SECOND GENERATION: ADAPTATION AND REINVENTION

Winner Take All: Imagine encountering a sluggish economy, technological change, industrial shifts and changes in consumer preferences, all at the same time. To compete within all of these challenges, this bearing supplier restructured, increased the size of their warehouse and offered strategic inventories at several price points.

There are many “forces” that can hinder a small company’s success. A sluggish economy, technological change, industrial change and consumer preferences to name just a few. Imagine if your business encountered all of these challenges at the same time.

Emerson Bearing Company (Boston, MA), a forty-year-old family-owned supplier of ball and roller bearings that reduce friction in mechanical devices, struggled within a rapidly changing, competitive industry to become one of the largest distributors of bearings under one roof within the U.S.

In 1957 two industry veterans, Justin Katz and his partner Edward Greene, founded Emerson Bearing, a small offshoot of the Korean War surplus market. Located in Brighton, MA, the company catered to the large New England customer base of bearings users in the original equipment manufacturers (OEM) market and the maintenance, repair and operations (MRO) markets. Katz and Greene competed with large regional and national chains, as well as other independent bearing companies in the area.

With many of the “smokestacks” still in operation, including paper mills, textile manufacturers, plastics machinery and wire manufacturing, the demand for bearings was high and the marketplace was dominated by bearings made in Europe and the U.S. But by the early 1970s the winds of change began to blow. To make a foothold, Emerson was the first distributor in conservative New England to embrace the lower priced, superior quality lines of bearings from Japan, whose lower prices enabled Emerson to “overstock” their warehouses by purchasing 12,000 units instead of 10,000 units for the same price. The extra product was offered to the wholesale market around the country through the Emerson Bearing name, thus beginning the process of building the largest inventory of bearings in the East.

Over the next fifteen years, the large smokestack manufacturers closed their doors and ultimately eroded the sales bases of many bearings distributors. Emerson Bearing’s competitors diversified into other product lines such as hydraulics, motors and pneumatics, with bearings ultimately representing only 30 percent of their sales volume. Emerson Bearing, however, decided to dig in their heels and remain focused solely on bearings.

Under the direction of the second generation of family leadership, Steve Katz and Steve Greene, the company decided to increase the size of their warehouse and offer strategic inventories of bearings at several price points. By using UPS delivery service, Katz and Greene knew they could cater to 95 percent of their customers with overnight service – and again, they achieved success.

By 1986 Emerson Bearing was holding strong on market share, but growth was needed. The company ceased selling their extra inventories to the wholesale market and decided to mimic the New England success story on a national basis by evaluating the 20-30 most popular niche markets and focusing on providing bearings for those segments. After a complete revamp of the sales team’s job descriptions, which included intensive training and financial incentives, the company was able to position themselves as experts in the market with the largest inventory as well.

This strategy worked well. Because bearings customers look for expertise, Emerson captured the new markets by their knowledge of bearings, extreme customer service, next-day delivery (which deflated the larger competitors) and by providing “the right bearing” at a remarkably low price. Since the early 1990s, the company has developed alliances with factories across the U.S., capturing a loyal customer base for niche products such as free running bearings for paper machinery, bearings for bowling pin setters and cut leaf chain from fork lift trucks.

Although the major national chains ($300 million +) control 60 percent to 65 percent of the national business, Emerson Bearing (at $7 million) has gained significant market share with local and national businesses with their vast inventories and expert staff. In a proud tradition, the same families that started the company in 1957 keep it rolling by specializing in bearings for OEM and MRO markets across the country. More than 30 people comprise their knowledgeable staff backed up by 33,000 sq ft of warehouse holding bearings, from precision miniatures of 3 mm ID to steel mill giants of five ft across.

Offering the right bearing for the job, including custom-made bearings, the company provides several price points within their vast inventory drawn from Asia, Europe and North America. Premium bearing brands include FAG, NTN, INA, NSK, KOYO and Nachi, while value-priced brands such as KBC, IKO, IPTCI, CBF, and others are in stock in a range of precision levels from Abec#1 to Abec#7.

The company did not follow the lead of their competitors who diversified and all but eliminated their bearings products. Instead, when confronted with the “force” of a diminishing market, the second generation chose adaptation and reinvention. They sought new bearings markets and become the source and reference for bearings. For this company, product and distribution evolution has been the key to long-term success.