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"If we were a public company, we'd be under pressure from Wall Street to reduce our debt and inventory, and our inventory would be 10 or 15 percent less. But the best way for us to give service is by having products in inventory. It keeps our customers coming back. As long as we stay private, we'll have lower turns than most," Glick says. Alro continually improves its computer hardware and software, telecommunications, Internet and data management systems. President Mark Alyea, a 19-year veteran of the company who began as a programmer, is the executive most responsible for advancing these systems company-wide. Alro built a Data Processing Center in Jackson, its "electronic expressway," to manage the information flow for all locations. It also backs up the data for quick recovery in the event of a disaster. The building isn't even identified by signage, for security reasons. To cite one innovative use of technology, Alro has instituted a bar-code ordering system with certain auto plants. To place an order, plant personnel just scan a bar code in an Alro catalog, and it's transmitted to Alro's computer. Alro's system automatically faxes an order verification back to the plant purchasing department. "A machine operator gets his material three to four days earlier than if he had to complete a requisition form and send it to the superintendent, the plant manager, then to purchasing," Glick says. "If somebody is on vacation or in a meeting, it gets held up. They may have a machine down in the meantime." Alro regularly updates its Web site and on-line ordering system, but has refrained from partnering with any of the metals trading exchanges. It's too early to know exactly what role the Internet will play in the industry, Glick says. "We're a little bit sheltered from the buying sites because our customers want stuff the next day, often small orders. They aren't going to get that through the Internet and they aren't going to get the service we can provide." Capital investment Alro's 44 branches total nearly 3 million square feet and new greenfield projects are in the works. The company is building a 120,000-square-foot metal center in Niles, which will open next summer, to better handle customers in southwest Michigan. Alro also plans to add 40,000 square feet to both Potterville and its 120,000-square-foot Indianapolis warehouse next year. "We aren't very sophisticated when it comes to our capital budget," Glick says, though the company spent at least $30 million on improvements in the last three years. "We make a budget three ways [based on market conditions]--the worst-case scenario, an average scenario and an outstanding scenario. To me, a budget is no more than a guess. We do them for our banks." Alro invests substantially in processing equipment. "We have a lot of new machines coming--flame cutting machines, plasma machines, saws. Customers are demanding such better quality today that some of the old equipment can't do it," Glick explains. Alro is flexible enough to act quickly when market conditions and customer requirements change, he adds. "We don't have to go through the bureaucracy that some bigger companies do." Acquisitions Mergers and acquisitions among service centers have slowed but hardly ceased, and Glick feels some companies in the industry are vastly undervalued by Wall Street. "We probably get two to three letters a week from business brokers or companies that are up for sale," he says. Alro, which has acquired 27 companies since 1983, judges the viability of acquisition candidates based on product line, geography and the quality of their personnel. "If they process and slit coils, we're not into that at all. If they're on the West Coast or way out of our area, we wouldn't pursue that. If somebody came up with a great location and a great product line, but the people were lacking, we wouldn't be interested," Glick says. Alro tries to retain the employees and managers at the companies it buys, but only those who can adapt to the new culture. "In many cases, their sense of urgency is not as great as the Alro culture's sense of urgency. We want them to take care of the customer the way we do," Glick says. When integrating acquisitions, Alro trains the company's employees on its systems, preaches its philosophies, and almost always boosts inventory and secures better deals on purchases. To finance acquisitions, Alro borrows from three banks with which it has long-term relationships. "We have debt, but we've maintained our debt-to-equity ratio at a level similar to or better than most of our peers," he notes. page 4 |