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A new look company

This Tulsa area company has quickly changed the face of the industrial supply industry

BlackHawk Industrial CEO Bill Scheller launched the company with backing from Brazos Private Equity Partners in 2009.

By Rich Vurva

To many outsiders looking in, the industrial distribution industry appears stodgy and old-fashioned. It’s not the typical kind of place where young people dream of creating a career path. BlackHawk Industrial is striving to change that perception. From the employee guidebook that‘s written in an easy-to-read style and features funky illustrations and even acknowledges that it’s OK to have fun at work, to the relaxed dress code and clever names for every company department, this fast-growing
company has created a non-traditional culture.

The corporate headquarters in Broken Arrow, Okla., is called “BaseCamp.” Entering BaseCamp, one wall in the lobby features the company’s mission statement and a mural with tepees, paying homage to the Native American history of the region. Each BlackHawk location will eventually display the same statement but utilize an art treatment that captures a piece of local history. Each location will post BlackHawk’s written “Commitment to Excellence,” signed by employees.

The BaseCamp employees competed for prizes in a contest to select a name for each of their respective departments. That’s why one area called “The Fish Tank” contains several collaborating departments with aquarium decor; the human resources department is called “The People Place” and has a glass door that offers privacy without shutting people out; the marketing department is known as the “Insane Asylum” and is decorated in a movie industry motif, with posters from the favorite movies of the marketing department employees. The doors to the sales department are labeled “Sell Block 1” and “Sell Block 2,” and the sign on the learning center door reads “Stay thirsty my friends.”

“We have made a conscious effort to put together something very culturally special, a place where people want to be highly productive and have a lot of fun every day. It is not the traditional stuffy corporate environment,” says chief executive officer Bill Scheller.
But just because the company projects a casual atmosphere, that’s not to suggest that BlackHawk doesn’t take its business goals very seriously.

The former chief executive for ORS Nasco founded the company in 2009, backed by funding from Brazos Private Equity Partners, with a plan to follow a buy and build strategy for acquiring independent distributors. BlackHawk made its first acquisition in 2010, added six more businesses in 2011, two in 2012 and finished 2013 with a flurry of six acquisitions. Today, the company boasts of 20 locations in North America and two in Mexico with annual sales of $350 million. (See “BlackHawk Industrial acquisition trail” at the end of this story for the complete list of acquisitions.) 

“To date, we have acquired some of the best distributors in North America in the markets we serve. We will continue to stay focused on acquiring other great customer-focused distributors to add to the BlackHawk family,” Scheller says.

Scheller’s goal is for annualized sales of $380 million by the end of the first quarter and about $500 million by the end of 2014. The plan is to transform the traditional distributor model by achieving a compound annual growth rate of 15 percent to 20 percent. By applying industry best practices, utilizing a newly installed Epicor P21 enterprise resource planning system, and newly certified ISO business processes, Scheller believes the company can take full advantage of BlackHawk’s scale. The long-term goal is to improve overall gross margin rates and, as a result, grow EBITDA margins.

Acquiring the best
Most acquisition targets to date have had annual sales of between $20 million and $50 million, primarily focus on cutting tools, abrasives and coolants, and have strong customer relationships. Some, like Oklahoma-based Duncan Industrial, concentrate on integrated supply business with a handful of large customers. Others, like Rogers Industrial in Arkansas, provide traditional distribution products and services. Companies such as Sanders Tools & Supplies in Peoria, Ill., Tool Service in Milwaukee and Precision Supply in Cleveland have a strong base of traditional distribution business, but also provide custom tool grinding services or turnkey fluid management programs.

“We are not just a catalog house that is selling out of the back of a warehouse. We sell highly engineered technical products as well as customized supply solutions for our customers,” says Scheller.

To help manage the company’s growth, Scheller surrounded himself with a strong senior management team. Some followed him to BlackHawk from his former business. For example, Heather Riggs is director of supplier development, and is charged with taking the multiple vendor relationships inherited from the legacy companies and building a unified BlackHawk vendor program.

Some senior managers came from acquired companies. Bob Miller, former president and CEO of Kendeco Tool Crib in St. Cloud, Minn., is senior vice president of regional development, responsible for managing the sales and customer service teams. Bob Koch, former president and CEO of Precision Supply, is senior vice president for engineered supply solutions, overseeing the onsite tool dispensing and management systems that currently include about 1,000 vending machines in facilities. Jim Cote, former president of Sanders Tools & Supplies, is senior vice president of national business solutions, and manages the national accounts selling team.

Chief information officer Stephen Burns has been designing technology solutions for 15 years.

Other senior managers came from outside of distribution, such as chief financial officer Parker Strickland, with more than 20 years of experience in strategic planning, acquisitions and organizational restructuring and management; vice president of human resources George Schwenk, who spent more than 30 years in labor relations and management roles at companies such as ConocoPhillips and Electronic Data Systems; and chief information officer Stephen Burns, with a track record of 15 years in designing technology solutions.

Big yet nimble
BlackHawk’s tagline of “Big enough to serve/Small enough to care” sums up its business philosophy. While acquired companies such as Seattle-based E.F. Bailey have a strong reputation in the Pacific Northwest, when a customer needs to expand into the Midwest or the Southeast, for example, the customer may hesitate to give more responsibilities to a small distributor. As a 650-employee company with multiple locations across North America, BlackHawk is big enough to take care of large customers like Boeing or Caterpillar but small enough to provide customized, value-added services such as an engineered supply solution or provide a manufacturing solution like band saw blade welding or tool regrinding that national distribution chains may not offer.

The traditional distribution business and the engineered solutions offering comprise about 90 percent of sales; 10 percent comes from manufacturing and assembly.
“Each customer is unique and wants different solutions. You want to be small enough to care about their individual situation but big enough to support them as the marketplace changes,” Scheller says.

Heather Riggs, director of supplier development, is building a unified vendor program.

One BlackHawk
The company is in the process of moving from multiple ERP systems, data networks, reporting systems and phone systems to a single platform, as well as a single brand identity. As companies are acquired, the goal is to become “One BlackHawk” as quickly as possible.

“You can imagine the nightmare and chaos of having nine vendor programs, on nine different ERPs, nine pricing updates, nine purchase orders, nine of everything,”
explains Heather Riggs. The process was manually intensive and also offered potential for error.

To eliminate the problem, BlackHawk established a single, enterprise-wide accounts payable process, which improves efficiency and reduces time spent on training not only internally but also with vendors. It replaced multiple purchase orders with a unified program and is in the process of having other administrative tasks ISO certified to ensure uniformity across locations.

“We are bringing all these different pieces of the platform together into one common core, to eliminate variations in processes and all of the manual effort involved,” adds CIO Stephen Burns.

Burns developed procedures that make it possible to transition to the BlackHawk email system two weeks after an acquisition closes, install the new phone system within 30 days, and migrate operations onto BlackHawk’s ERP platform within 120 days. In the past 12 months, the company has completed nine ERP implementations.

“We have implemented an initiative to remove our server hardware from the equation to consolidate all of that into a cloud-based environment,” says Burns. “That helps us rapidly grow the business without having to invest in hardware at the same rate.”

BlackHawk Industrial acquisition trail 2010 October Duncan Industrial, Oklahoma City, Okla. 2011 January Rogers Industrial, Fort Smith, Ark. May Fuchs Machinery, Omaha, Neb. August Sanders Tools & Supplies, Peoria, Ill. December Tool Service, Milwaukee, Wis. Tool Fabrication, Milwaukee, Wis. Fluid Service, Janesville, Wis. 2012 March Kendeco Tool Crib, St. Cloud, Minn. December E.F. Bailey, Seattle, Wash. 2013 September Precision Supply, Cleveland, Ohio Precision Supply de Mexico, Irapuato, Mexico X-Press Tool, Cleveland, Ohio MfgSurplus.com October Chicago Hi-Speed, Chicago, Ill. Quaker Tool, Chicago, Ill.

Salespeople and purchasing folks who previously had access to $3 million in local inventory now have company-wide visibility to $35 million in inventory held across BlackHawk locations, making it easier to make delivery promises to customers.

Scheller takes pride in what his team has accomplished in just a few years. “We have been able to build a very significant brand in a relatively short amount of time,”
he says. He anticipates tremendous room for growth, suggesting that a “near term” goal of $750 million in sales is an achievable target.

“We believe the future is very bright,” Scheller says. “We think the market environment is very favorable for us to continue to do what we are doing, which is building a leader in our market space.”

This article originally appeared in the Jan./Feb. 2014 issue of Industrial Supply magazine. Copyright 2014, Direct Business Media.

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