Paramount Supply blends traditional values with modern service and technology

BY MARY JO MARTIN
Editorial director

It is such a privilege to introduce Paramount Supply Co. as The Wholesaler’s PVF Hall of Fame inductee for 2011. This company was founded on a “wing and a prayer” in 1954 by John Hagen in Portland, Ore., but through hard work and determination, Hagen created a highly respected organization that has continued to persevere, innovate and grow.

Prior to starting his own company, Hagen had been a valve salesman with Harris Supply and Zidells. But entrepreneurial at his core, Hagen was able to secure a second mortgage on his home and with that seed money he rented a 2,000-square-foot warehouse. Thanks to the reputation he had built in the market, he soon was able to bring on lines such as Jenkins Bros, Taylor Forge and Flagg Flow, among others.

As Paramount president and owner since 1986, Ken Grothe — Hagen’s son-in-law — relates, “It was always enlightening listening to John relate to how difficult the early days were as he fought hard to secure product lines, carefully monitoring his finances, often moving inventory to the front of the bins so that visiting manufacturers and customers noticed he was stocking plenty of inventory. John always had great vision and insight, and always preached that at all costs you take care of your customers. His first big break came when Boise Cascade had a major failure in its Wallula facility and John made the long trek overnight to the mill to deliver the 12-inch cast steel valve they desperately needed first thing in the morning. When they realized the type of service that John would provide and was committed to, Boise Cascade decided that Paramount Supply was a company they wanted to do business with.”
Before joining Paramount in 1974, Grothe spent two years at Ernst and Ernst, and obtained his CPA certificate. As he explained, the education, training and auditing experience he received during that time was invaluable in helping him to understand the details of running and managing a business from a financial standpoint.

He bases his leadership/management philosophy on what he calls “the three Es” — educate, empower and execute.

“Paramount Supply over the years has been very keen on educating our staff in the fundamental and advanced principles of steam as well as heavy doses of technical product and manufacturing training,” Grothe explained.

“Most of our locations have at least one engineer on staff and along with the manufacturers’ personnel spend a significant amount of time learning how to solve product or process problems encountered by all industrial plants. Secondly —and generally much more difficult to actually implement, and really allow to happen — is empowering your employees. Paramount manages each branch as a separate profit structure. Each manager is empowered to run his branch as if he owned the company. All employees have to feel comfortable making whatever decision is required to take care of all issues that arise with customers on a timely basis.

“Customers, as you are aware, want information and decisions made quickly and the last thing they want to deal with is a bureacracy. Finally, you must execute the vision and mission statement your company has determined to be the best for its success in the marketplace. Your employees need to recognize where the company is headed and must have the appropriate tools to fulfill the vision. Feedback from customers and suppliers must be reviewed and, if necessary, appropriate changes implemented that will allow the company to better fulfill and execute its business plan.”

As part of its training program for both employees and customers, Paramount does in-house videotaping of its training sessions for many of its product lines, such as Numatics, Chesterton and others each month, making them available online to all employees. They are also very active with steam trap, expansion joint, pump and gasketing seminars for all customers who are interested in training for their plant personnel.”

Relationships matter

As Grothe relates, one of the most enjoyable aspects of the business for him is the depth of relationships that he and the company have developed over the years with many manufacturers.

“At times our loyalty to a manufacturer may not have been the best business decision but certainly allowed me to know I did everything possible to make the relationship work,” he said. “When I joined Paramount Supply we were a Jenkins Valve distributor and remained one longer than we should have, but in the end I knew Paramount Supply had honored their end of the bargain. I can tell you when Paramount Supply was a struggling company in the 50s and 60s, the only other wholesaler that would really sell to Paramount was Grinnell. John Hagen never forgot that and often reminded me of this and to this day it has been a large part of our loyalty to Anvil and Johnny Martin.”

As a wholesaler that is 100% devoted to pipe, valves and fittings, Paramount Supply stocks some of most highly respected lines in the industry, including:

• AC Valve • Anvil
• Apollo • Asco
• Ashcroft • B & G
• Chesterton • Crane
• Durabla • Durco
• Flexitalli • Garlock
• Gore • Numatics
• Spears • Strahman
• Trueline • Watson McDaniel
• Worcester

They also indent stainless steel valves and fittings as well as carbon steel weld fittings.

With Paramount operating in multiple regions of the country, they sell to a diverse customer base. In the Pacific Northwest, their largest customers are pulp and paper mills, food processing plants, semiconductor facilities, refineries as well as contractors in all parts of Oregon, Washington and Idaho. Meanwhile, their Houston facility has a strong focus on chemical plants and refineries, and in Phoenix semiconductor and mines are a heavy influence. Paramount’s Alaska business centers on refineries as well as military bases.

Grothe said that the biggest changes in customer expectations in recent years have been the time frame in which they want their expectations met.

“Customers expect and demand answers to their questions and solutions for their problems much faster than in the days of no e-mail or Internet,” he described. “Paramount Supply under the direction of James Grothe and his technology leadership has been able to offer a very advanced website, online customer ordering, direct links to manufacturers’ sites and all of the things technology-wise you’d better have to compete today. We engage in electronic commerce with both our suppliers and customers, and in fact I believe it has helped us bring solutions to our customers much more expeditiously. The biggest challenge has been all of the different software programs our customers are using and making each of our computer systems compatible. Being able to go the Asco website, for instance, and looking at their manufacturing schedule for any valve certainly gives you a leg up with the competition.

“Our approach to the market is as a problem solver. With engineers on staff in most of our locations and concentrating on their expert knowledge of steam as well as gasketing, we are a great source of immediate help for our customers. In most cases we are able to solve a customer’s problem quickly, offering solutions that are in the customer’s best interest long term without waiting for the manufacturers’ representative to go on site. In the generation of Facebook and Twitter, being able to solve issues for a customer quickly has been a great advantage.”

In addition, Paramount Supply offers a good deal of value-added services for customers, including such traditional services as pipe cutting, actuation assembly, gauge repair and special dimension air filters.
“Beyond that, our in-plant surveys also extend to steam traps, expansion joints, control valves and gasketing,” Grothe noted. “We have three, and soon to be four, locations offering soft and metal gasket fabrication. We have invested in one, and soon to be three, flash cutters which, with the aid of a computer, cut intricate gaskets without any dies. The quality and the accuracy of the gaskets have been overwhelmingly appreciated by all of our customers. It has been a large financial investment — but definitely worth it.”

With such a wide range of customers, Paramount Supply is regularly involved in projects of major scope. One of the more interesting projects the company was involved with recently was with the Coolidge Acquisition Group and Western Emulsions.

“They took a small refinery in southeast Arizona that was closed in early 1970 and completely rebuilt it to be a major unloading and loading facility for winter fill asphalt products,” described Grothe. “A new rail line had to be installed to handle 50 cars unloading one at a time, then eleven one-million-gallon tanks had to be refurbished. The facility has its own steam, fire and water treatment systems that had to be able to transfer the product from rail and trucks to the tanks, then blended and reshipped back out via rail and trucks. This was a design built project so we had to be able to supply material the following day or shortly thereafter as the engineers produced drawings nightly. This project took eight months, working seven days a week with 50 full-time welders. We furnished the PVF package, along with instrumentation, steam tracing and specialty products on a very fast-track basis that allowed the plant to open on time.

?“Another recent project of major size was the Britewater WWTP project in the Seattle area. It involved major instrumentation for most process systems within the plant, utilizing our repair and calibration facility with certification to national standards. Utilizing our software programs, we helped the many contractors involved in the project meet their requirements on this project.”

Looking ahead

As with most companies in our industry, Paramount Supply has been challenged by the state of the national economy and construction market in recent years. However, as Grothe noted, Paramount has benefited from its diversification of product lines.

“We have been extremely fortunate as our various branch locations, each with significant end user strengths, has allowed us to remain profitable throughout this time period. The pulp and paper market in the Pacific Northwest continues to struggle and, as recently seen from the Blue Heron Paper bankruptcy, competing in the world market in the newsprint business is a losing situation.

“As a distributor in the PVF world you need to know your niche, your strengths and weaknesses, and exploit them to the best of your ability. During this period, due to our branch bonus program and monitoring of costs, Paramount Supply has had no layoffs. Each of our branches maintain a separate profit sharing program for their employees in which everyone at the branch shares in the pool of profits. Our employees at each branch are aware of the sales and gross profit of the branch, along with all of the expenses necessary to keep a branch profitable. They see the cost of health insurance, are aware of the cost of utilities and know that with more employees, greater gross profits need to be generated. Educating your people to these facts is enlightening for them and they not only become more cost conscious but also contribute to cost efficiency.

“In the near term, I anticipate the MRO portion of our business to be very sound with nice gains from the previous year. Capital projects in most of our locations continue to be a challenge, especially with the tight credit and the mentality of many businesses to hunker down and wait to see what is really going to happen with health care and other government programs. Paramount will continue to look for opportunities to grow our market whether it is internal growth or acquisition. All in all, I am cautiously optimistic.”

Beyond the U.S. economy, the roller coaster of metal prices has also had an effect on PVF distribution.

“There is no question that the price of metals has affected our strategy, especially with our overseas indent orders,” Grothe said. “It is a constant battle to stay on top of the metals market and make long-term decisions with such fluctuations in the pricing. It has also been a challenge for our customers, as no one is thrilled with the time and quantity of price changes in this volatile market. I am not an expert in this field but I believe the future of these price fluctuations can be tied to China. When China has built enough office space for every man, woman and child to have a 5-foot cubicle (as well as plenty of empty mall space) something has to change. Should their consumption habits of purchasing large quantities of metals change, I think the pricing could fluctuate substantially down the road.”

In closing, Grothe shared what he believes are the keys that have helped Paramount Supply achieve such great longevity, and earn such high respect from their industry channel partners.

“One of John Hagen’s principles of business, and as my closest mentor, a principle we continue to follow to this day is ‘we are entitled to some of the business, but not all of the business and truthfulness is required at all times, honesty beyond reproach and a cheerful approach to doing a great job for our customers will lead to success,’” recalled Grothe.

“I allow my managers a tremendous amount of freedom, and in return I expect nothing less than complete honesty in all of our business dealings. We will walk away from an order if it is not in the best interest of our customer and could possibly cause a problem in their facility down the road. We all fall in love with sales, but it has to be a win-win for both our customer and Paramount Supply.”