Engman-Taylor Co.

Many companies are focused on the bottom line, but Engman-Taylor Co. (ETCO) Inc. looks past that to earn its clients’ trust. Vice President of Operations Jim Mueller says the company regularly finds ways to help its customers save money.

“There are many cases where we’ve actually reduced our sales by producing cost savings for customers,” he says, noting that ETCO considers the client’s loyalty to be more important than profits alone. “In the end, they understand that’s our real focus.”

Based in Menomonee Falls, Wis., ETCO distributes industrial products such as machinery, fasteners and hardware, tools, finishing supplies, and cleaning and janitorial supplies. Founders Carl and Joe Engman started the company in 1945 as Engman Brothers.

For 31 years, the Engman brothers had worked for Carborundum and when they started their own venture, they acted as manufacturer’s representatives for their former employer. In 1956, Bob Taylor acquired the firm and changed its name to Engman-Taylor Co. Inc.

After buying a brick-and-mortar facility, Taylor started carrying inventory, including many of the products ETCO sells today, such as abrasives and cutting tools. In 1971, Star’s father, Chairman Dick Star, came to work for ETCO and initiated the company’s focus on cutting tools.

In 1974, Star and partner Ed Melicher purchased the company, which now serves a broad base of manufacturing clients, Rick Star says. “They’re either cutting metal or fabricating metal in many cases,” he says.

Today, “We’re certainly one of the largest remaining family held tooling distributors,” he continues, adding that ETCO employs a team of 110. “The majority of our competitors that are family owned are much smaller than us.” 

ETCO also has additional locations in Machesney Park and East Peoria, Ill., as well as Appleton, Wis., and Charlotte, N.C. Additionally, it earned recognitions for its work, including the Value Added Partner of the Year Award in 2002 and Progressive Distributor magazine’s “Most Progressive Distributor” award in 2005.

Setting ETCO Apart

ETCO operates in a strongly competitive market, Star says. “There’s literally thousands of industrial distributors that purchase products and resell them,” he says.

This requires ETCO to set itself apart “by bringing new things to the table,” Vice President of Sales Bill Collier says. Those initiatives include specialists that can assist customers with the items they purchase.

For instance, if a customer is having difficulty cutting a material with a tool that he purchased from ETCO, he can bring it to the company for testing. “[We can do it] here instead of having to break into their manufacturing environment,” Star says, noting that this reduces the client’s downtime. “We provide a solution to [their] problem.” 

Each product center also has technical personnel who can visit the customer’s facility and show them the most efficient way to use a product. Collier adds that the company provides training “for whatever products they’re using.

“We use seminars or our learning center when we’re trying to find that area that can separate us from the rest of the pack,” he describes. “It’s our job to make sure our customers make a profit.”

Maximum Impact

ETCO helps its customers save money with its Customer Cost Savings Team (CC$T) consisting of applications specialists, on-site buyers, on-site customer service representatives, on-site product applications specialists and enhanced services specialists. Each works with customers “to evaluate and implement new efficiency-improving procedures and processes,” the company says.

Because ETCO stocks more than 50,000 products and is among the largest distributors in the United States for many of its suppliers, the company strives to offer the best pricing and most effective materials and equipment available on the market. The company continuously re-evaluates products from the hundreds of manufacturers in its supply base.

ETCO’s associates utilize their Cost Circles philosophy, which looks at three areas of cost. These three areas are its customers’ key expense drivers: manufacturing costs, administrative costs and the prices of products “that they’re buying or we’re competing to sell [to them],” Star says. “We look at everything that has a cost associated with it from their perspective.”

The company’s strategy, he asserts, is largely based on its customers saving money on their manufacturing floor. ETCO is even willing to recommend purchases that cost more if they will pay off in the long run. 

For instance, if a customer considers buying a drill for $10, ETCO will show them a $25 drill that will last longer and make 10 times as many parts, Star says. “We would show them [how] that’s a cost savings,” he says.

“If it’s somebody that’s shortsighted [and] is only looking at the cost of the drill, they’re only going to see the current drill is $10,” he says. “They have to understand the total cost and not just price.”

Getting customers to pay more can be challenging when there are people who only focus on the price, Mueller admits. However, “At the same time, if we can increase your capacity and increase your throughput in your manufacturing environment – thus making more products in a quality fashion – we reduce the cost of manufacturing,” he says.

Paid to Sell Less

ETCO assigns its own technical applications specialists to work at its customers’ facilities and find savings. The workers have expertise in areas such as cutting tools, abrasives products, metalworking fluids, assembly products, and precision measuring and inspection.

Those workers are rewarded for their work, Star says. “When one of our site people [finds] a cost savings, that person gets a percentage of that cost savings as it is projected over 12 months,” he describes. 

Staying Nimble

ETCO has seen market consolidation, both in its competition and among customers. “Everybody is a sister or parent of everybody else,” Star says.

Although it has been the target of acquisitions, ETCO has successfully remained a family owned organization, which Star says has kept it nimble. “We have a philosophy called ‘same-day response,’” he says. “Other organizations are not doing that.”

With this philosophy, associates can get decisions made at ETCO with far less red tape, Star says. “Our salespeople will call me on my cell phone and ask, ‘[Is] it OK to do this?’” he describes, noting that he likes to hear their opinions on the decisions, as well. “We encourage everybody to talk freely.” 

Ahead of the Curve

ETCO has nurtured a “forward-thinking” philosophy, Bill Collier says. “We’ve not sat still,” he declares. “We’ve understood the changes within the marketplace and we’ve made adaptations to be in tune.”

For instance, ETCO continuously looks at new suppliers or technologies that can change its manufacturing processes. “We try to bring that technology to our customers to make sure we’re in a good place going forward,” he says.

Thanks to that philosophy, “We are ahead on the technology curve,” he says. One example is how ETCO’s carbide suppliers recently introduced new products. To help its customers adjust to the change, ETCO held seminars “to bring that technology to them,” Collier says. 

ETCO also maintains solution centers with new technologies that customers can have hands-on experience with, he adds. “That is always changing,” he says. “We’re inviting our customers in so they have a chance to see it first-hand.”

Coping With Costs

ETCO copes with continually rising transportation costs, Star says. “We buy a lot of stuff that comes in every morning,” he says. “We try to [cope by buying] at a level that freight will be paid by the supplier.”

This often requires ETCO to purchase large quantities of items so that the suppliers will cover them, including metalworking fluids. “It comes in 55-gallon drums,” Star says. “It’s one of our more freight-intensive products.”  

On the sales side, ETCO uses its own fleet to deliver products to clients, Star says. “If a customer is not in a remote region, we do not charge [for freight],” he says. That becomes a competitive advantage as compared to the nationwide players.” 

Technology Management

ETCO regularly adopts state-of-the-art technology to manage its business, Star says. “We have automated storage carousels in our warehouse [and] electronic document retrieval systems throughout the company,” he says. “When it comes to transactions, we’re doing things at the customer level too.” 

ETCO uses EDI, barcoding, wireless scanners, online ordering and other technologies to reduce labor on the customer’s floor. Sometimes it’s their labor and other times it’s the customer’s labor.

One such method of labor reduction is helping customers keep track of their inventory through radio frequency identification chips (RFID). ETCO places the tags on items and installs portals at all the doors in a client’s storeroom. 

“When somebody walks into the room, grabs something and walks out, it’s identified the person, what they’ve taken and how much [of the product],” he explains. “If it’s never returned, the system knows that, [too].”

That not only lowers the incidences of lost items, “It establishes accountability,” Star says, noting that its customers’ employees often compete to use the least amount of items. “We’re doing the best thing for the customer.” 

Growing ETCO

ETCO plans to continue diversifying, both in terms of products and its footprint, Star says. “We’re always looking at additional geographical reach where it makes sense,” he says.

“We have to look at continuing to differentiate ourselves from a service standpoint and look at things our competitors don’t do,” he says. Product-wise, ETCO is currently exploring opportunities associated with 3-D printing.

Collier adds that ETCO will grow by adding new technologies and new staff members to support them. “We’re infusing good, young talent into new geographical areas,” he says. 

Strong Resources

Both Mueller and Collier are longtime ETCO employees. Mueller joined the firm 16 years ago, after gaining experience in manufacturing. ETCO looks for that same type of experience in its new hires, he notes. That way, “We understand our customer base and support it in a proper fashion,” Mueller says.  

Collier joined the company in 2000 after working at Triumph Twist Drill in Rhinelander, Wis. His previous experience proved to be helpful when he came to ETCO, particularly in the areas of efficiency and cost-containment. “I understood that Engman-Taylor could bring those resources to the table,” he says.

Both Mueller and Collier credit the company’s success to its staff. For instance, “There is a good cross-section of [people] across manufacturing [with] engineering backgrounds,” Collier says, noting that they provide strong customer and technical services. 

Its competitors do not have “the ability to bring the technical resources like Engman-Taylor can,” he adds. “We have that little niche we can draw upon to solve problems.”

Collier also praises President and CEO Rick Star. ”Rick is a great leader,” he says. “He’s the one that pilots this whole thing. He gives us the latitude and encouragement to try to do better.” 

Showing Support

Star is proud of how ETCO has aided its workers and their livelihoods, as well as the company’s involvement in charities. “We set aside a certain percentage of profit [for] the community,” he says, noting that the company has given to Elmbrook Little League in Brookfield, Wis., and Miracle League, a YMCA administered baseball league for disabled children.

Mueller, too, has gained satisfaction from ETCO’s charitable work. “It’s a good feeling when you can help others who need [it],” he says, adding that the company and its employees sponsored the PurpleStride Walk for Pancreatic Cancer and supported the Fight for Air Climb among others earlier this year.

The company supports groups such as veterans’ charities, the Special Olympics and Good Samaritan Outreach Center.

ETCO also helps fund disaster relief efforts and provided aid after the Gulf Coast hurricanes. The company donated $27,750 in cash and supplies via an employee match program.

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