Scott Daley shows up for work at Gem Plumbing & Heating, Lincoln, R.I., and oversees all the aspects of purchasing and stocking the shelves with plumbing and heating supplies for the fast-growing contractor with some 300 employees and 135 trucks.
Daley's to-do list can include overnight re-supply, price negotiations and procurement with local wholesalers and providing the important accounts payable and data collection functions to other departments and management.
Yet, Gem doesn't pay his salary or the salaries of his half-dozen staffers. Gem doesn't even pay for the $500,000 worth of inventory kept on the warehouse shelves at any one time, until that is, each piece is used.
Daley and his crew may work at Gem, but don't necessarily work for Gem. They work for Ferguson's Integrated Systems Division, which has provided Gem with its inventory management and supply chain expertise since last October.
"Inventory management may be a necessary function, but it's not a core function of our business," says Anthony P. Gemma, president of Gem. "Therefore, it's one we'd sooner outsource to a party like Ferguson. Inventory management is definitely Ferguson's core function."
As you may have guessed already, Ferguson Integrated is a part of Ferguson Enterprises, Inc., the country's largest plumbing wholesaler. This isn't a new service for Ferguson Integrated; however, the Gem relationship is the company's first integrated supply deal with its traditional customer, the plumbing contractor.
Anthony says the arrangement has already lowered procurement of its $6 million in annual inventory by 11 percent and increased the productivity of its techs by 8 percent.
"And that 8 percent means more to us than the 11 percent," says Larry T. Gemma, vice president of operations. "There's really only two ways you can make money in this business. Raise your prices or raise your efficiency. Prices in this industry are maxed out; they're not likely to go higher. However, we know we can improve and profit by becoming as efficient as we can."
InnovationAs innovative as the Ferguson deal is, it's just one way Gem, a traditional family-owned and -operated plumbing business, has implemented to increase efficiencies throughout the business. (Two other brothers are involved in running the show. Leonard and Edward are the president and vice president, respectively, of Gem's mechanical services, or new construction, division.)
"We've had some serious growth, but it has been controlled growth and we are getting more and more refined on where we should grow," Anthony adds.
He's not kidding about serious growth. Since the start of the new century, the company has doubled its size from $14.5 million in 2000 to almost $37 million last year, putting it at No. 76 on our recent Pipe Trades Giants list of the 100 largest plumbing and piping contractors.
Plumbing represents about 60 percent of that business, with another 30 percent from HVAC. Septic systems and electrical, relatively new ventures, account 5 percent each.
He's also not kidding about controlled growth either. Put in place at most every turn is a way to capture the endless streams of data in which materials, pricing, time and technical skills snake throughout the operations. Once captured, it can be understood. Once understood, it paves the way toward efficiency.
"There isn't an employee here who doesn't know how their work fits in with the big picture," Anthony says.
As impressive as the warehouse is to physically see, it doesn't tell a fraction of the Gem story. The bottom line on this bottom line: Why buy a half-inch copper tee the right way and do everything else the wrong way?
To understand this better, let's back up a bit and see how Gem answers its phones.
Call CenterWalking into Gem's Call & Dispatch Center feels more like walking on to the set of a James Bond movie. While a couple of rows of customer service reps and dispatchers sit in the slightly darkened room in order to better view their individual computer screens, three digitized projection screens, each 12 feet high, appear on the front wall.
Mission Control might be a more apt name for the center.
This information allows the dispatchers to quickly schedule the call and prepare the tech for the type of problem the customer is experiencing.
The display on the right projects 12 separate images of live traffic patterns courtesy of the state's own cameras strategically placed on overpasses of all major highways and byways. The images are refreshed every 60 seconds so dispatchers can give advice about accidents, general congestion and offer more efficient routes throughout the day.
Meanwhile, the display on the left pinpoints the exact real-time location of every Gem service truck on the road, working in sync with each vehicle's global positioning system. The GPS provides access to the exact location of all trucks at all times, but the projection also tells dispatchers who the techs are and, more importantly, what their particular expertise is. That comes in handy when an emergency call has to be booked as soon as possible.
Finally, a projection in the center features a common dispatch screen. This board allows for easy access to available appointment times and scheduling needs optimizing the use of every tech's time throughout the day. Featured above this board is Gem's "on time" ratio updated throughout the day.
"We're on time 94.7 percent of the time," Anthony says.
World ClassGem started calling itself "world class" even before they knew exactly how others defined it. The company is currently in the process of grooming itself for a Baldridge Award, a well-known quality management recognition program, sponsored by the U.S. Department of Commerce.
Thanks to a local chapter for the Center for Performance Excellence, a nonprofit group that uses Baldridge criteria, and its own membership in Plumbers' Success International, Gem began re-evaluating itself and discovered the best ways to measure its customer service.
While some of the measurements come from well outside contracting industry norms, Gem went ahead and adopted many of these bar-raising standards.
For example, Anthony says world-class companies take just six seconds to answer the phone and identify customer's needs.
From the second the phone rings at Gem, a couple of different software packages help provide the name of the person calling, whether or not they are a member of one of the company's service agreements and other helpful marketing information.
If customers are members of service agreements, then they get placed in front of the call order. Callers also know how long they are expected to wait before getting connected with a dispatcher. If that's not quick enough, existing customers have an option of punching in their telephone number and instructing the phone system to call them back at a particular time that is most convenient to them.
Regardless of whether it's a long-time customer or new callers, the phone system is also designed to offer a soft sell on the company's services while placed on hold. It could be an explanation of a service agreement or a limited time special offer.
Also, another prompt menu asks callers to press a key that corresponds to the service needed. However, the company's newer services such as "electrical" and "septic systems," are purposefully placed ahead of the company's old mainstay of "plumbing, " mentioned last.
"What we're doing is planting the seed for more business since customers may not know all the work we can do for them," Anthony explains. "It's just one way to make the customer aware that they aren't just dealing with a Mom-and-Pop operation."
In addition to scheduling the work at hand, the company slices and dices plenty of market data garnered by callers.
"There's no point in ever doing any advertising if you don't take the time to find out how the caller heard about your company in the first place," Anthony says.
As a result, customer service reps ask callers on the particulars of what made them decide to call Gem. Also, the company can tell how many service calls they missed booking when customers - even in nonemergency situations - rejected the company because "tomorrow wasn't good enough."
When we visited Gem in August, Anthony showed us data that indicated the company had lost out on 291 calls in one particular month when all its techs were booked up.
"What that tells us is that if that trend continues, we may be able to add trucks and do it profitably," he added.
Onsite WarehouseOK, so the call's been answered, the tech's been scheduled. He's on his way. Let's take a look at how Gem makes sure the tech has all the supplies he needs.
Traditionally, that would mean the tech stopping off at the local supply house.
However, Anthony wanted to go outside the norm. He talked about his idea with some wholesalers, and most wanted to help fill in the shelves or offer a standard consignment deal.
He got more of what he wanted with the Ferguson Integrated system solution.
To consider what Ferguson Integrated is, it helps to understand what it is not: It is not a Ferguson Enterprises warehouse plopped down under the roof of Gem Plumbing & Heating.
"In the simplest terms, Ferguson Integrated buys for Gem rather than sells to Gem," says Gary Williams, Ferguson's director of excellence. "Ferguson Integrated is more than just some 'add-on' business for local Ferguson branches."
Now, that's not to say that Ferguson Integrated doesn't do business with Ferguson Enterprises. Ferguson Integrated's rapid re-supply of Gem, for example, is accomplished partly through Ferguson Enterprises' Front Royal, Va., distribution center.
Ferguson Integrated, however, also buys from other local vendors - when it can get a better price or when time may be a more important factor than price.
"I think it comes down to finding the best price but also at the best delivery terms and also at the best lead time for Gem," says Scott Daley, general manager.
Ferguson Integrated's typical customer isn't a plumbing contractor - even contractors doing $37 million in business. Not a bad business, but it pales in comparison to the Fortune 100 blue bloods, such as General Electric and Johnson & Johnson, that the division has helped since its inception in 1989.
In fact, Daley comes to the Gem operation after serving in similar assignments with General Motors' Powertrain Division and a GM/Isuzu joint venture.
"GM makes cars," Daley sums up. "Ferguson Integrated specializes in instituting procurement processes and MRO management for GM's facilities."
With Ferguson Integrated on board, Gem no longer has to purchase or manage its own inventory - Ferguson owns it, tracks it and sells it, piece by piece, to Gem as needed.
That clearly frees up capital that can be used elsewhere in the company. But the arrangement is more than just lower prices.
Ferguson Integrated handles all the accounting, purchasing and logistical functions related to inventory, through its division headquarters in Cincinnati.
In preparation for the startup last spring, Ferguson Integrated implemented new inventory management software to provide just-in-time delivery of product, and also installed new storage hardware for the Gem inventory.
And with the completion in the coming months of a wireless system for scanning parts directly used off the truck, Gem won't even own any of the $16,000 worth of inventory stocked in each of its 100 service trucks.
Once the bar-coding system is in place with the trucks, all equipment and parts for every Gem truck can be restocked upon return from the day's work and ready for the next day.
"What we do is bring the Dewey Decimal System to Gem's internal warehouse," Daley adds. "It not only helps make sense of organizing the warehouse, but also brings a much higher level of sophistication to all the business information that all the products on the shelves represent."
A low price on, as we said, a half-inch copper tee isn't where the true savings of the Ferguson partnership comes into play. Rather, it's the seamless integration between managing the money and the movement of material that quickly goes in and out of the business which helps Gem do many other functions efficiently.
Dedicated To TrainingOK, so the call's been answered, the tech's been scheduled. He's on his way. He knows he's got all the stuff he needs. Let's talk about how Gem ensures that its techs know what they are doing.
Gem's new headquarters includes a dedicated training area dubbed "Gem University." Gem also employs a full-time training director, J. Rod Rodrigues, who oversees continual training in technical skills, designed to do the job right, and professional skills, designed to sell the right jobs. Rodrigues may even be found riding along with a tech to observe and critique.
For technical skills, there is some cross-training involved to make the techs well-rounded, but certainly there are particular areas of expertise each is known for.
For example, currently the company has a 1 percent call-back rate; the goal is zero. In the meantime, however, if any tech's personal call-back rate goes past 2 percent, than that tech attends mandatory training to improve technical skills.
Techs are also measured against how they perform professionally, meaning whether or not they were able to promote the company's services each customer may need.
"We charge a minimum fee," Anthony explains. "If that is all we get on an individual service call, then the tech may not be effectively demonstrating the full value we can offer to the customer."
If techs don't get more than the minimum fee 5 percent of the time, then they must attend mandatory training on general sales and service skills.
Gem University can accommodate up to 60 people at a time, and techs are expected to attend at least 250 hours of training annually.
While live classroom training is scheduled twice a week, Gemplumbing.com broadcasts and archives training on the Internet so employees can also monitor the sessions from their own personal computers at home. The broadcasts feature views from two camera angles so viewers don't just get one monotonous image. Power Point demonstrations are easily viewed on the monitor as well. Gem employees can even participate through a live chat room link when the class is actually in session.
"Techs want to learn," Larry says. "You give them the right stuff and they're like sponges."
Finally, Gem offers all employees a reward and recognition program in which points are given for education. The points can be accumulated and later redeemed for such items as electronics, tools, jewelry and other retail choices.
The End? Usually, when we wrap up the story we feel we've covered a company as efficiently as possible. While we've discussed some interesting points, there are plenty of other interesting aspects of Gem that we're going to have to leave on the cutting room floor. Briefly, Gem operates its own maintenance garage for its 135 service vehicles, 20 lift trucks and eight light- and heavy-duty pieces of equipment. In addition to the mechanic, a helpful computer program oversees more detail and automates as much of the process as possible. We also heard how an online catalog of the tools customized for Gem helps the crew in the field have what they need when they need it. And the Institute? Well, don't get us started. We think there's more stories down the road about Gem.
A Quick HistoryFounded in 1949 by Eleuterio "Larry" Gemma, Gem Plumbing & Heating Co. has been a family-owned business ever since. Larry began operating out of his garage in Providence, R.I., with only one truck, providing plumbing and heating service work. In addition to raising their nine children, his wife, Gloria, dispatched plumbing calls to Larry from their home.
Upon graduating from college in the 1980s, brothers Larry, Leonard, Edward, along with Anthony, guided the company in a new direction. With a new mission to provide a large customer base with true 24-hour emergency service, each son bought a truck and joined their father in providing plumbing services throughout the community.
The company was a respectable size when the brothers took over. But by 1997, Gem had doubled its workforce to more than 40 employees while the brothers continued developing a large customer base in the service division as well as taking on larger construction jobs.
Over the next five years, Gem grew both in service and construction, adding approximately 20 employees every year. Taking on large-scale construction projects and averaging over 100 service calls per day, Gem was ranked 54th in the largest privately owned companies in Rhode Island in 2001, 52nd in 2002, 50th in 2003 and leaped to 38th in 2004 by Providence Business News. In addition, Gem has made the top 100 fastest-growing companies in Rhode Island for the past five years, ranking 13th in 2001, 22nd in 2002, 32nd in 2003 and 9th in 2004.
The company's innovative practices have also gained the business national and local awards:
"Plumbing may not be rocket science, but we literally were in competition with rocket scientists to win this award for innovation," says Larry T. Gemma, vice president of operations for Gem. "We took a plain vanilla industry and made it a fun and exciting place to work."
Today, Gem employs more than 300 employees making it one of largest plumbing and heating contractors in southern New England. It ranked 76th in our own 2004 Pipe Trades Giants ranking, published in August, with sales of $36.95 million.
To cap off the recent growth, Gem recently moved into a 30,000-sq.-ft. facility in Lincoln, R.I. that sits on seven acres. It contains the Call & Dispatch Center, Gem University and the warehouse operations that are mentioned in our main feature.
Random Acts Of KindnessWhile we could put this in our "Memorable Marketing" sidebar, we think the Random Acts of Kindness needs a spot of its own, particularly since the practice is a part of Gem's mission statement:
"Through our world-class customer service, our dedication to excellence and our random acts of kindness, we will exceed your expectations ... every day!"
Random acts of kindness are pretty much just what you think. Say a tech is standing in line for coffee and he pays for the coffee of the person behind him. Or maybe he pays the toll for the car behind his.
Basically, anything a tech can do to brighten someone's day qualifies. While it certainly can be done for its own sake, techs can also leave behind a Random Acts of Kindness card that asks the recipient to "pass it on and do something nice for someone you encounter today."
The random acts explanation is printed on the back of the tech's business card - which, of course, is another way of leaving behind not just a great feeling, but a way to get in touch with Gem for future business.
"While there may be a marketing reason for doing the random acts of kindness," says Anthony P. Gemma, president of Gem, "the real reason was to make this a part of our culture."
Still, Gemma's extensive analysis of all his operations hasn't forgotten to measure this one, too. Currently, about 10 percent of the company's new business can be traced to the cards. Before adopting the random acts practice, the company figured it was only getting 4-5 percent of its new business with business cards.
In addition to the random acts, Gem and the Gemma family have long been active in a number of community service programs that are more than just random acts.
St. Mary's Home for Children in Providence, R.I., for example, recently named its new visitor center in recognition of the family. The Center will be called the "Gemma Family Visiting Center." St. Mary's also recognized the volunteer and support efforts of Gem by awarding it with the Philanthropist of the Year Award in 2002.
The family has also been honored for its fund-raising activities on behalf of breast cancer awareness, a cause the family took up following the death of their mother to breast cancer in 2002.
Memorable Marketing867-5309. Chances are you don't remember who recorded this 1980s song. (That would be Tommy Tutone.) Chances are you don't remember the full name of the song. (That would be "(Jenny) 867-5309.") Chances are you are going to have this one-hit wonder ringing in your head for the rest of the day (and then some).
That's music to the ears of Gem Plumbing & Heating Co., which obtained the number for Rhode Island and parts of Massachusetts. The memorable phone number is just one way the company markets its business.
Other marketing gambits include a well-designed Web site; a consumer newsletter called "Pipeline," and downright hilarious radio and TV spots capped off with the slogan "The Smell Good Plumber(tm)," that comes from Gem's membership in Plumbers' Success International. The "smell good" comes, in part, through clean uniforms and orange-scented booties techs put over their shoes when performing residential service and repair work.
"We wanted to change the customer's perception of a plumber," adds Anthony P. Gemma, president of Gem. "We want our techs to be recognized as knowledgeable and treated as the professionals they are."
As a result of these marketing efforts, the Gem brand name is growing in awareness just as the Gem business is growing in sales. A recent marketing survey conducted by the company indicated that half of consumers in their active trading area recognized the name Gem Plumbing & Heating.
Thanks to Gem's aggressive marketing for its plumbing and heating services, the company recently added septic and electrical services. Each new category accounts for about 5 percent of overall sales.