Celebrating a Century in the CE Industry By Mary Sedor
Article Date: 01-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Wars, the Depression, manufacturer collapses and M&As are among the storms Bramco has weathered for 100 years - and the company continues to learn, grow and roll with the punches of a temperamental industry.
Jay Paradis is the chairman of Bramco, the parent company of Brandeis Machinery and Power Equipment Co. headquartered in Louisville, Ky. Bramco, a founding member of AED, is celebrating its 100th anniversary in 2008. Bramco has 15 branch locations in five states, and the company represents Komatsu, Atlas Copco, Wirtgen, Sennebogen, Kobelco and Tadano. CED associate editor Mary Sedor recently spoke with Paradis to discuss Bramco's secret to longevity in the construction equipment distribution industry.
In 100 years, Bramco has seen several industrial and technological revolutions, has survived two world wars and several other conflicts, the Great Depression, the organization of labor, recessions, shortages and political and social crises of all kinds. Share some of the things that have helped Bramco not only survive all this time, but obviously thrive.
One thing for sure is financial conservatism. As business goes, we have not gone out on a limb as much as maybe other businesses like ours have. From a financial standpoint, we've been careful not to over leverage the business. That sometimes meant we had to pass up opportunities. Because this is such a cyclical industry with expansion and contraction in the economic cycle, I think being a little bit cautious financially is a good thing.
Related to that, we've had really good long-term banking relationships. Our principal banking relationship goes back at least to the 1920s. The name of the bank has changed over a number of years, but we've been able to stay with the same banking relationship and that's really helped.
I would also attribute our longevity to active ownership. We have a tradition of owners working in the business, not just staying out and taking in dividends. There have been a lot of businesses like ours that have tried to go public and had public ownership. Those will come and go, but the tradition of active ownership where the owners of the business actually come to work everyday - that's something that's really helped.
I've named many of the problems the nation as a whole has endured through the last century. But what specific tribulations did Bramco have to overcome in its history, and how did they serve to make the company stronger?
One was the Great Depression, which I think affected every business at the time. Even more of an obstacle or challenge was World War II. All of the manufacturers making construction equipment during WWII stopped, and started making tanks and airplanes. Coming up with a way to survive during the second World War was a real challenge for the company. The answer they came up with was to rent equipment. We became a rental company for the duration of the war.
A third challenge Bramco overcame was the death of a major supplier during the 1970s. Bramco was an International Harvester dealer when IH got sick and died. At one point IH was 70 percent of our business. The whole process of coming up with new products to sell, new manufacturers to represent and managing the final stages of the relationship was a real challenge for us.
We diversified, found some new business and took on Komatsu. That was a really important step for us to be able to replace a lot of our products with Komatsu.
What were the operational and people struggles associated with growing and opening new branches? In other words, what growing pains has Bramco endured?
We opened branch locations in the late 1940s and early 1950s. One of the problems with that was there was no interstate highway and no fax machines; and long distance telephone calls were incredibly expensive.
There were no computers or data lines.
There was a real issue in terms of command and control, such as knowing what's going on at that branch, who is making what kind of decisions and the like. At the time, I guess you could say the business was a little more fault-tolerant. The same issues we struggled with were the same issues the customers struggled with. You could almost say that the value we added at the time was a lot higher and reflected in our margins. There was a lot more room for error than there is today.
But one of the things that happened is we struggled along with that. In the early 1970s, with mainframe computers, there was a huge temptation to centralize all of the command and control structure and take out what we thought was duplicate expense at the branch locations. What we found is you could actually over-centralize, and customers weren't really happy with having to call someone at the headquarters if they were used to dealing with people out in their part of the world. The lesson we learned in the last 20 years is that you don't want to just blindly follow what you can do with technology. You want to have that human element out there that can be a face customers can deal with.
What have been some of the key strategies and tools for helping Bramco weather the inevitable cyclical nature of the construction equipment industry over the years?
This business is subject to a more cyclical effect than a lot of businesses. I've seen the market drop more than 50 percent during the last recession and fortunately it's gone back up even more than it was when the drop started. That's the bad news.
The good news is that because most of the assets involved in the business are variable assets, it's pretty easy to trim your sales when a storm comes up. The biggest issue is how you deal with your workforce. It used to be that you'd hire in good times. You can hardly afford to do that anymore. We're always short of technicians now, and all of them are highly trained. Every time we have one of them walk out, a lot of knowledge and experience goes with them. The trick is to figure out how to stay as productive as possible in good times, and then be able to retain your workforce in times that are not so good.
Tell me about your company's philosophy - "The Bramco Way" - how you've translated abstract concepts like (1) focus on the customer, (2) innovation, (3) continuous improvement, (4) total participation and (5) mutual learning, into tangibles that touch day-to-day business activities.
It's an articulation of the way we've done business for a long time. Customer focus, continuous improvement, some of the things we've embodied in the Bramco Way really were characteristic of the business before we put a name on it. When we did name it, it was a shorthand way to give employees, especially new people coming in, a quick way to understand how we do business.
The way it all came together was in the mid-1970s, when we were seeing real profit pressures on the business; this idea came about from a book about customers and how satisfied customers are the biggest predictors of financial success in business. Once we really started focusing on customer satisfaction, it led into continuous improvement, systems thinking, and that led into getting everyone involved.
It can be difficult to stay nimble to adjust to market needs when you're a large corporation - what's Bramco's secret for success or techniques for staying market- and customer-centric?
We're not large - that's how we do it. As far as company size, we've got 500 employees. A lot of other businesses in our industry are that size. The challenge is that we have everyone spread out in 15 locations in five states. One of the biggest challenges we have is keeping everyone on the same page. We accomplish it through internal communication tools such as our monthly newsletter, an internal blog, our strategic plan and visits to branch locations. We visit branches and bring in lunch and talk about what's going on to make sure everyone is on the same track.
We have a variety of disciplines to make sure that we stay close to our markets and customers, whether we do surveys or in-depth customer interviews. The key to staying nimble, I think, is two-way communication with customers and employees.
You mentioned renting equipment back during the War, and now you call it your Certified Rental program. What's Bramco's rental approach, and how has the company evolved its rental operations and techniques over the years?
We've been messing with rental since the 1940s, and it's taken various forms. Back then, we rented large or high-mover type machines for projects, then in the 1960s we had a lot of customers ask us to focus on smaller products. We sold our business RESCO, which had grown to the sixth largest rent-to-rent business, according to Rental Equipment Register.
We still had a lot of customers who were interested in renting, and their needs were not being met by the pure rent-to-rent houses. We decided it was time to come back, and we developed the idea of Certified Rentals to rent large CE equipment to customers on earthmoving jobs. It's very targeted and very focused; it has a very low labor content to it.
By and large, it's larger excavators, articulated trucks, bull dozers, wheel loaders - the things used on a fairly good sized earthmoving job. We stay away from smaller equipment. It makes no sense for us to be in that kind of business. We're involved in the stuff that's harder to come by.
Can you offer some pearls of industry wisdom - or just plain advice - that you'd want to share with dealers who are just fighting to stay in business for the next five years, not to mention 100?
First, pay attention to all of your stakeholders. Every business has more stakeholders than owners. One of the biggest mistakes I think I've seen made most often is when managers think, ‘My only allegiance is the ownership of the business. If I take care of the owners, everything else will work.' If you don't take care of the customers and take care of the employees, it's going to be hard to take care of the owners.
Second, communicating well is one of the reasons we've had a longstanding, good relationship with our bankers. They've lent us money because we've been very diligent in good times - and bad - in letting them know what's going on in the business. We under-promise and over-deliver.
Also, having the same level of communication and openness with employees has been very useful. I remember in the 1970s, when I first came here, we had a little episode where we lost a lot of very valuable employees. When we got into it, the only reason we lost them was because we hadn't been as diligent as perhaps we should have been in letting them know what the company was doing and the future direction that was planned for the company. Having that kind of high level of communication with both your investors and employees is extremely important.
Share your favorite company anecdote - perhaps some little known fact or some quirky personality from the past who left a mark on the company.
[Editor's Note: Paradis' uncle, Ed Buchart, served as the president of the company until he retired in the 1970s. Paradis relayed a number of stories about ‘Uncle Ed,' and we liked this one best.]
My favorite was right after World War II. Manufacturers started making equipment again and we had a lot of customers who wanted shovels. There was a shortage and we had a huge waiting list of people wanting them.
At that point, Uncle Ed was the head of the sales department, and he had one customer in eastern Kentucky come in and say he'd been waiting for two years to get a big shovel to use on a construction site and he wanted to know where he was on the list. Uncle Ed was elusive in his answer about when this customer might be getting his shovel.
This customer got so frustrated that he pulled out a big revolver, laid it on Uncle Ed's desk and said, "Mr. Buchart, I want you to quit equivocating and tell me exactly where I am on your waiting list."
Uncle Ed looked down and said, "It appears as if you're No. 1 on the list."
The customer got his shovel the next week.
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