Aggressive product roadmaps, big future business ideas, and changes in strategic direction are common growth strategies. But Lawson Products, a 67-year-old, NASDAQ-listed, consumable maintenance supplies (MRO) distributor takes a different approach to growth, one with tremendous impact that truly delivers a WOW! factor: continuous incremental improvement.
Beginning in 2010, Lawson Products embarked on a revitalization program that has resulted in top-line growth, adjusted EBITDA growth from 0% to over 10%, operating leverage over 30%, all while maintaining gross profits of 60% over seven years. Continual growth and progress.
We accomplished these results through two foundational growth strategies: continuous process improvement through the adoption of Lean Six Sigma and a commitment to continuous incremental improvement in all aspects of the company and its value proposition.
Process map the enterprise
Lawson introduced lean in early 2013 with the primary goal of improving employees’ quality of work life. It was quickly and broadly embraced across the company. Twenty year-long projects later, lean is now part of the Lawson Products DNA. Teams have significantly improved customer support service levels, reduced supplier non-conformances, and improved quoting cycle time for special order items. A cross-functional group of employees representing HR and field sales reduced the recruiting cycle time by 56% by improving the company’s social media presence, simplifying the job application, and better defining the sales representative position.
We use lean as a competitive advantage. Our sales and service reps ask customers, “What’s in your way [literally and figuratively]?” and “What’s weighing down operational excellence?” Lawson Products enables its more than 70,000 active customers to plan better and work more efficiently. With its Lean Six Sigma advantage, Lawson Products has improved customer retention from 88% to 92%.
Big data, big advantage
The second foundational growth strategy, broad-based continuous incremental improvement, is based on the application of and company-wide commitment to data analytics. This has enabled team members across the company to explore process improvement and execution effectiveness across departments and functions. This approach to growth has touched all aspects of the company.
The human resources department changed our hiring and onboarding process. Product management and marketing refined their approach to lifecycle management, core products, and our ability to fill a hierarchy of needs for customers. The company advanced its commitment to the optimum balance of superior performance private label products with service intensive vendor managed inventory (VMI). And by embracing knowledge sharing software combined with a collaborative culture, more than 1,000 field sales reps in the U.S. and Canada answer each other’s technical questions every day.
Improvement, achievement, success
This approach to growth takes more time than big ideas or big changes in strategic direction; however, if the company’s value proposition and strategy are sound, continuous incremental improvement can result in a more robust enterprise, enabling lower risk performance improvement and less volatility in financial performance.
It can also result in a broad-based evolution of the company culture.
In a sense, each team member is re-engineering the workplace. It defines us. It unifies us. And it makes a good company a great one.