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Acklands-Grainger, Inc.'s New Vision of Collaborating with its Customers

by Fred Moody

AGI's Visionary Collaboration

Doug Harrison, the new president of Acklands Grainger Inc., (AGI) is aiming to nearly double the company’s revenues to $1 billion as he describes its current role as the largest industrial supplier of its kind in Canada, providing maintenance, repair and operating (MRO) supplies. This depiction of the company seems to belie the fact that AGI supplies everything from apples for Canadian miners, to sourcing and supplying an ice-polishing Zamboni for a client in the Northwest Territories. Developing AGI over the next five years will depend on this kind of ardent focus on its customers specific requirements and fulfilling their ever-evolving business needs, Harrison explains.

AGI has people on site in our customers’ facilities...and this is a further form of outsourcing in the supply chain at the end of the day. A good example of this would be Celestica.”

- Doug Harrison.

Harrison’s entrepreneurial bent and capacity to transform a company has a lot to do with his former role as vice president and managing director of Ryder Integrated Logistics, Canada. It’s a company he built in Canada, virtually from the ground up. He started as the sole employee and today Ryder Integrated Logistics in Canada has an estimated 1,700 employees, more than 7,500 vehicles and annual revenues of more than $250 million. With deference he demurely looks back at Ryder and explains, “...really, it was a matter of finding the right people to launch the company here into its current cycle of 100 percent annual growth.”

Last year he reached a milestone. After more than 20 years in the logistics field and on the eve of turning 40, Harrison recalls he had reached a mid-career juncture. Even with his legacy of impressive stewardship at Ryder Canada, his stature in the industry and a wealth of logistics knowhow that went back to his youth, he intimates that the goals he had for the next 20 years of his professional life prompted him to leave the logistics company.

However, Harrison’s departure from a senior position in logistics to join Acklands Grainger was warranted largely because of his logistics background.

Harrison smiles a broad smile, and could be a pitchman in his blue suit for Canada when he adds that his Canadian roots also skewed his future in favor of AGI. After all, the Canadian offices of Ryder are a division of Ryder System, Inc., a $6.8 billion per year company that has immense resources in the Americas and Europe, and he was mindful of this in his decision. “To take on a more senior role at Ryder would probably have meant I would need to make a decision about relocating, possibly to another country,” he says.

Still, as a Canadian who expresses concern about the brain drain, and has a fondness for the Canadian north, he remains a confirmed believer in international business and alludes to the value garnered from his days at Ryder fulfilling his international business responsibilities. He also just completed his Masters in Business Administration in December last year at Heriot-Watt University, based in Edinborough, UK. Harrison attended the European school as it afforded him more international experience and, he chortles, “it gave me something to do on airplanes,” where he did a lot of his studies while crisscrossing the globe between the U.K. and Canada. Hariot-Watt is in the top 12 percent of British Universities, according to a recent Financial Times survey. The school is also a pioneer in distance education with students from 150 countries now studying in its Distance Learning MBA program. With his characteristic candor Harrison says Hariot-Watt also gave more flexibility than many Canadian universities as they often required a Friday and Saturday each week for classroom time. “I just could not commit a Friday and Saturday every week of the year for two years while maintaining my role and responsibilities for Canada and Europe.”

Also as member of the Young Presidents’ Organization (YPO), now celebrating its 50th anniversary as an exclusive network and body providing learning and life-enhancing experiences for corporate leaders worldwide, Harrison clearly treasures education. “I stress the value of continuous education inside any organization,” he explains, noting he remains a board member of the Canadian Institute of Traffic and Transportation (CITT). He is also a former member of the board of the Canadian Professional Logistics Institute and a member of the Top Forty Under Forty Program, which he identifies “as a great success story.”

Bridging the gap between AGI’s past and its future strategy has also been predicated, he says, not only on his own leadership but also on the knowledge and collective wisdom provided by his newly assembled team of executives and some of Canada’s leading educators in strategic planning. He singles out two of professors - Dr. Peter Richardson and Dr. Elspeth Murray of Kingston, Ontario-based Queen’s University, where for the last four years he has periodically lectured about leadership and business strategy.

Developing this strategic focus has been a major undertaking, partly because AGI has never had one in a formal sense, and also due to its recent history. In the late 1980s Acklands was a troubled national distributor of automotive products and supplies operating at a loss. It had sold its automotive business in eastern Canada to prevent bankruptcy in 1991, when a Canadian businessman bought the company. By 1992 he had added a BC-based distribution business called M&P to its operations, then soon afterwards purchased Safety Supply Canada and another firm, J.B. Reid, a cutting tool distributor. By 1994 the company divested itself of all its automotive distribution centres, except for those in the prairies, and retained its growing body shop businesses in the west. It had also improved its distribution network to raise its annual industrial supply revenues to $323 million by 1996.

“AGI has not really had a formal strategy in the past,” Harrison says reflecting on its history. “But we have now defined what our future will be and created our mission and vision for the future and defined how we are going to arrive there.”

In addition to his penchant for emphasizing education and business strategy, his international business experience is also having an impact. As an executive who has worked in up to 30 European countries, he has positioned the company in a global context in terms of best business practices and strategy.

Harrison likens the changes under the auspices of the European community to what is occurring with the North American Free Trade Agreement (NAFTA) and points to a trend for European head offices in different countries to consolidate them into one office. In tandem with this they are often looking more strategically at procurement activities, warehousing operations and the mobility of people across national borders.

“I would say that the Europeans are just slightly more advanced than North Americans in terms of overall logistics but not by much - not as much as I would have thought earlier,” he reflects. Even given these trends he does not foresee a lot of consolidation in terms of AGI’s branches across Canada. But he does see a different approach in terms of the company taking its product to market. “Now up to 90 percent of our product moves through our branches to the customer and as we look at our logistics and procurement models there is probably an opportunity to ship direct from one of our distribution centres right to the customer - and a few, albeit limited, opportunities to ship directly from our supplier to the customer.” Still, nearly a quarter of the company’s business is based on its “walk-in business” at its branch plant operations, and AGI remains committed to them.

“AGI has not really had a formal strategy in the past,” Harrison says reflecting on its history. “But we have now defined what our future will be and created our mission and vision for the future and defined how we are going to arrive there.”

AGI now has a three-pronged approach to meet its customer’s requirements: its branch-based operations, a new E-commerce initiative nearly ready to be launched, and value-added programs whereby AGI employees are at a client’s location to service production and maintenance operations. “It’s another form of outsourcing in the supply chain at the end of the day,” Harrison says, referring to AGI personnel at client sites. And the practice is growing in popularity with a number of its key clients. Toronto, Ontario-based Celestica, formerly IBM Canada’s Toronto manufacturing facility, and now the world’s third largest electronics manufacturing services provider, is a good example, Harrison points out.

AGI conducts rapid replenishment of inventory, anticipating inventory needs and carries 300,000 stock keeping units (SKUs) so that any client in Canada will have its requirements fulfilled within 24 hours.

The centrepiece of Acklands Graingers’ marketing strategy has traditionally been its printed catalog, published every two years in French and English with descriptions of up to 71,000 SKUs in its 1,760 pages. (The entire company network includes up to 300,000 SKUs.) Although the catalogue has not been available online in Canada, Harrison notes it will be this year, complete with customers’ capacity to produce their own on-line customized catalog. In contrast, the traditionally 4,800-page catalog, featuring some 80,000 SKUs by the U.S. arm of the company, has all of its catalog items available on its Web site.

“Specifically, the AGI Web site will be tailored around business-to-business E-commerce and driven by value-added features as we have so much information to offer clients,” Harrison explains. “We have looked at how we can make technical information easily available in this way for clients. The key thing we have said as we have gone through the site’s development is the supply chain needs to be seamless from the technology standpoint to the customer. We are also looking for our suppliers to be able to handle this E-commerce initiative, and examining our procurement to be done through E-commerce, as well as fulfilling our customer’s business requirements.”

“We have gone from supplying apples for miners to sourcing and supplying a Zamboni to one of the cities in the Northwest Territories. We inventory product for our customers and we go out and source product on a long-term basis for customers where they have a specific need – and we will go out and buy that inventory just for them.” -

Douglas Harrison.

Today, on the cusp of weekend fishing trip, a tradition which has endured throughout his career, he suggests his experience from many disciplines has had to coalesce quickly in his new position. From his temporary Richmond Hill office, down the hall from a his new office undergoing renovation, he observes his current role in terms of satisfying customers, shareholders and ASI’s people relates to the predilections and lessons of his past.

Harrison’s grounding in business and logistics, he points out, did not originally develop within a multinational corporation. They began at home. At the family-owned lumber business, Penn Building Centres, couched in the heart of Ontario’s Niagara Peninsula, Harrison recalls loading the family’s private fleet of trucks and the crossroads he reached early in his life: to become stockbroker or a logistician. He opted to be a stockbroker. But after a short tenure at a bank, he switched. He found the banker’s environment was restricting, given his family’s élan for business.

In addition to his role at Ryder in Canada, Harrison’s tenure included a position at Route Canada as director of National Accounts. Route Canada, then a CN-owned trucking operation, was sold under the then federal Conservative government in 1986. Only 18 months later the company’s bankruptcy prompted an inquiry that chastised the government for the sale and demise of the company. The then Justice Guy Richard issued a 97-page report which argued its people were unfairly treated by the company.

Today, one of the primary strengths he singles out at Acklands that will enable him to meet his mandate to increase its Canadian arm’s annual revenue yield to $1 billion, up from $600 million, in a profitable manner, is its people.

He has already helped, evidenced by the company’s 18 percent growth in revenue this first quarter compared with the first quarter in 1999. He emphasizes the drive to bolster performance begins with people and their changing of the company’s culture. “A focus on people and recognizing the value of people is one of the last few sustainable advantages today in business, and is very important,” he says, adding, “cultural change inside a company cannot be achieved by one individual, and so we have formed a great group of people and strong managers. It involves 18 executives who then involve another 30 people who are driving strategy and changing the focus inside the company.”

He met with his executive team for the first time in December last year to talk about the company’s strategy in the rapidly changing multi-billion dollar industrial supplies marketplace. After just five months as president he knew AGI’s market was one beset with change that could be a fulcrum to leverage greater profits and better serve its customers. He also realized the same market changes imperil its corporate performance without the correct direction.

Stuart Pennman, formerly a principal in Ernst & Young Canada’s global logistics practice, has been recently recruited by AGI, “to bring a great deal of expertise to the organization in terms of logistics - and he has recruited some people as well,” Harrison says of the developing team. All of the company’s warehousing operations and its inventory divisions and practices report directly to its new-found logistics group as of March this year.

While the seemingly recent changes converging on AGI appear daunting, they were not unsignalled, Harrison points out. In fact, during the past three years AGI’s marketing intelligence shows some of its key clients on the national landscape were readying themselves to make what could be disjunctive steps from AGI’s perspective as they started to outsource their procurement activities and warehousing operations. The two moves showed a new market paradigm unfolding that could have harmed AGI’s network of branches across Canada. But the company has responded with aplomb.

In fact, AGI initially began to capitalize on the changes it saw as early as December 1996, which was a milestone year when Winnipeg-based Acklands was purchased through a $400 million buyout by W.W. Grainger Inc., a Chicago, Ill.-based distribution company. Harrison’s specific strengths in change management have also already helped AGI to capitalize on the bedazzling number of changes in the market, which have involved the company’s largest corporate customers such as Ford, General Motors, Imperial Oil, Suncor, Canadian Nation and Canadian Pacific as well as MacMillan Bloedel. These customers have started to call for direct shipments from manufacturers to their locales. It’s a departure from their traditional placement of orders through AGI’s extensive network of 230 Canadian branches in its 199 locations, in every province excepting PEI. (Some of its locations had more than one branch, for example, an automotive branch of the company may be co-located with one of its industrial supply centres.)

Already, however, Harrison notes that the company’s 85,000 customers are finding AGI more responsive to the calls for lower prices in some areas, more Just-in-Time (JIT) shipments and streamlined invoicing procedures, and with AGI issuing an estimated 80,000 monthly invoices there is considerable complexity in implementing these changes. Harrison elaborates that “we now starting to see results based on our new strategy in terms of improved customer-service levels and reduced inventory.”

In addition, a rising number of technologically sophisticated clients have prompted AGI to provide E-commerce or Internet-focused applications for their business transactions. Thousands of small- and medium-sized clients have looked to AGI as an institution in their community and a place to socialize over cups of complementary coffee. They have told AGI’s management that the company must evolve as they acquire more knowledge about market product prices and the availability of products due to the Internet.

Harrison is a strong proponent of leadership and operational acuity both in terms of the company’s coming foray into E-business as well as in regard to its traditional role as a national distributor where logistics is a core competency. In taking the company to $1 billion in annual revenues during the next five years and forecasting double-digit growth, Harrison suggests “we will continue to grow at that rate throughout Canada, as long as we are cost competitive and quality driven.” In anticipation, a lot of people and customers are looking to Doug Harrison with great expectations.