McMaster-Carr Supply Company is an industrial supply distributor that serves as the middleman between industrial supply manufacturers and MRO (maintenance, repair, and operations) customers.
McMaster-Carr is a private, family-owned company. Although it does not disclose financial information, its recent investment in a $75 million new Atlanta warehouse suggests that the company predicts high order growth in the future. Construction for the new facility began in 2013. The 700,000 square foot building is expected to hold 1,000 employees, a warehouse, and office space.
McMaster-Carr remains a fan-favorite among machine shop employees and maintenance teams. Its cult-like following creates a mania around securing one of the “coveted” McMaster-Carr catalogs which are only shipped to McMaster’s target customers.
McMaster-Carr Supply Company creates value by targeting a certain type of customer and then going above and beyond to meet those customers’ needs. It very effectively matches its business model to its operating model.
Creating Value for Target Customers
McMaster-Carr has a huge product offering and is able to deliver products to customers in the same or next day. This value proposition makes McMaster-Carr valuable to end users who need hard-to-find parts as fast as possible. For example, when a machine breaks down, MRO customers will need products quickly to get their operation running again.
Capturing Value from Target Customers
McMaster-Carr’s target customers don’t buy products in bulk or plan their purchases far in advance. Since most manufacturers aren’t in the business of selling single items, users come to McMaster to buy “onsies and twosies” of specific parts. This in turn allows McMaster to charge a higher margin on products.
By effectively matching its operating model to its business model, McMaster-Carr differentiates itself from competitors and appeals to its target customer.
McMaster carries over 550,000 products and ships 98% of items from stock. The company has five warehouses located in Illinois, Georgia, Ohio, New Jersey, and California. McMaster-Carr’s approach to inventory management allows them to fulfill their same or next day shipping promise to most customers. Since McMaster-Carr chooses to target customers who need material quickly, they need to make sure they satisfy this customer demand.
If customers call McMaster-Carr’s customer service department, they will never reach an automated service line. This is helpful for end users who are often placing orders while on the floor of a job shop or manufacturing facility and don’t have time to wait twenty minutes before speaking to a customer service representative.
Customer service representatives will go out of their way to source products that McMaster does not carry. Customers can also call the service line with another distributor’s part number and the representative will provide them with the McMaster-Carr part number. This high level of service caters to end users who care less about the cost of a single item and more about getting the exact product they need.
McMaster-Carr’s website is intended to be user-friendly for people who may not be comfortable using the internet. Detailed specifications are available for every item and customers can use a filter function to narrow to exactly what they need. One customer commented, “Hands down the best online site. Even a computer idiot like me can order with no problem.”
McMaster-Carr offers same day or next day shipping on most orders. They use “hub skipping” to ensure this is possible. For example, if an order ships from Atlanta, a courier will pick the shipment up in Atlanta and drive it directly to the Charlotte UPS hub, avoiding the Atlanta UPS hub and saving a day. Again, this is important for end users at MRO companies who need their products as quickly as possible.
One former McMaster-Carr manager explains, “McMaster-Carr’s upstream shipping operation constantly made improvements to improve the efficiently in getting customer packages out the door – allowing for more customers to have their package within hours, not days like standard in the industry.”
McMaster-Carr allows customers to return any purchase for credit or a full refund at any date. Customers do not need to pay re-stocking fees or include any specific paperwork with the return. Many of McMaster-Carr’s target customers don’t have sophisticated inventory management systems of their own. Therefore, they may need to return items they didn’t need to complete a project months after they made the initial purchase.
McMaster-Carr’s operating model supports its customer promise to bring value to end users of MRO companies. Its reputation for having a wide product offering, exceptionally fast delivery, and solid customer service suggests that it will continue to attract new customers and retain old ones.
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