Our latest road trip was to Distribution Management in St. Charles, Missouri, for a tour of its distribution center and corporate headquarters.
Having spent some time with the leadership team at TD SYNNEX, we had some understanding of just how diversified these national distributors have become. TD SYNNEX is a $63 billion organization, and Distribution Management is a $1 billion company that is truly a family-owned business.
Frank and CJ with Distribution Management’s Barney Kister during a tour of the distribution center.
For the better part of two days, Barney Kister, senior vice president, strategic relations, served as CJ’s and my host and tour guide. After visiting Distribution Management’s distribution center, we walked away with a clear understanding of why this organization enjoys a good reputation from dealers we know well.
Distribution Management by the Numbers
The software employed in what is referred to as the distribution center is homegrown. It has led to an order accuracy of 99.98%. We learned that there are three other highly automated centers around the country. These four facilities shipped 5,701,821 orders in 2022. The company is justifiably proud of its ability to reach 99% of the United States in one to two days. Distribution Management also has a 13-time award-winning MPS program.
CJ helps pack an order in the distribution center.
After touring the distribution center, Barney took us on a tour of the corporate headquarters and introduced us to the company’s founder Tom Fleming. Tom spent five years of his career selling IBM typewriters in downtown St. Louis where he learned that there was a demand for typewriter ribbons, which inspired him to start his own business.
In 1972, All State Business Machines (ABM) was born as a reseller of typewriter ribbons. Tom went on to build what is today a national distribution and fulfillment organization functioning in six locations. Like the many dealers we know, Distribution Management has many tenured employees who feel like they are part of a family. CEO Sean Fleming is Tom’s nephew, a young 52-old who was driving forklifts in his uncle’s warehouse when he was 16 years old.
Barney claims he was the first person to be hired by Tom Fleming and is pleased to have his daughter Sarah Custer, VP, sales operations, follow in her dad’s footsteps.
Eight Points of Pain
To provide the best possible solution for MPS Distribution Management took a deep dive at the rising costs and challenges facing dealers during the post-pandemic period. In the company’s view there are eight points of pain:
- Shortage in quality labor
- Accessorial fees
- Growth of average interest rates
- Fuel surcharges which doubled to 18% for UPS Ground
- Base freight rates have increased by 12% during the past two years
- Address correction fees which are currently $19.50 per package
- Material costs as much as 65% for corrugated packaging materials
- Peak surcharges of $1-4
From our perspective, this was very enlightening. This visit taught us a great deal about the increased costs of shipping and all that goes with that.
Distribution Management asks dealers to consider that when a dealer ships from their facility (typically toner cartridges), the cost is $13.00, and when it is shipped from Distribution Management it is $8.00. Data analytics comes from the Managed Print Services Association (MPSA). All they ask is for dealers to do the math. Ten thousand shipments x $12 freight reduction yields a cost savings of $120,000.
There is so much more to this program, and when we think of the pressure on margins for MPS, we must urge our dealer subscribers to take a hard look at this program, which Distribution Management calls its Supply Management System.
A Strong Culture
Despite its growth, Distribution Management is still very much a family business. You get the sense as you walk through the executive corridor with Tom and Sean Fleming’s doors wide open that the staff is amazingly comfortable in asking for their thoughts on how to manage a critical matter.
In our 44 years of visiting businesses large and small, we can sense when a corporate culture encourages leading executives to step up and solve problems without much in the way of formality.
We had lunch with many of the leaders in the headquarters, and we sat next to Greg Welchans, president & CMO. We advised the group that we were going to tape a Fridays with Frank the following day and I asked them what they would like me to say about Distribution Management? The first person to respond said, “Talk about our culture.” We knew exactly what he was saying because we saw it throughout our visit.
Diversifying with Distribution Management
We appreciate how these national distributors has grown this year. They are in a prime position to help dealers diversify their businesses and improve their overall profitability. For us, you cannot ask for more.
In Distribution Management’s case, we believe that their biggest opportunity is the expansion of their business in production print, including packaging and labeling. That is the way print is going and where investments are necessary to stimulate growth.
As I was about to finish this piece, I asked CJ for his thoughts on our visit. He replied, “Dealers have to be willing to give up their content and work with Distribution Management,” referring to having the company ship supplies directly to the dealer’s customers. He nailed it. You must trust your partners or else you will never maximize your business relations. Better still, allow them to build your trust and Distribution Management will do it.
Many thanks to Barney Kister and the rest of the Distribution Management team for their hospitality throughout our visit. Dinner with Barney and his daughter Sarah Custer was a true pleasure.
Distribution Management on Fridays with Frank
For more on our visit, be sure to watch the August 18th episode of Fridays with Frank. And, in case you missed it, Editor-in-Chief Scott Cullen wrote an enlightening feature on Distribution Management in our June issue.