Bearing Up Rather Well

If you ask Don Latham, president of Canadian Bearings Ltd. of Mississagua, Ont., about his interests outside of business, you will probably see a look of mild puzzlement cross his face. Or at least you will for the balance of 2004.

For 2004 is a year in which Latham has a busy slate. He is well into his first year heading up Canada’s largest bearing and power transmission distributor, and he also presides over the 420-member Power Transmission Distributors Association (PTDA), based in Chicago, Ill.

Press Latham further and he’ll tell you he hopes to get in some golfing with Bev, his wife of 33 years, as the weather permits, and to pick up the occasional book to read. But mostly his attention this year is focused on his company and PTDA, as both stand at a crossroads in their development and future progress.

It’s not that Latham looks perplexed, for neither of the organizations faces worrisome challenges. However, they are in a state of rapid evolution in response to things like customer demand and changing technology. And Latham knows that the kind of decisions and dialogue that he initiates during 2004 will doubtless have a major impact on both Canadian Bearings and PTDA for many years ahead.

Latham is a 20-year veteran of the bearing and PT distribution industry. Trained as a metallurgical engineer in specialty steel, he came to Canadian Bearings when former president Farrokh Kahlili began to build his executive team after buying the company in 1983. Along the way, Latham has picked up an MBA and with it a strong bias toward marketing.

Before his appointment to president last Oct. 1, Latham was a vice-president primarily responsible for Ontario and the national account group. With his marketing perspective came a strong sense of customer service and technical support, which he takes pains to see instilled in Canadian Bearings’ outside sales representatives at all 38 branches in central and eastern Canada.

“We expect our reps to have a sound understanding of the fundamentals, but it is more important for them to understand the needs of the customer than to cram their heads with knowledge of every product,” Latham says. “With the expanding field of products, that’s not possible anyway, so instead we provide the tools to link our reps back to the original source of information.”

The sales reps are actually required to document the impact of their recommendations and solutions. In fact, their compensation package is based on it.

“Some customers make that a contractual obligation,” Latham says. “We want it to be universal. We want it to be the way that we sell. In other words, we want to deliver solutions.”

About 85% of Canadian Bearings’ customers are involved in maintenance, repair and operations (MRO), the other 15% being original equipment manufacturers (OEMs). The product range stocked by the distributor is extremely broad. As well as bearings and power transmission items, it includes conveyor belts and fluid power products. Bearings, in fact, now make up less than 50% of sales.

“Our topline growth comes from large customers on the MRO side that pursue integrated supply-type solutions,” Latham says. “These companies seek to streamline their supply chain by reducing their supplier base and cutting inventories and transaction costs. We are putting a great deal of effort into partnering [with] these companies.

“We are also developing our own e-commerce links so as to see our suppliers’ inventory the way we see our own, which again will help streamline the supply chain and reduce piles of inventory.” Major suppliers to Canadian Bearings include SKF, Emerson Power Transmission and Goodyear Industrial Products (on the conveyor and power transmission belt side).

Latham says that market share is difficult to measure, since every distributor in the industry has a substantially different mix of products.

“You tend to resort to how your topline growth compares with others’, on the assumption that you know who all your competitors are, and ours has exceeded most of our competitors’. It’s hardly an exact measurement but we are satisfied with the results to date. The goal is to increase the share of the wallet of key clients, rather than win new clients, since ours is a pretty mature market.”

Latham says it’s also becoming tougher for manufacturers to carve a unique niche, at least in terms of product. “They now tend to differentiate themselves on things like supply chain, condition monitoring systems and end-user training. The one thing we are not finding is the realization of one of electronic commerce’s implied threats, which is to cut out the middleman. Distribution and customer service are sophisticated activities calling for a broad array of value-added products, services and personal contact, which is not where manufacturers’ core competencies lie.”

This augurs well for PTDA too, though it still faces such issues as corporate consolidation and possible changes to the traditional definition of its membership, which impact one another and are influenced by customer demand and changing technology.

“Originally PTDA was largely composed of mechanically based PT distributors and relatively small independents,” says Latham. “We still have lots of them but we now also have large distributors, frequently at odds with the small ones, and there’s been strong growth in the electronic side of things over the years.

“Some members like things the way they are. Others want change, to reflect the evolution of the industry. We will spend time dialoguing with members to arrive at decisions, such as should we remain small by staying traditional or opt for organized growth, and if we grow, how do we maintain aspects like networking?”

Manufacturers are also full members of PTDA, though the board is restricted to two of them. “For issues that are really vital to manufacturers, we look to PTDA’s manufacturer council to achieve consensus.” The council comprises 10 members, including this year Bill Childers, president of NSK Canada Inc., also based in Mississauga.

Canadian companies play a big role in PTDA, with 15% of the membership. (Some 73% comes from the U.S., the balance from Mexico and offshore.) Canadians have also taken the “pioneering step” during the past couple of years of holding an annual conference this side of the border.

“As well as participation from member companies, we encourage a larger role for the end-user. Last year in Niagara-on-the-Lake (Ontario) our end-user forums featured four superb customer presentations on how they see their supply chain and what they expect for the future.” Similar enthusiasm has been expressed for this year’s conference (May 13-15) in Montreal.

Latham says he has often been involved with associations where only a few people do all the work, but that’s not the case with PTDA.

“Here, there is a high level of participation in committees,” he says. “Member involvement played a key role in the production of the Power Transmission Handbook (which runs to 220 pages), and the industry’s ‘described best practices’ has been heavily influenced by standards developed through relationships between distributor and manufacturer members.”

Recent PTDA initiatives include encouraging the Philadelphia, Penn., based Association for High Technology Distribution to join the group. AHTD members are mainly automation solution providers dealing in motion control products and sensors. “We have to make sure that what we would offer together would have significant benefits for all.”

Of course, the prime PTDA event is the annual conference — recently renamed the Industry Summit — which this year takes place from Oct. 14-16 at Disney’s Contemporary Resort in Orlando, Fla. The theme is “Distributors — What do you do, again?” to reflect the fact that distributors are constantly being required to redefine themselves and what they can do for their customers. It also reflects their changing role in the marketplace as they morph into service providers with a wide array of services, including repairs, design work and even building subassemblies. Fee for services, or actually
getting paid for doing extra work, is sure to be a hot topic at the event.

There will be important keynote speakers too, such as Howard Putnam, who turned around Southwest Airlines and will talk about leading an organization through change and difficult times, and a spokesperson from the Disney Institute, who will discuss quality issues.

Members who arrive early for the conference and in time for the golf outing might see Don and Bev Latham already out on the course, with Don maybe looking a little more relaxed as the presidency baton waits to be passed along to the next capable, committed PTDA member.

Richard Rix is a Toronto-based writer who may be reached at 416-449-0878 or richardrix@sympatico.ca.

For details on PTDA’s Canadian Conference, May 13-15 in Montreal, or on the annual convention (now the Industry Summit) Oct. 14-16 in Orlando, see page 54, visit www.ptda.org or call the association at 312-876-9461.