Hercules Industries

When contractors are seeking dry HVAC products, slit sheet metal or metal production equipment, Hercules Industries is the answer for all three. “As far as presence in the market, I’m not aware of anybody who offers the variety of products that we do in the footprint that we serve,” President Andy Newland says. “We are a little unique in that there are not many distributors that have the variety of product that we offer.”

When offering flat rolled steel sheet and coil, Hercules Industries competes primarily with metal service centers. Hercules also supplies furnaces and air conditioning units as an equipment company does. The company offers supplies such as grilles, registers, diffusers, insulation and metal ducting. Additionally, it sells and services new and used equipment such as press brakes, roll-formers and shears to manufacturers.

Hercules Industries says it is one of the largest manufacturers of air ducts and processors of flat sheets in the United States. Its high-speed manufacturing process produces a full inventory of low-, medium- and high-pressure ducts and fittings. Its inventory of coiled steel ranges from 10 gauge down to 30 gauge, in widths from 2 feet to 5 feet. The company also stocks flat sheet in full 5,000-pound skids and in open racks for purchases by the sheet. Additionally, it carries pre-cut coils that are 5.394 inches in width from 20 to 24 gauge, and 5.5 inches in 18 gauge.

The company is vertically integrated and is both a manufacturer and wholesaler. It produces residential ducting in standard sizes, whereas most orders for commercial facilities require it to create custom components.

“Our core competency is to sell directly to contractors,” Newland says. “Commercial contractors run the gamut as far as their level of sophistication. The most sophisticated would have a shop where they make all their own fittings and ductwork. We try to wholesale to them the raw material – raw sheet metal, rolled flat sheet – any sort of raw material they would need to fabricate their product. 

“Other commercial contractors have no shop at all, and they have us build everything for them,” he continues. “We try to find a place in the customer’s business no matter how sophisticated they are from a manufacturing standpoint. Our goal is just to have a place in any offering to all contractors, regardless of their size.”

Bar-Coded

Hercules Industries’ manufactured products are bar-coded, labeled and identified in its 12 distribution centers. “That allows us to sell through channels such as Home Depot and retailers like that who require that sort of labeling,” Newland says. It also is used for internal verification of inventory. 

Approximately 25 percent of what Hercules Industries sells is HVAC equipment. “About 15 years ago, we weren’t even in that market,” Newland says. “We’ve been very happy with the growth in that – to go from 0 percent to 25 percent in 15 years – and so it’s a big part of what we do.” Another 25 percent is supplies and the rest is either fabricated products or raw materials. Selling coiled and flat sheet metal is approximately 50 percent of that. Hercules also fabricates sheet metal pipe and manufactures a sealant and adhesive to prevent air leakage around ducts and to adhere insulation to ducting.

Some of the products Hercules supplies are more regional in demand, such as round spiral pipe from 4 inches to 72 inches in diameter in Arizona. “The spiral pipe is used for commercial heating or air conditioning systems,” Newland says. “They sell so much of that we thought it would be more efficient to make it there. We’ve geared up manufacturing to be able to support their demand. We also just recently fabricated all the product for a contractor doing a VA hospital in Denver, which is the biggest construction job we have been part of.”

Distribution Centers

Hercules Industries has four manufacturing facilities and 12 sales and distribution centers throughout the southwestern United States. A total of approximately 140,000 square feet is dedicated to manufacturing, and the distribution centers total approximately 500,000 square feet.

At the company’s Denver campus, a 100,000-square-foot distribution facility is being built that will more than double the approximately 40,000 square feet dedicated to regional distribution there now. An additional 40,000 square feet in Denver is used for transfers among the company’s various branches. Hercules Industries’ strongest market share is in Colorado.

Keeping track of the company’s 12,000 SKUs is the task of a unique ERP system. “One of the challenges we found in being a distributor and manufacturer is that most ERP systems are either designed for manufacturers or distributors and very, very few are designed to do both well,” Newland maintains. “So we found a company – HarrisData – that had a software that fit our needs.”

HarrisData’s ERP system reports usage of raw materials and parts and keeps track of standard costs and variances related to manufacturing. Usage quantities are passed on to the distribution module, which manages the inventory requirements and sales orders at the company’s branch locations.

“It is a fully integrated ERP system – not two or three systems bolted together to do what we needed to do,” Newland declares. “We’ve been on this system for 15 years. It’s been a nice asset for us to support our business model.”

The software is IBM-based system. “We’ve upgraded the hardware and software many times,” Newland says. “We’re on a year-old IBM server, and one of the challenges for business in this day and age is data and cyber security. We believe IBM is as good as anybody at maintaining that security.”

Human Forecasting

Hercules Industries combines the expertise of its employees with forecasting software to help set inventory levels. “We depend primarily on our employees to know what is coming down the pike,” Newland says. “There are some instances in which you could get some big, one-time orders, and the system may suggest to replenish those same quantities. We use forecasting tools, but we are always geared more toward our employees making the decision, not the system.”

The company is in the process of upgrading its picking system to use tablet computers. It will allow orders to be batched on a mobile tablet so employees can pick several orders simultaneously and provide the most efficient routing through the warehouse. “It’s a major project of ours right now to improve some of our efficiencies in that area,” Newland says. 

HarrisData is developing the system with Hercules Industries. “If we have a business need they think other customers need, they do a co-development where they integrate it into their base software,” Newland explains. “We’re working with them to develop this module on a co-development arrangement so they deliver it to us as a standard software system. A lot of distributors have faced the challenge of trying to move to the quickly evolving world of hand-held technologies, and I think HarrisData has seen the need to move in that direction. You’re moving from a paper-based picking system to something on a hand-held device.” 

Hercules Industries is not using any automated picking systems in its distribution centers. Sometimes an order of merchandise of various sizes is loaded on a single pallet. “Small parts are a smaller part of what we do,” Newland points out. “We haven’t had the volume to justify any sort of investment in a system like that because the volume isn’t there. The bulk of our business is new construction-type, larger bulk products.”

Sizable Fleet

Newland estimates Hercules has a total fleet at all its locations of approximately 210 vehicles to deliver merchandise to customers and move it among company branches. These vehicles range from 12-foot and 23-foot stake beds to 53-foot semi-tractor trailers, along with sales vehicles. 

“We have a lot of weather geared more toward box trucks to keep products protected,” Newland says. “Part of our business model is to allow the managers at the branch to determine what they need to best service their customers because there are so many dynamics – the weather, the type of product they are loading, the type of equipment their customers have to unload and the facilities they are delivering to.” 

Hercules Industries delivers products to most areas of Colorado, Utah, southern Wyoming and New Mexico, as well as the Phoenix metro area. Parcel shipment services also are used when necessary to deliver products to customers promptly.

 Newland attributes the company’s success – some of its customers have been with Hercules since it opened in 1962 – to the commitment of its employees and its family culture. Newland is in the third generation of family ownership and management of the company.

“We’ve got a wall outside my office where we acknowledge all the people with our company for 20 years or more,” he says. “It’s nearly 30 employees we’ve had who have spent 20 years or so with the company. That sort of commitment to the company just really allows us to focus our efforts on serving the customer and not retraining employees on our system and philosophy.”

Delegating authority keeps Hercules Industries’ employees engaged. “We do everything we can to give our branch managers and our salespeople the autonomy to serve the customer as they need to,” Newland declares. “We believe that has translated into a high level of customer service and very longstanding relationships with our contractors that we’ve been fortunate to have earned. So it all goes back to bringing on the right people and providing the culture and benefits to retain those people, and providing the same level of service that customers have learned to expect.” 

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