MRO Today - Built to last

Built to last

As it nears the half-century mark, Rolair Systems shares its strategies for weathering this latest economic downturn

by Tom Hammel

When markets go south, companies look first to trim the fat and hunker down. When markets go to the deep south, like they have in the current construction slump, manufacturers often make second and third rounds of cuts. But in doing so, some accidentally cut themselves to the bone. Decisions that look innocuous on a spreadsheet become disastrous in reality. These companies often learn too late that their self-inflicted cures were in fact, worse than the disease.

It takes a smart, courageous leadership team to avoid this trap. Associate Engineering Corporation, makers of Rolair air compressors, is a prime example. Although Rolair makes only one product — air compressors for construction — they have actually expanded their reach and gained market share during this downturn. How did they do it? Is Rolair insulated from the chill that has hit the rest of the industry so hard? No.

“This downturn is as extreme as we have ever seen,” says Tim Kelley, Rolair president. “Like it has everyone else in manufacturing and distribution, the soft economy has impacted us tremendously.”

“But,” he adds, “we’ve continued to focus on our relationships. And because of those efforts, although our business is off, it’s at least off at an acceptable level.”

Rolair’s management team has seen downturns before. (L-R): Dan Fox, national sales manager; Tim Kelley, president; Mike Kelley, vice president; and John Corrao, general manager, strategically bend the rules to take care of existing customers. At the same time, they aggressively prospect in wider geographic regions and complementary market categories. As a result, even though sales volumes have declined, Rolair continues to gain market share. When the market recovers, Rolair expects to emerge stronger than ever.

Kelley is quick to point out, however, that this is not the case for all of Rolair’s distributor and contractor customers. This awareness, and Rolair’s response to it, is the first component of the company’s survival strategy.

Customers for life, through thick and thin
Understanding Rolair’s response calls for a little background. Ever since Tim Kelley’s father bought Rolair in 1969, the company has gone to market through independent distributors. When STAFDA, the Specialty Tools and Fasteners Distributors Association, was born in 1977, Rolair joined soon after. In the 30-plus years since, STAFDA has become the United States’ leading construction supply association. Long-standing friendships and professional relationships are hallmarks of the STAFDA market even today.

“Our relationships are key to our business,” Kelley says. “These are people we’ve dealt with since the 1970s and we take care of them. When things are tight like this, we let them lean on us and tell us what they want and what we can do to help them through this slow period.

“Some are struggling worse than others so we’ve bent rules a bit to do things a little differently than we normally would when business is booming. People appreciate that, and when the economy comes back around, that will be repaid, says Dan Fox, national sales manager.

“There’s a loyalty on both sides — it may sound dramatic but I believe there is a partnership here and that’s how we approach it. These people aren’t just customers — we’ve been with them though tough times before — a lot of them have been our customers for 20 and 25 years.”

Mike Kelley, Tim’s son, clearly feels the same way.

“We do everything in our power to make sure our relationships are strong,” he says. We are constantly asking ‘Are we doing everything we can for you? Is there anything we can do, like maybe working with freight discounts or whatever, to make doing business easier with you?’

“Volume is down for everyone and the game has changed somewhat. As the soft economy has moved through, we’ve had to look at things differently to make sure that doing business with us is as easy as possible.”

Two-way loyalty
Why not just accept an offer from a big box retailer like The Home Depot?

“Our pledge to our distributors is that Rolair’s name will not be in the box houses,” says John Corrao, general manager.

“This philosophy has been in place since the 1970s,” Tim Kelley adds. “And it has worked. We’ve had ups and downs, but our growth over the last 15 years has been pretty significant.”

In addition to STAFDA, Rolair also belongs to Sphere1, a buying group that allow distributors to combine buying power and leverage their combined strengths in their respective markets by partnering with preferred vendors, including Rolair. Sphere1 has brought Rolair a number of strong new distributor accounts across the United States.

“Do one thing”
An old saw says, “It is better to do one thing well than many things indifferently.” Over the centuries, people from Benjamin Franklin to Albert Einstein have paraphrased that wisdom, and it serves as Rolair’s guiding principle to this day.

Rolair’s “do one thing well” philosophy toward components includes industry-leading Honda engines, Chinook pumps and extra large cooling oil capacities in all its products. Ironically, this means that the best air compressors for high heat environments — like Texas, Southern California and Florida — are built in Wisconsin.

Although Rolair has had many opportunities to expand its lines into ancillary products like nail guns, other air tools, hoses and so on, the company maintains a laser-like focus on compressors. Each Rolair compressor, whether electric or gas-powered, portable or stationary, is built with only heavy-duty components, including Honda gas engines and Chinook pumps.

Each compressor is designed with an eye toward eliminating any potential for jobsite failures. When jobsite reliability is everything, there are no shortcuts. Only the highest quality, most rugged components will do.

Keeping units in top running condition is paramount, too. Rolair was the first company in the industry to design belt tensioning devices on its models to help contractors replace drive belts quickly, right on the jobsite. Wrenching just four bolts does the job.

Pick your color
Rolair’s independent distribution also allows it to be in many places at once, even on the same jobsite. Rolair provides “private color” compressors for selected regional distributor customers. Orco, a major distributor in California, uses red Rolair compressors. From the road, Orco salespeople can immediately identify Orco-branded Rolair compressors on jobsites just by color. In Michigan, Fasteners Inc. compressors are orange, to name just a few.

And when those compressors go into the shop for service, Orco and Fasteners Inc. technicians can know immediately that they are working on a unit their salespeople sold.

Expansion opportunities
In soft markets, companies and salespeople have to be creative to keep orders coming in. Rolair created an OEM specialist to develop new markets that don’t compete with its existing construction channel distribution.

The efforts have paid off; Rolair compressors now serve a growing segment of paving contractors and the rapidly expanding blow-in foam insulation industry. Rolair is also fitting comfortably into the duct cleaning market.

At Rolair, the only voice louder than the distributor is the customer. Rolair management relies heavily on distributors and contractors to help drive product innovation. Contractor complaints about other companies’ compressors tipping over in truck beds were relayed to Rolair by loyal distributors looking for a solution. Rolair’s Dennis Schmidt, shown here with his creation, designed the first vertical pancake compressor to answer the call. His simple, ingenious design, inherently more stable on jobsites and in transit, has since been copied by numerous manufacturers.

New (and old) partnerships
Thanks to its willingness to work with other innovators, Rolair is now the compressor supplier of choice for an emerging Australian company that produces a unique compressed air recycling system for air tools. The system dramatically reduces tool noise, virtually eliminates dust and increases the deliverable air volumes of compressors so contractors and shops can do more work with smaller compressors.

This translates directly into lower energy costs, which over time amounts to 85 percent of the total cost of ownership of an air compressor.

After years of building Chinook pumps into Rolair compressors, Chinook granted Rolair exclusive rights to market its pumps in the United States. Chinook’s combination of cast iron cylinders for durability and aluminum heads and crank cases for superior heat dissipation make them desirable in a wide variety of industrial and OEM applications. As other pump manufacturers see OEM sales trail off, Rolair’s sales of Chinook pumps continue to grow.

Focus, focus, focus
“So even though we’re still in a downturn, thanks to our involvement in groups like Sphere1, we’ve expanded our market share considerably,” Tim Kelley says. “When the market does turn around again, well, our share now is 30 to 40 percent larger than it was before — it’s a big number.”

“As weird as it seems, narrowing our focus has been a real advantage,” Mike Kelley concludes. “We make the best compressors possible, service them the best we can and sell them through STAFDA distributors with whom we have long-term relationships. That focus is a big part of our success.”

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