Sixteen years after merger, company is now one of nation’s largest independent distributors.
For five decades, Standard Welders Supply and Mid-South Oxygen Company were competitors. Founded six years apart in the 1940s in Memphis, Tennessee, the two family businesses had long, proud traditions of excellence. By the 1990s, the two had grown into several surrounding states, and yet their markets remained nearly identical. In 1996, Standard and Mid-South decided to merge, creating a new company called nexAir.
Today, nexAir is one of the largest independent distributors in the nation, and nothing short of a well-oiled machine. The company has seen astounding growth over the past 16 years, and it has done so by honing in on the business units that are most successful. On paper, nexAir has grown from $80 million in sales in 1996 to just over $100 million in 2011, but these numbers do not tell the whole story. Taking into account a consolidated medical division and the divesture of a $13-million-a-year beverage gas business, CEO Kevin McEniry estimates that sales in the gases and welding equipment side of the business have grown by more than 90 percent during this time.
McEniry and President Bill Proctor both describe nexAir as “focused,” and it is hard to argue otherwise. But by their own admission, the sailing was not always smooth in the River City.
What Doesn’t Kill You
The 1996 merger of Standard and Mid-South was aimed at creating economies of scale and stripping out the redundancies of two overlapping businesses. Despite similarities in geographic footprints and markets served, a deeply rooted competitive mindset lingered, leading to an us-and-them mentality early on. “Some questioned whether one company was being treated more fairly than the other,” recalls Proctor. “It got down to things like which part numbers we were going to use.”
CEO: Kevin McEniry
President: Bill Proctor
Headquarters: Memphis, Tennessee
Branches: 24 in Alabama, Arkansas, Georgia, Louisiana, Tennessee and Mississippi
2011 Sales: $100 million
Year founded: 1940
Year joined GAWDA: 1951
Consolidating overlapping sales territories, combining neighboring locations and getting the company on a single computer system created additional challenges for nexAir during this adjustment period. With so many distractions, McEniry says it was a challenge to remain focused. “During the merger, we became internally focused,” he says. “We had to work through the distractions to get back to being focused externally on servicing customers.”
In order to be effective, the company knew certain decisions could not be made hastily, particularly personnel decisions. “We wanted to give leadership positions to the people who would be most effective, regardless of which organization they came from, and there was no way of knowing who those people were on day one,” says McEniry. Even as the family owners worked to establish a chain of command, they had determined that there would be no layoffs due to the merger. When nexAir was formed, it had some 400 employees. Over time, the company righted itself through attrition, and today has 267 employees.
Proctor recalls the merger as a difficult period for nexAir. “It took a good three years before we were really hitting on 12 cylinders,” he says. “In the long run, I think we are a stronger company because of it.”
Although nexAir has 130 fewer employees now than in 1996, the company now serves four additional states. In addition to three main facilities in Memphis, nexAir has 21 locations throughout Tennessee, Alabama, Arkansas, Georgia, Louisiana and Mississippi, with sales territories extending into southern Missouri, southern Kentucky and the Florida Panhandle.
Having survived the turmoil of a merger, nexAir has matured strongly as an organization. The same holds true for nexAir’s markets, which have become increasingly focused as the company has expanded. This center of focus on the sales side is industrial, medical and specialty gases and hardgoods. The largest segment of revenue for nexAir comes from sales to the manufacturing sector, which accounts for 44 percent of the company’s sales. Another 20 percent is institutional, including hospitals, clinics, universities and research facilities. Smaller segments include transportation and automotive, construction, utilities and store retail sales.
In 2009, nexAir’s markets shifted with the divesture of the company’s bulk beverage CO2 business. Initially, nexAir had no intentions of selling its beverage gas business. With customers in 15 states, it was nexAir’s broadest geographic market, but the business only accounted for 12 percent of nexAir’s total revenue. Although it was a profitable segment, nexAir was at a crossroads. In order to truly grow the beverage business, the next step would be to take it to a national level. “Going to a national scale would have required a tremendous investment in capital and people. We would have had to take people away from our core business of industrial and medical gases to put them in what was only a minority share of our business,” says Proctor. nexAir never had to make the difficult decision to go national. Unsolicited, NuCO2 (Stuart, FL) approached nexAir with an offer to buy the business unit. “We weren’t actively looking for a buyer. The timing was just right,” says Proctor. nexAir accepted, able to move forward with a more focused business.
Even with the divesture of its beverage gas business, nexAir’s product breakdown remains in favor of gases, at a rate of roughly 58 percent compared to 42 percent hardgoods and equipment. Whether its gases or equipment, nexAir is quick to identify—and capitalize on—growing market opportunities.
Hydrogen and propane in particular are areas of recent growth at nexAir. In 2010, the company added a hydrogen filling facility in Memphis with a 9,000-gallon storage tank and monthly fill volume of 1.5 million cu. ft. And in 2011, a propane filling plant increased nexAir’s propane cylinder fill capacity with the installation of a 30,000-gallon tank with four automated fill scales. “Our propane business started out as a convenience for our customers and was not a real focus for our sales force. We looked up one day, and we had a fairly substantial propane business,” says Proctor, who estimates that about 90 percent of propane sales relate to forklifts. With added filling efficiencies, a propane product manager and a renewed focus on generating new business, nexAir’s propane business has grown by 50 percent in a few short years. Current monthly propane fill volume is around 60,000 gallons.
Excelling in Automation
Automation and robotics are burgeoning markets for nexAir. “Customers are looking for ways to automate their processes. As their supplier, it is our responsibility to bring them the latest technology and processes and then show them how to get a return on that investment,” says Proctor. The company is aggressively targeting customers in the manufacturing sector, looking to introduce them to robotics. Most often, it’s welding processes where nexAir’s customers have the potential to improve productivity through automation. “The technology is improving, and the cost is more affordable,” he says. “Robotics is a growing area for us, and one that will hopefully make our customers more competitive.”
Mid-size manufacturing companies in particular are a sweet spot for nexAir, since many large corporations have already made the leap into robotics, and small companies typically do not have the volumes to justify automation. “The return on investment for mid-size companies can be great if they have the right application. It’s difficult to automate if the customer is making multiple parts in very short runs,” says Proctor. To help make this distinction, nexAir actively trains its general sales force through supplier training courses on automation. Salespeople learn to identify the types of applications that are ideal for introducing robotics, honing in on processes that are repetitive and easily positioned.
Even with a skilled sales force, educating customers on the value of robotics is a challenge for any distributor. As McEniry says, “Improving productivity is not just about which machines the customer is buying, but their ability to utilize those products in the proper fashion to drive efficiency.” In order to give customers a hands-on look at automation and enhance its own employee training, nexAir opened a robotics demonstration center in 2011. The company invested more than $400,000 to outfit the facility with a cutting machine and a robotic welding cell. The machines are connected to 1,000-liter microbulk tanks for argon, nitrogen and oxygen, giving customers a true feel for nexAir’s turnkey solution.
Since opening the demo center, nexAir has held a number of invitation-only seminars, in which customers can receive classroom training and witness first-hand what automation can do for their own processes. Customers bring along parts that they may want cut or welded. During the seminars, nexAir takes the customer’s parts and loads them onto the cutting machine or robotic cell. “We time the processes and look at the integrity of the cut or the weld,” says Proctor, who conducted a robotic welding demonstration during one of the recent seminars.
The demonstrations have been an effective introduction to robotics for nexAir’s customers, helping to ease some customers’ resistance to automation. Once the introduction has been made, the sales process becomes much easier. “Success breeds success,” says Proctor. “Once you get one robot into the customer’s location, they tend to find other applications that can be automated.”
With an average employee tenure of 12 years, employee retention is a strength of nexAir’s. One major draw for employees is the opportunity for upward mobility. At nexAir, advancement is driven by accomplishment, not tenure. Says McEniry, “We always want to have the most capable people running the company, for the good of the company and its employees.” Among nexAir’s current group of officers, more than half are under 50 years of age, including McEniry, 42, and Proctor, 47.
Recruits are drawn to nexAir initially because of opportunities; they stay because of the culture. “It’s something we work extremely hard to promote and maintain,” says Proctor, and it all starts with open communication. McEniry explains, “We think of ourselves as a big company with small company attention.” The company’s senior management has an open door policy, and executives regularly meet with each of the branches to keep all employees informed of the company’s progress. “We treat our employees as if they were family, and they carry that on to our customers,” says McEniry.
With 267 employees, training plays a critical role in keeping everyone on the same page. Before the days of nexAir, Standard Welders Supply developed a management training program through which new hires underwent a formal round of training to learn the business. Proctor himself was one of Standard’s first recruits in the program, which nexAir continues to use today. “The idea behind our management training program is to keep talent in the pipeline to continue to be able to grow the business. It’s as much a succession plan as anything,” he says.
|It is our responsibility to bring customers the latest technology and processes and then show them how to get a return on that investment.|
Once hired into the training program, an employee spends six months to a year at the plant. They start out loading and unloading, filling oxygen, filling inert gases, then spend time working in the spec gas lab. Throughout the process, trainees are tested to assess whether their strengths lie in operations or sales. Those strengths dictate the recruit’s career path at nexAir. In this way, employees are rarely hired for a predetermined position. As for the rare exceptions, Proctor says, “Even when we hire someone who has been in the industry, they have to spend some time learning about our culture and the company.”
Training doesn’t stop after an employee moves on from the company’s management training program. The company’s safety director conducts a monthly safety webinar with drivers and operations personnel, as well as providing additional safety training as needed. Product process training equips sales and customer service employees with tools to help customers, whether it’s from nexAir’s call center or at a customer’s site.
One particularly unique training experience employees receive is through nexAir’s communications training program. nexAir brings in an instructor from a local university to conduct a public speaking course for employees from all departments and disciplines. The aim of the course is to instill confidence and greater self-awareness in participants. “Whether you are selling a product or explaining an idea to your coworkers, it is important to be able to speak intelligently and effectively,” says Proctor. Participants in the course deliver speeches to their peers, who evaluate them on elements such as grammar, use of interjections (such as “um”) and timing. “Our managers try to attend the classes just to watch the speeches. The progress from the initial speeches to the graduation speeches is absolutely phenomenal,” says Proctor. The course helps employees in their day-to-day work, whether they are on the phone, collecting money from a customer or working with vendors.
In their 72-year history, nexAir and the two companies from which the current business sprang have undergone expansions, consolidations, a merger, a divesture, even a short period of turmoil. Through the changes, the company has emerged with an acute awareness of company culture, a leaner operation and a focused strategic vision. Thanks to strong customer partnerships and actively building its market share, nexAir has enjoyed considerable growth since the merger of Mid-South and Standard in 1996. As the company grows, the attitude of its leadership remains consistent. “At no point are we too proud to think we’ve figured things out,” says McEniry. “We will continue to look in and outside of the box to make the decisions that are best for the company and our customers.”