It’s the crushing question for any business: Should I go forward and take a risk that will allow me to grow or do I accept the status quo and keep the operation profitable while limiting my chances of expanding? This dilemma arises for any business that wants to flourish, and while cost is always relative, when you’re investing millions of dollars, the decision-making process can get even more uncomfortable.
The question of a major expansion with a new warehouse [see sidebar on p. 10] became the thorny issue the Hercules Industries brain trust had to confront before “greenlighting” their new 100,000-square-foot Denver warehouse that adjoins their corporate offices.
The Hercules Industries story was already a success well before confronting the need for a new warehouse. William E. Newland launched the company as a humble HVAC startup in 1962. Today, it is a manufacturer and wholesale distributor of HVAC sheet metal products and equipment with operations in five states, including four manufacturing facilities and 17 sales and distribution centers. (Hercules Industries clocked in at the No. 28 spot on Distribution Center magazine’s Top 50 Distributors in the United States for 2016.)
When asked what was the tripwire that convinced Hercules to go forward with the expansion, Pat Newland, vice president, sales, said the answer became evident in 2013. “We were growing and realized that we were at the point where our capacity was met,” he says. “We knew we couldn’t grow anymore. We had a major limiting factor, which was our ability to ship product effectively to our branches.”
Newland says that while the overarching plan was to increase capacity, the new warehouse suddenly added more built-in efficiencies throughout their distribution process. The decision to move forward also coincided with their three-year strategic plan. “We’ve always taken pride in not only delivering as promised but ensuring that we got the order right the first time,” says Newland. “This expansion was large in size, but we believed the benefits would trickle down to virtually every customer.”
No matter how grand the project, it’s the potential impact on customers that a business should never forget, Newland said. There is an adage among doctors that no two patients are exactly alike, and the same holds true for distribution centers: Each one has unique needs designed to fit product specialties, physical constraints and customer needs. In Hercules’ case, they had to demolish several buildings for the expansion but worked around a structure, which had earned a historic landmark designation. The hurdle was not insignificant and delayed the project by two months. But, after filing the appropriate paperwork and seeing that no one from the public objected, they proceeded with the expansion while leaving the building intact, which had been in existence since 1890.
One question that arises with any expansion is whether the number of jobs will increase or decrease. Because of increased sales, there was an increase in sales-related jobs, but on the warehouse side, the number of employees remained unchanged.
After the experience, what advice would Newland offer to other distributors before undertaking a new distribution center or expanding an existing one.
“I would suggest finding your pain points, your exact areas of discomfort and why that affects your strategy,” Newland says. “That’s when we go back to why we created this distribution center in the first place: We didn’t have enough space, which had become a limiting growth factor for us. Growth is one of our core business philosophies. We’re going to have continued growth through reinvestment in our company, which is part of our mission statement. If something is holding you back from fulfilling your company’s mission and your three-year, five-year or 10-year strategy, you have to ask: ‘What’s limiting that?’ If it comes as a distribution factor or space, start putting a few KPIs [key performance indicators] behind it.
“You can also contact HARDI members and ask questions, as we did. Start reaching out to members and ask questions like, ‘What kind of revenue per square foot should we expect?’ We did this in trying in to determine various KPIs.”
Newland acknowledged that, after frequent strategy sessions, using KPIs and having conversations with HARDI members, the answer seemed obvious in retrospect. “Oh, my gosh, we’re bursting at the seams,” he recalls. “It was a no-brainer to go ahead with the project because it was everything we wanted to do within the strategic vision of the company.”
Newland said the other factor that was critical to Hercules’ successful transition was their ability to create a team oriented toward their needs and a working relationship that was comfortable based on previous projects.
“I can’t overemphasize the importance of selecting partners for the project that are aligned with your strategic vision,” Newland says. In Hercules’ case, they were able to work with partners with whom they had previous experience, ranging from the architect to the general contractor, subcontractors and an industrial engineer. He says it’s not just looking for the lowest bidder but for a partnership that brings everyone in as a team member.
“We are honored to receive Distribution Center magazine’s Golden Warehouse Award,” says Hercules President Andrew Newland. “We strive to make this a company where people enjoy coming to work and are proud to say they work for Hercules. Top notch customer service is a natural outcome of this sort of culture. We are extremely grateful for being awarded the Golden warehouse award because it validates the hard work of so many of our employees and reinforces their pride of a job well done.”