Kessler Sales & Distribution

KSD continues expansion to accommodate growing customer demands

BY MARY JO MARTIN

Editorial director

In 1935, long before it was common for women to work outside the home, Kessler Sales & Distribution got its start from a rather unlikely source -- Rae Kessler, a first-generation Russian immigrant. Mrs. Kessler’s husband, Morris, was a plumber who rented space to store his equipment and supplies. One day in 1935, while Morris was working at a job site, a pedestrian happened by the storefront space and noticed a used radiator in the window. He went inside to inquire if it was for sale. The enterprising Mrs. Kessler made the sale, and decided to capitalize on the opportunity, founding what was then known as Kessler Plumbing & Heating Supply Company in Paterson, N.J.

Kessler Sales & Distribution opened a new distribution center in Clinton, Ill., in 2002 (left). This was Kessler’s first satellite location. At right is Kessler’s new Ardmore, Tenn., location, built this year.

Over the next 40 years, the company operated as a traditional plumbing supply house in the Paterson area. Because of the city of Paterson’s unique designation -- it was the nation’s first planned industrial city, built around the 77-foot-tall waterfall called the Great Falls of the Passaic -- it was home to numerous textile mills and manufacturing facilities. These operations provided a strong foundation for Kessler’s business during the early years.

Morris and Rae Kessler’s son, Robert “Bobby” Kessler, joined the business after returning from active duty as a belly gunner on a B-17 during World War II, and went on to become president of the company in 1954. He had a keen eye for real estate and was responsible for moving the company from its original location to a 48,000-square-foot facility several blocks away. This site is the cornerstone of what has now become Kessler’s 400,000-square-foot Paterson distribution center.

In the summer of 1975, Bobby Kessler began the process of moving away from the traditional contractor-based wholesale business and towards the role of a business-to-business master distributor. The company, by then known as Kessler Industries, began reaching outside its core New Jersey market to serve wholesalers in New York, Pennsylvania and Connecticut. In the ensuing years, it expanded to serve the entire Boston to Baltimore corridor.

Between 1975 and 1990, the company systematically divested itself from contractor-direct sales to the point that it was only servicing approximately a half dozen large, local construction contractors. These contractor-direct relationships remained in place throughout the 1990s at the request of several of Kessler’s major vendors that needed a dedicated distributor to funnel their product into the construction boom that was sweeping New Jersey. However, recognizing that for its growth plans to continue it needed to eliminate the possibility that customers would view Kessler as potential competition, the company terminated its relationship with those contractors in 2001. That completed Kessler’s transition to become a full-time, full-service, wholesale-only master distributor.

From its inception, Kessler has been known for its vast inventory of copper tube and steel and plastic pipe. In 1991, the company expanded its offering in a new direction by adding Jacuzzi Whirlpool Bath to its product portfolio. Jacuzzi provided Kessler an entrance into the showroom market -- a segment of Kessler’s business that has grown steadily ever since.

The company continues to be based in Paterson, N.J., about 12 miles west of Manhattan. The corporate offices were designed with an “open air environment,” meaning there are no cubicles or private offices -- not even for the owner. The inside sales team is located in the center of the office, which forms a sales pit that is constantly creating a buzz. Seated around the perimeter are the marketing, purchasing, finance and it departments.

In recent years, to better service customers and accommodate its continued growth, the company opened a series of distribution centers in key markets around the U.S. In the later part of 2002, Kessler opened its first satellite location in Clinton, Ill., followed by new facilities in Dover, N.H. (2004), Shelby, Ohio (2005) and Ardmore, Tenn. (2007). Including the 400,000-square-foot DC in Paterson that is a few blocks from the corporate office, Kessler fields in excess of 1 million square feet of warehouse space.

Approximately five years ago, as the new DCS were being opened, the Kessler management team felt that the time was right to consider a name change. They wanted a name that would identify the company’s new direction while reassuring its long-time wholesale customers in the Northeast that they could still depend on Kessler. Thus, Kessler Sales & Distribution -- or, more simply, KSD -- was born.

The third generation of Kesslers, Neil Kessler, purchased the company from his father in 1994 and has since served as owner and president. Neil likes to say that he’s been with the company his whole life, which is actually pretty true. He started working in the warehouse on summer vacations and weekends as a youth. Neil is a born salesman and that’s one of his key responsibilities for the company. He calls on wholesalers in the metropolitan New York market. He also is responsible for purchasing the copper tube and coils. Neil acts as the company’s visionary -- planning for where Kessler will be in both the short- and long-term.

Neil is ably assisted by a number of key executives:

• Vice president/general manager Tim Hagan. An industry veteran of 24 years, Tim has been with Kessler for eight years and is responsible for running the company on a daily basis. The controller, sales manager, purchasing manager, it manager and all the individual warehouse managers report directly to him. Tim is responsible for purchasing domestic and imported steel pipe for the company and is actively involved in all of the company’s overseas sourcing of product. He sees his role as taking Neil’s vision and making it a reality.
• Controller Barbara Lechleiter. A 40-year company veteran, Barbara started in the accounting department and working her way up to the position of assistant to the controller and then to controller. She is responsible for overseeing all a/p and a/r staff, the credit manager, the hr team and the it department.
• National sales manager Sean Fitzgerald. With 20 years of industry experience, Sean has served Kessler for the past three years. He initially joined the company as a territory manager and was instrumental in Kessler’s successful start-up in the Ohio market. Early in 2007, Sean was promoted to his current position overseeing the entire inside and outside sales team.
• Purchasing manager Mark Lasser. Mark has been with Kessler for 30 years. His responsibilities include purchasing plastic pipe and all the boxed goods for the company. Mark has been instrumental in the development of the KSD branded products.

Kessler’s 110 employees serve customers including plumbing & heating wholesalers, industrial supply houses, showrooms and kitchen & bath stores, as well as big box retailers. The company does not sell to contractors or retail consumers. In addition to its private label brands, Kessler offers American Standard, Bertch, Bootz, Bradford White, Classic Flame, Delta, Docol Faucets, Gerber, Ginger, InSinkErator, Jacuzzi, Motiv and Reznor.

Kessler private labels a variety of products, including imported steel pipe, PEX tube and fittings, ball valves and nipples branded under the trade name KSD, as well as vitreous china and stainless steel sinks branded under the trade name Liena Bay. As Hagan noted, “Our goal in private labeling is to find the highest-quality products and offer them to our wholesale customers at extremely aggressive price points -- giving them a competitive edge in the marketplace. This is not to say that we do not understand the value of branding, after all, lines like American Standard, Jacuzzi and InSinkErator practically sell themselves.”

Its total sales can be divided among the following categories:

• Commodity pvf product-domestic (67%)                                                           
• Commodity pvf product-imported (15%)                                       
• Boxed goods/fashion plumbing-domestic (13%)
• Boxed goods/fashion plumbing-imported (5%).
  

According to Hagan, Kessler goes to market with an “inside-out” approach. “By this I mean that a substantial amount of our business is driven by our inside sales team,” he explained. “They are charged with the responsibility of actively reaching out to their customers on no less than a weekly basis. They do not sit by and wait for the phones to ring. This approach of proactively soliciting business may be the single, biggest difference between Kessler and other master distributors. In addition to our inside sales team, we employ several outside salespeople that call on customers. We also use independent sales rep agencies in several of our markets to help us maintain a local flavor.

“In terms of the internet and online sales, our website, www.KSDusa.com, provides information about the company, our products and our locations. We have recently introduced an ‘e-marketing initiative’ whereby we send out weekly specials and promotions via e-mail. The response to date has been very favorable.”  

Time is of the essence in master distribution. It is imperative that master distributors get product shipped to customers quickly and accurately. Much of Kessler’s success can be attributed to the fact that they have the inventory on the ground at one of their DCS, so that it is ready to ship when and where it’s needed. The company generally carries between $25 million and $27 million in on-hand inventory. Its fill rate as of the end of the second quarter of 2007 was 98.26%. Over the course of the last 30 months, Kessler averaged an impressive 99.43% fill rate.

“We often refer to ourselves as a ‘trucking company that specializes in the distribution of plumbing-related product,’” said Hagan. “Each of our DCS has a complete and comprehensive inventory of the commodity-based products we sell -- that being copper tube & coils, steel pipe, PVC and ABS plastic pipe, and PEX tube and fittings. These products are big, bulky and freight intensive. By regionally warehousing them in multiple markets and shipping via our own fleet of flatbeds and tractor trailers, we can deliver product both faster and in smaller quantities.”  

Kessler can ship within a 250-mile radius of any one of its DCS for a $2500 order -- and even that is a “soft” minimum. Because Kessler services particular geographical territories once or twice a week from each dc, they have the flexibility to accommodate customers’ circumstances. For those who are outside of Kessler’s delivery parameters but within the regional marketplace, the company will contract an independent carrier and ship the load FFA for a $7500 order.

According to Hagan, changing customer expectations are at the root of why Kessler -- and master distributors as a whole -- add value to the supply chain by shrinking time and space.

“Over the last 10+ years, the internet has changed all our expectations,” he noted. “Do you remember when the internet was a new and amazing adventure out of the pages of a science fiction novel? Do you remember when waiting for your dial-up modem to connect wasn’t an excruciatingly painful exercise in frustration? Can you imagine sitting at your desk now without a dsl or other high-speed connection? My guess is probably not. Consumers have become accustomed to clicking a button and receiving their deliveries in one or two days.

“Why would our wholesale customers be any different? After all, they are just trying to satisfy the expectations of their customers. We need to ship faster than the factory or mill can ship and/or we need to ship in quantities that are less than what the factory or mill can ship. If we can’t ship faster or ship less, there would be no need for us. Additionally, manufacturers are continually looking to drive costs out of their processes and products and one solution has been to eliminate or drastically deplete reserve inventory. Gone are the days when a third of the factory or the mill was committed to warehousing product as it comes off the production line. More often than not, today’s manufacturers are producing for orders in hand and not for anticipated business. Couple this with the wholesaler’s desire to increase turns and work within the parameters of a just-in-time inventory replenishment system, and that puts tremendous pressure on the supply chain -- pressure that reverberates in the expectations wholesalers have of Kessler, and of master distributors in general.”  

In the last five years, Kessler has more than doubled its sales. The company is currently six months into a comprehensive five-year plan that calls for doubling its number of distribution centers to 10 by 2011. While Hagan declined to give exact locations for the new DCS, he did hint that “all you have to do is look on a map and see where we are not to figure out where we are going. So keep an eye out for Kessler -- it’s a pretty sure bet there will be a dc in your market soon.”

For more information, visit www.ksdusa.com.