When the economic climate indicates a slide, the natural reaction is to regroup, conserve effort and reassess everything that you do, from product lines that you handle to the number of people you employ.
For some, however, it is the time to further advance a new direction or improve a plan that you began implementing years ago.
One such group is integration controls distributors. While the precise definition can be exacting, for simplicity's sake, it is a wholesaler who does much more than serve as a supply house for contractors. Integration controls distributors are on the cutting edge of technological developments, coupled with a highly trained staff and willingness to spend time and money to gain a competitive advantage. Their playing field requires a more-complex approach than the traditional controls distributor. Many also view what they do as a greater connection to how distributors will conduct business in the future.
One such person who pays particular attention to this group is HARDI member Jim Hayman (pictured), director, business development, of the purchasing cooperative Controls Group North America (CGNA). Slightly more than half of its members fall under the description of an integration distributor, Hayman says.
“Integration distributors have staff engineers and IT people who understand or support Niagara software products.” This level of expertise is possible now for distributors who began years ago with a commitment to train their people on direct digital controls (DDC), he says.
Making this change for a business is a major step because there must be a new focus, financial commitment and willingness to support more-sophisticated products.
According to Hayman, as distributors began to recommend building automation solutions that were not brand-mandated, it gave them and their contractor partners the option of choice rather than a monopoly on one system favored by the building operator and defined by the protocol of the system.
In the past, if you had a Honeywell controls system, you could only use products with Honeywell's protocol and a Honeywell guy to design it. If you had a Johnson Controls system, you could only use Johnson devices. It worked because each controls manufacturer and building engineer understood their particular system, Hayman explains.
“But an integration controls distributor is the only place where engineers can find expertise with multiple manufacturers' products,” Hayman says. “That is one of the real keys, because building owners or their operators generally don't care about brand. They want the problem solved, and the integration controls distributor is the only guy that can say, ‘You should use this brand for the office space, and the thermostats and the humidity sensors on the first five floors; but for the apartments on floors six, seven and eight, you probably would want to go with another brand because they have devices that the first manufacturer does not even make.’”
This fundamental shift in the controls business began about five years ago as options changed from a closed system based on ingrained brand loyalty to an open system or open protocols where multiple solutions became available through a new software platform.
Are more controls distributors joining the integrated ranks? In CGNA, this has been the case. When Hayman started with the group in 2003, they had three integration distributors. Today, there are 18, slightly more than half the membership, and they even have their own committee.
While some might think moving toward integration would be “obvious,” the change has been sluggish nationally. “When I attend seminars on the subject, experts lament the slow adoption of open system solutions by building owners,” Hayman says. The stumbling blocks are cost and developing expertise within the employee base and not being sure where to turn for answers.
But Hayman says that is changing. “As company managers and owners face the ever-growing reality of rising energy costs, they're going to look for a solution to cut expenses,” Hayman asks. “Controls are the place to begin.”
“I am convinced that energy prices and the energy crunch are going to drive open systems.” In addition to energy issues, the entire green movement is a perfect entrée for integrated distributors as energy efficiency and LEED® certification make an impact on both commercial and residential markets, he says.
Despite his enthusiasm for integration distributors, Hayman is also quick to point out that there “are some very successful distributors” who are not integrated. He reminds us that going the integration route requires a significant commitment of time and money, and the need for certification on open protocol systems for employees.
“For some, it's not a fit for them, and there are still many parts and controls out there that do not require that level of sophistication,” Hayman says. “I think those guys are going to be around for a long while. They're not going away any time soon,” he says.
He believes controls distributors continue to be successful whether they're an integrated or a more-traditional business because there are many contractors throughout the country who lack the time or inclination to keep abreast of the products and technology.
According to Hayman, contractors are looking for two things: the need to get a product today, which involves a stocking distributor, and the product support to ensure its proper installation. “There's always going to be a contractor who asks: ‘Where do you hook up the blue wire, and what do I do with the orange wire?’ And the guy behind the counter at a controls distributorship says, ‘Oh, here's how.’ So the integration guys are just doing the blue wire-orange wire thing several levels up and doing it with programming.”
In the foreseeable future, there is room for both types of distributors, according to Hayman, which is what makes the industry appealing. But no industry runs at the same pace technologically. Distributors can choose the fast-paced, higher-end technological solution offered through integration or remain a top-notch parts and service place. The distributor is the best judge of his route for the future as he gauges the local market, types of customers and his company and personal goals, Hayman says.
Minvalco Inc. is relatively new to the integrated controls model business. Based in Minneapolis, Minvalco has three other branch offices scattered around Minnesota and Wisconsin. Only three years ago, this company took its first steps to becoming an integration distributor, according to Dan Sinn (pictured), general manager. Minvalco, which focuses on the commercial market, understood that it was important to maintain excellence in several key areas if they were going to succeed, according to Sinn. “Faith in the company's expertise and a proven track record of reliable service are extremely important components when it comes to maintaining a successful operation,” Sinn said, but that's just the beginning. It takes more than faith and a track record, he said. “If you really intend to close the deal, you have to be sure that you can deliver on the product, offer a fair price and provide support when it is needed.” While these elements might seem commonplace, more often than not these simple factors can make or break a company in the long run.
Sinn trained to become an engineer and worked in the HVACR industry for 26 years before he became the general manager at Minvalco. “It's easy to say you offer solutions to potential customers; it's another thing to actually have the skills needed or the immediate access to the manufacturer to provide those solutions.” Sinn explained.
Minvalco offers a wide spread of services, from bidding to tech support. “Most of our work with larger contractors is not bid work,” Sinn said. “We provide a range of product, service and expertise that not only wins the deal but brings them back to Minvalco for the next job.”
Despite the declining real estate market in greater Minneapolis, Minvalco and its 40-plus employees have only seen a slight dip in sales. “We're confident that as we ride out these current market conditions, our performance as an integration wholesaler will continue to pay dividends,” Sinn said confidently.
Most integration distributors work in the commercial market, explains Terry Turner (pictured), president of Concord, CA-based Controlco. “The residential market focuses far too much on the lowest cost, and it lacks the repeat business and contacts that we establish with maintenance teams in commercial buildings,” he says.
Controlco started moving toward becoming an integration distributor more than eight years ago, making him one of the first to move in that direction.
What they saw was the ability, albeit slowly at first, to offer expertise for a product even if they didn't carry that particular item. By selling the maintenance crew or owner a competitive product, Controlco was available to offer their expertise when another need arose, he explained.
The notion that any one product line “owned” a building slowly began to dissolve. “The ability to offer alternatives now gave real control of the building to the owner and not one specific manufacturer,” Turner says.
The basic step in becoming an integration distributor is to gain control over the HVACR systems in a building, he says.
The next step is one that is particularly unfamiliar for many in the HVACR industry, that is, offering solutions and products for areas outside HVACR such as access and lighting. “When you get to this stage, you have really given complete control of the mechanical systems to the operator of the building,” Turner says.
Making the transition to becoming an integration distributor is neither easy nor inexpensive, Turner admits.
The training curve is extensive, and the investment can be sizable, he says. “We wanted to think strategically about our future, and becoming an integration controls distributor made the most sense for us.”
Tom Peric' is the editor of HVACR Distribution Business magazine. Contact him at 856/874-0049 or firstname.lastname@example.org.