloys.
The Houston headquarters has 210,000 square feet under roof and 14 acres of outside storage. In less than a decade in business, GSS has opened several additional facilities:
• The Richmond, Va., branch began operations in January of 2005. The 125,000-square-foot operation is managed by Billy Reeder.
• The 120,000-square-foot Indianapolis operation, under the direction of Dan Noblitt, opened in October 2006.
• The Los Angeles operation was formed in April 2009 as a result of the acquisition of the assets of Specialty Valve and Fitting. Steve Martinez manages the 125,000-square-foot Los Angeles facility.
However, it was the acquisition of FFF in September 2006 that created the most significant opportunity for long-term growth. FFF brought 25 years of relationships and an experienced management team to the table. In fact, the previous owners of FFF still retain equity and act as an important part of the GSS management team.
“We like to think of ourselves as a hybrid company,” said CEO Bill Bootz, who has more than 20 years of experience in master distribution. “Sumitomo provides large corporation resources and expertise but we still offer the operational environment and customer service of a family business. Human resources are our most important assets. Creating a management team as opposed to a group of managers takes time. Our experienced management team is broad and deep, and includes:
• Danny Lee and Stan Lee, who founded FFF.
• Ken Albano, a metallurgical engineer with an MBA and extensive turnaround experience. Before GSS he played a key role at Ameriforge .
• Lee Brown, who had a long career at Southwest Stainless.
• Bill Thomas, who learned a tremendous amount from his time at Allied.
• Paul Brahier, known for his time at Dixie Pipe and Texas Pipe.
• Joe Phoenix, a chemical engineer and ASQ-certified quality engineer.
• Robert Horton and Joe Flores run the Houston warehouse operations.
“The combination of GSS and FFF offers customers one of the broadest ranges of process piping components under one roof in the master distribution business. Transaction cost economics are the focal point of our growth going forward and carbon pipe inventories will soon be arriving in Houston. GSS and FFF are now hitting their stride. Carbon seamless pipe, valves, and a large scale manufacturing operation will be a catalyst for rapid growth in the future.”
Recently, Bootz, along with VP Ken Albano and sales/marketing manager Nathan Green, gave editorial director Mary Jo Martin greater insight into the GSS/FFF organization.
MJM: Give us a look at the SKUs you stock and how you keep transactional costs as low as possible?
Green: We strive to lower transactional costs to our customers by offering a one stop shop for distributors of process piping components, and we are constantly expanding the breadth and depth of our offering to do so. Currently, GSS/FFF inventory approximately 37,000 line items; 20,000 of those encompass the stainless, nickel and non-ferrous grades (stainless, nickel, aluminum, duplex, etc.) and the remaining 17,000 fall under our carbon product mix (carbon, chrome and low-temp).
A recent inventory purchase and expanded credit lines have allowed us to add more than 2,000 new, never-before-stocked line items. The majority of our inventory is imported, with approximately 65% being from “approved” Western European mills and the rest coming from low-cost countries like India, Malaysia and Vietnam. Our domestic product mix is continually growing and we have even started to inventory Chinese material in select markets because it’s becoming more widely acceptable. Consequently, we can accommodate any Approved Material List (AML) or country of origin restrictions. In addition, because of our unique buying method consisting of long-term agreements and tonnage commitments, we are able to guarantee a continuous influx of material at lower costs, helping ensure we never quote “no stock.”
Our latest inventory venture is in carbon steel pipe, in which we will inventory 1/4-inch to 24-inch welded and seamless pipe in STD, XH and True Schedules.
MJM: How are your sales divided between industrial and commercial?
Green: Based on our product mix, we feel like we are the most viable source of material for all PVF sectors. Because we maintain such a large inventory of Western European-approved import material and are headquartered in Houston, we have become a dominant player in the Gulf Coast refining and petrochemical sector. Our strategically located branches allow us to reach similar markets in the Midwest, Mid-Atlantic and West Coast.
We have been successful in carving out a niche in the approved sector, but it’s the commercial side of the industry that comprises 60% to 80% of demand for pipe, flanges and fittings. Multi-million-dollar investments from Sumitomo have allowed us to make tremendous strides in growing our commercial-grade inventory. This expansion is helping position us to increase commercial market share and ultimately become a “cost leader.”
MJM: Do you have special training programs for employees to increase their technical knowledge?
Albano: Our approach to the training and development of our employees is broader than increasing only their technical knowledge. We develop individual training and development programs based on the needs and aspirations of each employee. Training for new hires generally begins with a multi-week assignment working in the warehouse. This allows the individual to learn our products, manufacturers and the order fulfillment process. We utilize the American Management Association for training in areas such as selling skills and leadership. The American Supply Association is used for warehouse operations and inventory management training. We have a close working relationship with the Department of Engineering Technology and Industrial Distribution at Texas A&M University where we send employees for training in branch management, marketing and sales, and other areas.
I have a M.S. in Metallurgy and Material’s Science and 30 years of manufacturing experience, which provides me a solid background in providing training in specifications review, metallurgy, and manufacturing practices. I’ve also developed a technical and manufacturing training syllabus that includes visits to the metallurgical testing laboratory that we use, and visits to our suppliers, both in the U.S. and overseas. The visits to manufacturers train our key employees in steelmaking, forging, pipe manufacturing, heat treatment and quality assurance.
MJM: Who are your primary suppliers?
Bootz: Long-term relationships are at the heart of our supply strategy. Relationships are forged over time through open communication and information exchange. The relationships always take precedence to price.
Our core suppliers for GSS include Tubacex, Enlin, Erne and Metalfar, while FFF has an exclusive marketing arrangement with Ulma Forja. Other key suppliers include SKB, Erne, Metalfar, USK and Benkan.
MJM: How do you evaluate potential new suppliers and what is the process you go through when adding a new line?
Albano: Prospective suppliers are subjected to a rigorous quality and manufacturing capability assessment. This is a three-phase program. After an initial “paper” survey of manufacturing capability, prospective suppliers are audited. The audit examines the prospective supplier’s quality system, testing and inspection capability. In addition, the manufacturing capability and practices are carefully evaluated to ensure that the equipment and practices are capable of meeting specification requirements.
Audit findings are exhaustively documented and shared with the supplier. Recommendations are usually made to improve the supplier’s quality system or process. Parts are then selected at random and marked with a unique stamp. These parts are sent to us for “First Article” testing in accordance with one of our specification-specific testing protocols. Results of the first article testing are also shared with the suppliers. Prospective suppliers must demonstrate a sound quality system, manufacturing capability, and acceptable first article testing to become an approved supplier. Random inspection, and sometimes destructive testing, is performed on parts culled from shipments of new suppliers as a validation of product quality.
MJM: Do you have an outside salesforce, or are all sales done through inside personnel?
Bootz: Our sales force is expected to do inside and outside relationship development. We do not have any full-time road warriors. We do, on the other hand, encourage all sales personnel to invest their time with customers at ball games, concerts, dinners and other activities. In optimal situations, we like to have our facilities toured, which is our most effective sales tool.
MJM: How do you market your business and target potential new customers?
Bootz: We sell through distribution. The majority of distribution companies are well known and long established. The challenge is to create a value chain that offers an edge over other market participants.
The key to doing this is to understand the strengths of our competitors and the needs and operational differences of our customers. This process has led to the continual expansion of our product offering and supply base.
Our website, www.OneStopPVF.com, provides continual updates on the company and has useful information for customers. Many people are familiar with our advertisements in trade publications likeThe Wholesaler. These tools are designed to assist the most important part of our marketing — person-to-person contact.
MJM: How have your customers’ expectations changed over the years, and how has FFF/GSS adapted to those changing needs/wants?
Bootz: The industry is in a constant state of transformation. Global sourcing is routine today. Our focus has been on adding value through diversification and specialization. Diversification is in terms of new suppliers and the combination of carbon and stainless under one roof. Specialization in terms of nickel alloys, rare grades of stainless, chrome, low temp, large diameters and high pressure parts.
Our focus has been on value creation. We believe our course is sound as others have begun to follow.
MJM: Are you pleased with the amount of activity you are seeing on your website?
Green: When you think of GSS, we want the next thing that pops into your head to be FFF, and vice-versa. We want the names to be synonymous. With the onslaught of the “green” movement and internet growth, physical brochures and line cards are becoming a thing of the past. Because of this, and staying loyal to our business philosophy, we have merged our company websites into www.OneStopPVF.com, offering one location where you can go to find all of the information and resources that you need.
To bring more visibility and raise awareness of the site, we have started e-mail-blast marketing campaigns also. These periodic blasts are sent to our over 3,000 contacts and contain new product information and pertinent GSS/FFF news. We have had a great response to these email campaigns with many people “clicking through,” which directs them to our website. We want it to be a resource for our customers so there is lots of useful information on the site. Things like product listings, new products, contact information, weights and dimension charts, links to metal market pricing, and dollar conversion rates are just a few of the things you can expect to find. We recently added a page making Online MTRS available to our customers. We want to keep the site fresh, so each time customers visit we want to highlight something new they might not have seen or a service they didn’t know we offered.
MJM: With so many sources of competition in the marketplace, how does FFF/GSS differentiate itself?
Bootz: Trust. We are trusted by the industry. We define our role and stick to our mission. We do not take expedient shortcuts.
MJM: How do you ensure that you have the right type and numbers of product on hand at all times, while not getting to the point of having too much of your resources tied up in inventory that might not be moving?
Bootz: Our business is to have it. We have a unique approach which relies only slightly on historical usage. Primarily we focus on maintaining target amounts on the floor. The majority of products are procured on a monthly basis providing a constant inflow of goods.
FFF has recently adopted the GSS procurement model and correspondingly fill-rates and inventory turns have increased.
Turns are not the priority in master distribution as many items will sit for years. Niche items always make the turns low. On the other hand that is our value in the supply chain.
MJM: Can you describe the leadership philosophy at FFF/GSS, such as accessibility to customers and employees, and hands-on activity by the owners?
Green: As with any merger, there are always concerns as to how well the company identities and cultures will mesh. When our new Houston facility was built, the carbon and stainless sales forces remained segregated. For customer service purposes and the overall cohesion of the group, the sales staffs were eventually merged. Now our Houston sales office houses approximately 25 total salespeople and four executives.
Our “bullpen” format facilitates more information sharing and learning opportunities for younger salespeople. While the “bullpen” is not a new concept to PVF, we put an interesting twist on it. You’d be hard pressed to walk into any office and find the CEO and VP of a $150-million company sitting smack dab in the middle cubicle. It brings new meaning to “open door policy.” Hierarchy still exist for practical purposes, but information flows more freely because employees are encouraged to take ownership of certain areas and research and develop suggestions and strategies for company improvement. The information chain is more circular as opposed to the top-down method of larger corporations.
Our “control tower” method allows for executives to be in tune with employees’ needs by hearing and seeing the daily issues that plague all companies. It also helps our executives gather valuable information and stay on top of market trends and changes, allowing for quick and decisive action with regards to operations and purchasing.
It’s an atmosphere where people feel free to speak their mind and no ideas are dismissed — leading to what we call our “culture of inclusion.”
MJM: Is there anything you can share with me regarding the company’s near- or long-term goals and strategic plans?
Bootz: Our objective is to be the preferred supplier to distributors of process piping components. We will continue to lead in terms of quality, cost and product diversity. Soon you will see additions to the management team. Attracting top talent to continue product diversification will fuel our growth. Over the near term GSS will offer carbon, chrome, stainless, nickel alloys and aluminum in pipe, valves, fittings and flanges under one roof.
We expect 2010 will be a time of realignment. Inventories have been shed by many. Recent acquisitions will transform traditional supply channels. More and more suppliers will target direct sales. We remain curious about the impact of private equity going forward.