For years the sales staff at Austin Hardware & Supply felt as though they were trapped in a box. Since 1960 the company has acted as a distributor of various hardware supplies, such as door locks, hinges, gas springs, and handles to a variety of customers.
But being solely a distributor has built-in disadvantages. If an Austin Hardware customer wants a new door lock system, or if the customer decides a certain product is too expensive or could be bought from another distributor for less, sales staff had few options. They could go to suppliers and ask if the new lock could be produced or if a price could be reduced, but if the supplier said no, that was usually the end of their alternatives.
The result, says Mark Jeffries, Austin Hardware's chief engineer, is that customers might decide to defect to another supplier, or the company would have to pass on the opportunity to supply the customer with a new product. "Sometimes the supplier would help us, sometimes they wouldn't," says Jeffries. The end result is that Austin Hardware often felt as though it was not in control of its business.
In 2001, with competition heating up from distributors who were gaining access to lower priced hardware imported from China, the company decided it had to take matters into its own hands. "We made a basic decision: We can't let anybody hold us hostage to our own success," says Jeffries.
In effect, Austin Hardware decided to create its own product design business. Rather than pass on opportunities, it would now attempt to provide its customers with new products or lower-priced products, by designing and outsourcing their production to manufacturers at home and overseas.
The company's decision proved to be a success, particularly as it developed ties with manufacturers in China. However, managing a growing number of product development projects became increasingly difficult.
Source: Baseline, http://www.baselinemag.com