Episode Transcript
[00:00:03] Speaker A: Welcome to AINA Insights where prominent leaders and influencers shaping the industrial and industrial technology sector discuss topics that are critical for executives, boards and investors. INA Insights is brought to you by INA AI, a firm focused on working with industrial companies to make them unrivaled segment of ONE leaders. To learn more about INA AI, please visit our website at www.ina.AI.
[00:00:40] Speaker B: Welcome to another episode of Titanium Economy podcast hosted by aina. Our guest today is Jeffrey Dice, President of Wind Supply Inc. Founded in Dayton, Ohio in 1956, wind supply has grown into 8.4 billion wholesale distributor of construction and industrial supplies. Now built on a very simple premise, but a distinctive idea that the best way to serve local contractors is to put real entrepreneurs in charge of every location.
Jeff joined wind supply in 2004 as a regional financial officer, rose through internal audit and technology, led the company's equity group and became the sixth president in wind suppliers history in February 2023.
He's a CPA with a degree in accounting from Indiana University and a Master's in supply chain management from Wright State, a finance and an operations leader now running one of the most distinctive business model in American industrials. Jeff, pleasure to have you on board to get us started. I think let's spend some time understanding Wind Supply a bit.
So wind supply is 8.4 billion distributor operating across nine verticals, 45 states.
Can you give us a 30 second overview of what Wind Supply does and how are they different?
[00:01:59] Speaker C: Yeah, Wind Supply is a national player.
However we are not a national company. We actually are a collection of individual C corporations or local companies around the country.
Over 680 of them.
We do play in the space of plumbing, H Vac, pvf, electrical waterworks, firefab, pumps.
But the reality is yes we are national but we act very independently and very local.
[00:02:28] Speaker B: Got it.
I think talking about the local and independent portion a bit right. We said each Wind Supply location is a independent C Corp with the president and their own operating team that has a meaningful equity stake. Now can you walk us through how does this buy in work? Who puts in the capital?
What does the financial upside look like for the owners of building something meaningful here?
[00:02:57] Speaker C: Yes, in all the cases when supply has the majority stake equity stake in a company, the minority stake is owned by the company present and key employees of that team.
The typical ownership structure for a wind supply company or the ideal one would be a 60% by equity stake by One Supply Inc. 30% by a low company present and 10% by the key employees. Now that ownership stake does vary Based upon the ability to buy in. Sometimes it takes a few years for a president to get up to 30%. So it doesn't happen day one.
But that is the typical setup. Now from a compensation standpoint, they do have share price appreciation, they do get a dividend flow from their equity stake. And that team that works at that local company has a very lucrative uncapped profit sharing plan.
[00:03:51] Speaker B: Got it. That's actually very exciting.
Now in this more localized model, can you walk us through what does wind supply control from Dayton vs where do you genuinely stay out of their way?
[00:04:07] Speaker C: Well, I would have to say that we stay out of their way a lot.
This campus is a support service campus.
So what we do is provide services for our local companies.
There are some services that they pay a fee for that is standard, like the ERP system, the county services, compliance services that, that would be part of the standard package. But then there are elective services that they could choose or not choose to use. That'd be credit services and purchasing services, back office privacy optimization, area marketing. So we don't force all the services on companies. It kind of depends on the basis. And many times, there are many times our services have to actually compete with third parties on the open market for, for that business.
[00:04:53] Speaker B: Got it.
Now just spending a bit of time on the distribution business, which is a thin margin business.
How does the local owner model affect the incentives to, to protect margins specifically? And how does an owner price and sell differently than if a branch manager was in charge?
[00:05:15] Speaker C: Well, there is obviously a great sense of the protect margins because their compensation is based upon the earnings at that little company. So margins have a big play into the profitability. So but I would say our companies are actually unlike a large top down company that they set their own pricing.
So it's very market based. It's very. And what we do encourage, encourage them from Dayton or they actually have a separate local company board they report to is that get paid for what you're worth. So they do services, value added services and they do in a lot of different ways. It's not standard in the model, but we do say make sure your margins, you're getting paid for what you're worth.
[00:06:00] Speaker B: Got it. That's, that's actually pretty true for margins. Now if I think about, I mean you describe this model as a entrepreneurial ownership in distribution. Right.
Can you tell us more about how does this impact customer experience given that you've got genuine owners at each location and how does it compare to your competitors?
[00:06:21] Speaker C: Well, one thing with Winsupply in our local companies is that they could really have a owner to owner conversation.
And that resonates very differently than when they're working with a branch manager, that owner of their customer. The owner of the customer knows that they're playing the same game. I guess as of there's a financial incentive for them to do well at the customer level. They understand that the company they're working with has just as much stake in the game.
So yeah, it does drive a different level of business.
One thing about our local company entrepreneurs and the owners is they have the ability to be faster. They have the ability to make it easier for the customer. They have the ability to be nimble because they know the individual market conditions. They don't have to come to Dayton and wait for a decision to be made. They can make that on the spot within their market to serve that customer. So there is a huge advantage not only them being an owner, but be in that market and be able to make that decision to sell themselves.
[00:07:27] Speaker B: Now I mean that's a true testament to being nimble and fast decision now shifting tracks to growth right now and how you scale the operations for this company. Right now Wind Supply has closed multiple acquisitions from a Kansas Waterworks distributor to a Florida electrical distribution and supply house.
How do you acquire a family owned business and how do you transition them to a Wind Supply model without losing what its worth was when you bought it?
[00:07:59] Speaker C: Well, I mean We've done 30 plus acquisitions over the last 10 years.
I'm going to have to say we're never been perfect but we've learned over the years.
Ultimately what we're doing is we're, we're acquiring people requiring the people that made that company who they are.
So that's the first thing we do to protect is those, those people.
We don't want to ruin the relationship they have with their customers.
So we always go with that do no harm type approach.
Not everyone's differently is different.
There's some that actually want to be on our ERP system day one if you think that's beneficial. Others that we take a wait and see approach was learn about when they want to learn about when supply. It might be a year down the road and maybe five years down the road. Everyone is kind of custom based upon that individual company, the single and two locations. A little easier for us versus a branch operation. We want to be careful with the branch operations because ultimately they want, they have to want to be our model at some time down, down the road may not be a year or two Maybe five years down the road. But we do, we do take it slow to make sure we're not ruining the customer relationship along the way.
[00:09:13] Speaker B: Got it.
And that's on the customer relationship side. Let's, let's talk about culture a bit. Right? Because every acquisition you do brings new people, people who have not grown through the wind supply culture in the organization. Now can you talk to us about what does it take to sort of bring a company president fully on board with the wind supply operating model and at what point, at what signals you look at which tell you yes, he's on board?
[00:09:45] Speaker C: Well, it does vary and everyone is done, I guess is done differently.
So what we, what we do with every acquisition is we will have a area leader and some companies will call a regional manager that will work closely with that company. So he will make sure that culture remains the culture was before the acquisition. But then he will start teaching about when supply culture along the way.
We also have other retraining resources. We got field trainers, we have our support service campus will be in touch with those companies. We will have a couple of training programs. We have a management development training program that will help teach when supply culture. So again it happens at different speeds at different stages.
And each company we acquire has a separate board of directors and that board of directors will work with that company to kind of assess the readiness the come into Wind Supply, come into our ERP and truly become a wind company. The reality is it takes a little time, but we have a lot of resources to help along the way.
[00:10:55] Speaker B: That is awful.
Shifting to your competitor now, Wind supply stands out. If I look at the base of your competitors like Ferguson's, three and a half times the size, Grange is twice the size. Core and Main are operating in similar revenue range, but all of them have centralized company owned branches.
Can you talk to us about how does this local model give print supply a genuine edge and what are the trade offs that you had to sort of work through to sort of go towards a local versus a central model?
[00:11:32] Speaker C: Yeah, the edges, and I mentioned this before is kind of the speed and easy ease of doing business with us and be able to serve the customers in those local markets.
And some of the companies you've mentioned, they deal with large projects. Our companies also deal with large projects and we could compete on the same scale. We have distribution centers and really good preferred customer relationships that help us through this larger projects. But I tell you it's for us, I think we could compete at a national level. Like any of those competition, we just do it differently and we do it from a relationship standpoint and the people that we have running our companies are true entrepreneurs and they have a different level of skill and you have to have a different level of skill. You're not just running a branch, you're you're running a company, you're running a C corporation. And you have to understand how to not only serve the customer but run a P and L also manage a balance sheet. And it's very important for them, it's very important to have that high skill level to be able to deal with those, their customer base.
[00:12:44] Speaker B: Jeff, thank you for that. I think just casting our lens to the future and some of the more innovative technologies right now. Right. So Wind Supply made its first drone delivery in 2022 and you've invested in a Dayton based AI firm, Mind's Eye and the focus for the company has been to sharpen your supply chain, forecasting, purchasing and e commerce decisions.
You've also gone on record multiple times to say AI is going to level the playing field from a knowledge point of view.
Can you talk to us how what does this practically mean for a local owner in a mid sized market?
[00:13:22] Speaker C: I've said many times that AI is going to be the equalizer of knowledge. So I think knowledge will become a commodity actually I believe for the win Supply business model that's the advantage to us because one thing that our team, our local model brings to the field is grit.
So the people that have the most grit and willing to go the extra mile to serve the customers will win in the next phase of the game. Because AI and the knowledge standpoint, everybody's going to figure that piece out. So everybody's going to have the same tools in their hands. It's the one that can out hustle the next to when out the customer.
So that's what I foresee in the future. And we're where we at when supply as any of our competition is looking at ways to integrate AI, how to make their operations more efficient and how to make data more accessible.
That is just how you use that data and how you use AI in the future to win.
[00:14:21] Speaker B: So shifting away from the AI part a bit, right. And focus on this core project that you are currently in the midst of delivering which is the 1.6 million square foot distribution capacity expansion across Atlanta, Oklahoma City and Dayton.
What does this mean for a local owner experience once this facility is done and on board?
[00:14:48] Speaker C: Well, it means a lot more breadth and depth of our inventory and we are for a while we've been Kind of lacking on distribution space. So obviously as you've seen, we're expanding that pretty quickly.
But beyond that, and especially in the Atlanta D.C. we're going to try a few new things. Expanding the ability to service beyond just the A and B type items. We're looking at servicing C and D type items and electrical, which is something that's the first time we're going to do in our DCs. But more importantly, the breadth and depth across our entire network gets that product closer to the little companies which gets that product closer to the customer. And our goal is to be able to get that product to any company within one day of service.
So it's again, that's part of the overall goal.
This just gets us one step closer.
[00:15:44] Speaker B: Got it.
Well, thank you for that Jeff. I think I'm going to move away from winsupply to your own journey for a bit right now. Your path to presidency ran through finance and technology.
You were an auditor, CFO of Nolan Group, cio, head of Equity Group and then rather than through a sales or a brand channel, you are now the president of the company. Right.
Can you talk to us a bit more about how did your background shape how you lead this culture first in a decentralized organization?
[00:16:19] Speaker C: Sure. I've bounced around a lot at Wind Supply. About every year and a half I felt like I was taking a new position.
But my background but the accounting background and just kind of the actually I had a few other pieces of background was gave me the ability to develop relationships throughout the company.
With my first couple of years at the company I made a purpose of developing relationships with the operations side or air leaders or low company presidents and got to learn that as well as possible. So I was. I didn't want to become just a accountant or a finance guy. I want to be a well rounded understand the business. So I made that a purpose early in my career and from that then I just took on every opportunity I could to throughout my career where I was the CFO Nolan I started up internal audit. I started up the shared service division of One Supply Inc. I ran it even though I had no IT background but I did have a business background. So I brought the business to IT when I ran the Equity Group and again kind of brought my accounting background to the CFO based role.
And now I'm bringing that all that experience into the president's role. So bring the finance and business side but I have the relationships on the operation side to be able to mesh all that together.
[00:17:35] Speaker B: That's fantastic. Now I think going back to where we started and probably one final closing question for you. I think we've discussed Titanium economy is all about industrial companies driving America's growth and frankly not getting enough credit for it.
It's a very silent economy just working through.
[00:17:56] Speaker C: Right.
[00:17:57] Speaker B: And wind supply story version of that story is all about ownership. Right. I think you said the best the conviction that the best way to make great industrial companies is to make as many people inside it as genuine owners. Now from your perspective, what would it mean for the American business landscape if more companies were to be built that way?
[00:18:19] Speaker C: Well, I actually thought about this question a little bit and I get asked this a lot and actually was asked this at a town hall a couple of days ago.
One thing that our model does is is a great way to distribute wealth throughout the organization. So one thing we do celebrate is our local presence. Our local owners out there. Many of them will make uncapped funds on profit sharing. They will make more than people here in Dayton. They have the ability to do that. Our model is set to do that. So one is the great distribution of wealth. And if all the companies do that, they could distribute throughout their organization a lot more efficiently than some of these top down organizations.
Another thing about our model that I love seeing is that it's very local based, so they're very nimble. So in times of a recession or a down economy, they can shift what they do in business. And the companies that are in a good market could continue to play in a good market.
The companies that are in a struggling market, they'll be able to shift where they do business. They may be a residential company now, could shift to a commercial company so that our model allows that and allows that to do very nimbly and very quickly.
[00:19:31] Speaker B: Oh, that's fantastic.
Well, Jeff, we're at the end of our podcast.
I really appreciate and thank you for sharing the candid story of Win Supply and how you function. And I wish you all the best.
[00:19:46] Speaker C: Well, thank you. Thank you for having me.
[00:19:53] Speaker A: Thanks for listening to INA Insights. Please visit INA AI for more podcasts, publications and events on developments shaping the industrial and industrial technology sector.
[00:20:10] Speaker C: Sa.
