Ideal Supply - "Farming" For Opportunities - Engine Builder Magazine

Ideal Supply – “Farming” For Opportunities

As the winner of our fifth annual "Machine
Shop of the Year" award contest, Ideal Supply Co., Listowel,
Ontario, can claim a number of "firsts." It is the first
Canadian recipient of our award and, to our knowledge, it is also
the first machine shop which has obtained ISO (International Standards
Organization) 9002 certification.

About two hours due east of Toronto and centrally
located in the province of Ontario, Ideal’s corporate headquarters
are located in the middle of some of the richest farm country
in all of Canada. Not too surprisingly, agricultural customers
comprise about half of all of its automotive business. But Ideal’s
management are a progressive group that has continually been involved
in innovations designed to expand both the markets it serves as
well as the products and services that it offers.

In addition to its strong agricultural base,
Ideal Supply serves the automotive domestic and import, heavy
duty and industrial, performance, restoration, small engine and
marine markets. The 10-employee machine shop in Listowel is one
of the best equipped shops in Canada, encompasses a little more
than 11,000 sq. ft. and next year will celebrate its 50th anniversary.

Ideal Supply actually consists of three major
divisions – Automotive, Electrical and Industrial. The Electrical
Division accounts for 70% of the company’s $60 million in annual
sales. Electrical Division sales encompass the full spectrum of
both retail and wholesale electrical products including everything
from fuses to wires to breakers to transformers. Industrial automation,
utility supplies, motor controls, electrical tools and design
assistance are offered in addition to its complete selection of
electrical construction supplies.

Ideal’s Electrical Division customers consist
of electrical wholesalers, industrial and municipal and school
board accounts as well as a variety of second tier suppliers.
Ideal also operates two retail lighting outlets, known as Avon
Lighting, within its Electrical Division.

Ideal’s Industrial Division supplies a broad
range of products to manufacturing plants, hospitals, boards of
education and government institutions in its trading area. As
industrial clients acquisition requirements and expectations continue
to change dramatically, Ideal has responded with leading edge
technology, expanded product offerings, centralized service centers,
a preferred partnering program, and 24-hour emergency call service.
With single-source supply (integrated supply) for all maintenance,
repair and overhaul (MRO) needs, Ideal is satisfying ever changing
demands for a broader range of product and application expertise
from its customers.

The Automotive Division

The Automotive Division consists of a full
range of automotive parts and services, including paint and body,
tools and equipment, hydraulic supplies and radiator repair, hydraulics
and engine rebuilding.

The company has had a strategic partnership
with UAP/NAPA Auto Parts for the past 16 months. That relationship
has made Ideal the largest distributor for UAP in Canada. UAP
ships parts directly to Ideal Supply’s 17 branch locations throughout
Ontario from its two parts distribution centers. Ideal also services
its headquarters and branch locations with a $3 million inventory
out of Listowel.

Of Ideal’s total 9500 customer accounts, automotive
and machine shop represent about 4500. Eleven of Ideal’s 17 branch
locations also offer machine shop services, although the Listowel
location handles about 45% of all machining and engine rebuilding
work taken in.

The branch machine shops offer most services
except for such items as complex cylinder head rebuilding, crank
grinding, line boring/honing and block honing. Those jobs, however,
can be delivered to Listowel and returned to branch locations
within one to two days when required.

Of the company’s 300 employees, 34 work in
Ideal’s machine shops. We had the opportunity to visit the main
shop in Listowel, which presented a broad spectrum of machine
work and engine rebuilding jobs in progress. As was mentioned,
agricultural work accounts for about 50% of all machine work and
engine rebuilding. Passenger car and light truck represents another
20%, with heavy duty, industrial and restoration work accounting
for about 10%. The rest of the shop’s jobs come from performance
and a variety of other niche markets.

The day of our visit, in addition to typical
import and domestic head and block work, we saw a variety of agricultural
cranks being reground, a DOHC Mitsubishi cylinder head, a 1910
Tudhope four-cylinder engine in for a partial rebuild, a straight
eight Auburn (1930s vintage), a Model A Ford engine, and a turn-of-the-century
John Deere® flywheel engine, all making their way through
disassembly, cleaning and the machining processes.

Machine Shop Division Manager, Kim MacKenzie,
told us that cylinder head repair, crank grinding (primarily for
agricultural applications) and radiator repair were currently
the busiest departments in his shop. That’s right, radiator repair!
Each branch location that offers machine shop services, as well
as the shop in Listowel, also offer custom radiator rebuilding
and stock a line of exchange rebuilt radiators.

Ideal’s rebuilt engine warranty requires that
the vehicle’s cooling system and radiator be inspected. About
25% of the time a rebuilt radiator is sold with a rebuilt engine.
"Clean and repair" work on radiators is almost always
done on the remaining engine sales.

Ideal has offered radiator rebuilding since
1967. MacKenzie notes that it is part of a value-added approach
to selling engines that allows the company to make an additional
profit and helps ensure that customers enjoy trouble-free engine

"We provide a lifetime warranty on the
passenger car and light truck radiators," said MacKenzie.
"The heavy duty applications get a one-year warranty. It
provides us with nice gross margins and there is not a lot of
overhead cost since we can house the entire department in a 20′
x 30′ room staffed with two employees. It takes about 1-1/2 to
2 hours to rebuild the typical passenger car or light truck radiator
and about three hours to do the typical agricultural unit. The
really large radiators for heavy duty applications, though, can
take a day."

In today’s market machine shops cannot depend
on the typical 350, 302 or 231 engine and head work to remain
profitable over the long term. Production engine rebuilders and
retailers provide far too much price competition on these types
of engines. In Canada, the OEM new car dealerships are also much
more active in competing for the parts and service business in
the independent aftermarket.

As many machine shops have come to realize,
diversification is an important ingredient to achieving long term
profitability, and to also help smooth out the sometimes cyclical
nature of the business. In its own markets, Ideal Supply has found
that when its electrical business slacks off in the winter, its
automotive business increases, and vice versa.

Other examples of Ideal’s Automotive Division’s
diversification, in addition to its radiator business, include
a complete hydraulic service center. The center is the area’s
largest distributor of hose and couplings. From 1/4" to 2"
hose and couplings can be cut and crimped to meet specific diesel
fuel, gasoline, oil, air and hydraulic applications.

Like the radiator business, the hydraulic center
offers Ideal another way to package a variety of services and
products to an expanded customer base. Providing hydraulic service
to its agricultural and industrial accounts, as well as its heavy
duty and automotive customers, allows Ideal’s 14 Automotive Division
salesmen to sell the other machine shop services and products
it has to offer to those customers.

Ideal also operates a separate tool and equipment
business known as Global Tools and Equipment. Tools and equipment
are sold and/or rented to a variety of agricultural, industrial
and automotive accounts. The company offers everything from battery
chargers, hand tools and arc welders to garage creepers and pneumatic
tools to body repair and lifting equipment.

"A shop just doing passenger car and light
truck machining and rebuilding is in trouble," offered MacKenzie.
"Shops just offering those products and services often have
to cut their prices to compete for that business. When that happens
they are unable to invest in the type of equipment and employee
training that they need to keep up to speed with today’s technology."

"We are very diversified," added
Dave Murtha, Quality Coordinator for Ideal. "Innovation is
a major part of what we do today. What was new five years ago
is the norm now. Things change fast."

A major aspect of Ideal’s evolving innovation
has been its investment in becoming ISO 9002 certified. ISO certification,
which Ideal received at the end of 1996, is the crowning achievement
of the company’s quality initiative. But it is also a living document
through which Ideal can ensure the highest quality products and
services are extended to its customers. Independent quality audits
are performed by KPMG on a periodic basis to ensure that the company
is following its continuous improvement program.

"We realized that we needed a plan to
be able to maintain our ‘Service In Quality,’ initiative,"
explained Murtha. "ISO 9002 certification has provided us
with the ability to link customer satisfaction with constant quality
improvement. Customer satisfaction and continuous improvement
in quality and service have been married to a regimentation process
that ensures it."

A lot of news has been provided on large corporations
that have achieved ISO 9002 certification, but for a machine shop
to implement these procedures is quite an achievement. The short
explanation for what ISO certification is would be to say that
through a process of documentation, products and services can
be provided that meet or exceed customer expectations on a consistent
basis. ISO certification also provides an environment in which
continuous improvement of the operations of the business can be

"When we first got involved with ISO certification
we thought of it mostly as a plaque we could hang on the wall
and a flag we could fly in front of our headquarters," said
Murtha. "But what we found was that it gave each of our employees
a voice in improving the system. It brought us together as a team
in an environment in which we could make continuous improvements."

Within the machine shop a team of seven employees
met for several months to document all of the procedures in the
shop and to create flow charts. Through implementation of documented
procedures, Ideal has seen significant improvements.

"We’ve seen productivity improvements
and cost reductions," explained Murtha. "For example,
where once we used 100 different forms in our warehouse, we now
have just 20. "We’ve seen real improvements in the relationships
we have with our customers and our vendors. Continuous improvement
is working."

"We also believe that our employees are
happier, more satisfied and more productive," added MacKenzie.
"There is more accountability under ISO. Our process now
requires that we handle any problems that come up in a specific
manner. It’s forced us to work together as a team. It’s a process
that happens throughout the entire company, including the machine
shop and the various departments within the machine shop.

"It’s not that we were lost or doing a
poor job before we implemented ISO," said MacKenzie. "But
through ISO we found how to put all of us on the same page. We
could ensure that all of us were working together to achieve continuous
improvement in our products and services."

Ideal Supply has also been innovative in developing
a "Going The Extra Mile" incentive program for its employees.
Under the program, each employee has a card in which other employees
can place a "Going The Extra Mile" sticker, along with
a brief description of what the employee did to deserve the sticker.

For each 30 stickers that an employee earns,
he or she receives $30 worth of gift certificates to McDonald’s.
For every 125 stickers an employee earns the company awards overnight
accommodations to a resort.

"It’s part of our employee orientation
program and its our way of creating what we refer to as a ‘thank
you cultural’ within the shop," explained MacKenzie. "Every
department in the shop participates in the program."

Ideal Supply also tries to be innovative in
the way in which it markets its products and services its customers.
MacKenzie says the company prefers to avoid discounting its products
and services whenever possible, trying instead to cross market
its diversified services and provide its customers with promotional

One of the promotional tools Ideal Supply uses
is to provide retail customers who are able to wait for their
repair work with a gift certificate to a local restaurant. The
certificate pictures a cup of coffee and pastries on its face.
The certificate is inserted on an 8-1/2" x 11" sheet
of paper that includes the company’s name, address, toll free
number and Internet address, along with a message that reads:
Taking time to say "Thanks." We appreciate your business…from
the Machine Shop and Radiator Service Staff.

In its efforts to stay busy 12 months out of
the year, Ideal aggressively markets and promotes its products
and services. The company advertises through a variety of mediums
including local newspapers, shop ads on invoices and monthly statements,
direct mail flyers, company/consumer product guides, newsletters,
crankshaft, cylinder head and radiator shipping boxes, signage
on all company vehicles, including a restored 1935 two-ton truck
which often finds its way to local parades and fund raisers, and
through the Internet.

The company’s Internet web page (
consists of about 35 pages which, among other things, detail the
products and services the company’s three divisions offer, provide
branch locations addresses, contacts and services, and offer direct
links to suppliers’ web pages.

Company President, Tim MacDonald, notes that
Ideal Supply’s customer base has been evolving, and that those
customers, more and more, are looking for expanded information
and resources. "Our customers are becoming more sophisticated,"
said MacDonald. "They increasingly want more access to technical
and service and product information that we have."

While acknowledging that Ideal must continue
to be aggressive with its outside sales force, he says that his
company must also provide better and more immediate answers to
customer questions. "The more sophisticated customer is really
the one we want," explained MacDonald. "And it is that
customer that wants immediate answers to technical, service, job
turnaround and product questions. We feel that the Internet will
be another resource that will make it easier for our customers
to do business with us. Eventually we will probably issue our
customers a password which will also allow them to place orders
with us through the Internet."

MacDonald seems pleased with the diversification
and the sales growth that Ideal Supply has been able to achieve
since it first opened for business in 1926. But he knows that
competition for his company’s products and services will only
increase over time. He noted that growth can come from new business
as well as existing business, but that in both cases it must be
managed correctly.

"We are always searching for new markets,"
concluded MacDonald. "But it’s just as important that we
continue to find ways to do a better job at what we’re already
doing. In both cases, we have to remain financially stable in
order to support that growth."

Ideal Supply Co. seems to have used the past
72 years exceptionally well to position itself to be successful
well into the next business millennium. Through management initiatives
and product and service innovation its future looks very secure
over both the short and long term.

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