Creative initiatives, leadership promote consistent growth at Masters Supply
BY MARY JO MARTIN
Editorial director
In just five minutes or less, customers using Masters Supply’s revolutionary Drive-Thru service can have their orders loaded and be back on their way to the jobsite. The highly efficient operation has proven to be very popular -- and a real time-saver -- for customers.
Throughout its history, Masters Supply has been known for its exemplary customer service and in 1996, the company initiated its most unique service with Masters Drive-Thru will call.
“To our knowledge, this was the first and only plumbing Drive-Thru, and the three full time employees staffing it manage over 100 orders per day,” noted Masters Supply president David Wachtel. “The Drive-Thru operates from 7:00 a.m. to 6:00 p.m. Customers call in their orders and, with the evolution of technology, it is common practice for them to place orders via cell phone while they are en route.”
Orders are processed to a Drive-Thru building printer that is located at the entrance to the pipe yard. The printer activates an alert tone in the pipe yard and in the main warehouse that lets Drive-Thru personnel know that an order is being printed. There is also a bell that customers can ring to alert the Drive-Thru staff they have arrived to pick up an order.
“Time is one of the pivotal elements customers monitor, and when they call an order to the Drive-Thru, in five minutes or less, they are on their way back to the job,” explained Wachtel. “Some orders are loaded while the customer waits in his truck. We are always looking for ways to make it easy for customers to buy from us. Regardless of the industry, people want convenience -- and they don’t mind driving further for that convenience.”
According to Wachtel, the success of Masters Supply’s Drive-Thru revolves around employee buy-in. “Some of our competitors have tried to copy the Drive-Thru, but it is not just about a system -- it’s about people. Before the implementation of the Drive-Thru, the management had to sell the idea to the employees. Some employees laughed and snickered at the idea, but when they saw how it would be set up, they bought into the plan and it just took off. Having the Drive-Thru has also freed up counter personnel, so they are available to offer additional assistance to a customer who needs someone with experience to help them find what they need.”
History of strategic growth
Masters Supply Inc. was founded in 1939 by Carl J. Zoeller in Louisville, Ky., as a full-service wholesaler of plumbing and heating supplies alongside Zoeller Pump Company. Vince Zoeller joined the firm in 1945, and the company realized immediate success due to the construction boom that followed World War II and the application of good management practices. In 1957, Masters Supply spun away from Zoeller Company and strategically relocated to central Louisville, where its headquarters remain.
In 1964, Masters opened a second branch in Elizabethtown, Ky., to service the plumbing community, including well water contractors in the surrounding counties. To accommodate the substantial growth experienced in the mid-1990s, a 15,000-square-foot warehouse with adjoining storage for steel pipe was added in 2000.
Starting in 1984, Masters Supply realized a large expansion in the industrial market, and hired a contingent of experienced salespeople to sell pipe, valves and fittings. To accommodate that market, a fabrication shop was opened at the Louisville location to thread steel, stainless and pressure plastic up to 4 inches and roll groove pipe up to 16 inches in diameter.
Through acquisitions in 1989, Masters Supply opened locations in Lexington and Danville, Ky. Also in Lexington, Masters acquired Creative Kitchen & Bath, a 7,000-square-foot designer showroom. The showroom’s employees are degreed designers who custom design and provide the installation for upper-scale cabinetry. Masters Supply went on to open a second Creative Kitchen & Bath Showroom in 2004, a state-of-the-art, 5,000-square-foot facility in Louisville.
Dedicated leadership
When Vince Zoeller retired as vice president in 1986, the company formed an Employee Stock Ownership Program (esop). Nine years later, Masters Supply president and founder Carl Zoeller retired and the esop acquired shares of company stock from Zoeller, which gave the esop 100% of the common stock of the company. Robert (Bob) Carr -- who had been with Master Supply since 1974 and served as cfo -- succeeded Zoeller as president, a position he held until he semi-retired in March 2002 and assumed the role of chairman of the Board.
Following that move, Masters Supply announced new leadership. David W. Wachtel became president, John L. Burke was named chief financial officer and John A. Bowling was appointed vice president-purchasing. Carr died unexpectedly in October 2003, which led to Wachtel being elected chairman of the Board of Directors in addition to his role as president.
Wachtel is a product of promotion from within. He started as a truck driver in the early 1980s, set up operations when Masters Supply made acquisitions in Lexington and Danville, introduced the Drive-Thru, and is developing the company’s fifth branch, to be opened in Shelbyville, Ky., in January 2007. Wachtel is always hands on, helping at the counter, delivering a rush order and directly involved in job quotes.
Branch management philosophy
Each of Masters Supply’s four locations employs a branch manager, all of whom are given significant responsibility for running their operations.
“Our branch managers are all local members of the community in which they serve, an important factor in working with both customers who identify with one of their own,” said Wachtel. “Branch managers are given the responsibility and authority to operate their location in the manner they believe is best in order to make a profit. The managers are assisted with inventory through central purchasing monitored by our vice president-purchasing, John Bowling, but the level of inventory is often determined by the branch managers themselves.”
Each location includes a spacious showroom with displays that allow customers to see how deluxe and standard plumbing fixtures look when installed. The Creative Kitchen & Bath showrooms in Louisville and Lexington have full-time degreed designers on staff.
Masters Supply currently employs more than 120 -- 27 of whom have been with the company 20 years or more, while an additional 21 have at least 10 years of service -- and houses 12,000 different products under 175,000 square feet of warehouse space on 30 acres. The company provides password-protected internet catalog ordering, which was developed by mis director Dale Steinke. An illustrated paper catalog helps customers find current plumbing, industrial, heating and cooling products. Major product lines carried by Masters Supply include American Standard fixtures; faucets from Delta, Moen, Grohe, American Standard and t&s Brass; Bradford White water heaters; Maax/ Aker fiberglass; Mansfield/Swirlaway whirlpools; Elkay stainless steel sinks; Zoeller pumps; Nibco valves; and Goodman heating and cooling equipment.
As Wachtel explained, to best serve both customers and Masters Supply, teamwork is essential between outside and inside sales staff. So they’ve initiated various motivational tactics to strengthen that teamwork.
“We started a contest from within between sales teams and the branches,” he said. “The growth of sales, gross margins, inventory turns, receivables, warehouse tours and new accounts were tracked and measured for 12 months. The winning inside/outside sales team won trips of their choice and the winning branch was given money to share among employees.”
Masters Supply services a 50-mile radius from each location. The territory spreads north to Columbus, Ind., south to Bowling Green, Ky., east to Morehead, Ky., and west to Owensboro Ky. However, the company doesn’t let those boundaries fence them in.
“If a loyal customer has work beyond our traditional territory, Masters Supply still delivers to the jobsite,” noted Wachtel.
The company subscribes to the philosophy of central distribution, with inventory being distributed from Louisville every evening.
“By running our trucks to the branches each evening, the transferred material is at each branch when it opens for business the following morning,” Wachtel said. “We also have more than 30 trucks in our fleet for jobsite delivery. If an order is called in before 5 p.m., it will be delivered before noon the next day; if called in before 10 a.m., it will be delivered the same day. This service is guaranteed, or the material is free. To date, this guarantee has not been met on only three occasions - two of those incidents were questionable and the remaining order was printed in error at the will call counter.”
Charting the course
Masters Supply became a member of the C.L. Watt cooperative buying group in 1978, which was later merged into the Plumbing Division of Affiliated Distributors, the largest distribution network in North America. Cooperative earnings have been a significant source of income for the company in the past and they reached a record level in 2006. In fact, Masters Supply was recognized as Affiliate of the Year-Performance for the Plumbing Division at A-D’s recent North American Meeting. The award is given to the outstanding affiliate who has shown overall growth in A-D supplier remittances and/or participation based on remittance volume as a percent of total company purchases. It is also based on outstanding participation in A-D programs and divisional initiatives.
According to A-D, Masters Supply has been a member of the Private Label product sub-committee since 2004, and is one of the leading distributors of A-D’s private label brands, which has increased opportunities to expand that program to the benefit of the entire Plumbing Division. In 2005, Masters Supply achieved a 48% participation rate while increasing their remittances over 44%. For the first six months of 2006, Masters Supply’s purchases from A-D suppliers have increased 40% more than their overall purchase growth, reflecting a strong commitment to supporting A-D suppliers.
“Masters Supply has experienced double digit growth every year since 1994,” noted Wachtel. “We have also had growth in company stock as much as 30% during that time span. Combining services such as our Drive-Thru, two-hour deliveries, guaranteed same-day delivery, speedy counter service, 24-hour emergency opening, internet service, catalog service, fabrication service, on-site job trailers, popcorn at the counters, etc., with knowledgeable, dependable and friendly people satisfies customers and gives them reason to return again and again.
“The commitment to service is possible only when qualified people are available to provide it. Masters’ most noted policy is to promote from within its ranks. When you put the combination of knowledgeable, dedicated employees with a wealth of experience in an employee-owned company, it is easy to promote to fill positions. I work side by side with the finest group of people one company can have. We have a high degree of employee loyalty that has been built for years.”
As Wachtel described, the construction market in Kentucky is fairly consistent, which means that although they do not typically experience booms that sometimes occur in other markets, they don’t suffer from the busts either.
“Being as diversified in product offering as we are has helped tremendously,” he explained. “When residential sales decline, industrial sales seem to increase. When housing starts slow, remodeling increases, so diversification works.”
Wachtel said it is his mission -- and that of everyone at Masters Supply -- to carry on the tradition started by Carl Zoeller. Although Zoeller is now retired and living in Florida, he still receives financial statements every year from Masters Supply and, as Wachtel reported, is pleased with the company’s performance.
“We have a strategic plan for growth scheduled through 2012,” Wachtel explained. “At Masters Supply, we use the method of ‘measured growth’ -- we choose not to expand too quickly, but rather, over time. This philosophy has worked for nearly 70 years, and will be our plan for the future.”