Insight

It’s Bufab’s fortieth year of trading. It’s also President and CEO Jörgen Rosengren’s fifth year of office. Executive Editor Phil Matten caught up with him, at one of the Group’s latest acquisitions, to hear what he has changed and what he has not, about growth and acquisitions, about wide desks and what it means to be a solutionist. 

Ask Jörgen Rosengren what changes he has driven in his first five years and, perhaps surprisingly, he is keener to talk about what he has not changed. “There are some very, very core things at Bufab that we have not changed and do not plan to change.

One, of course, is the focus we put on our customers and on serving them well and doing what we do for them in an excellent fashion. Bufab is 40 years old and we would not be here and would not be growing if we were not doing things that our customers really needed and liked.” 

Nor has he changed Bufab’s entrepreneurial culture. “We believe the people closest to the customers have the best idea of what they need. We want these people to have the independence and authority, but also the will, to make decisions that benefit our customers. We have been, are, and always will be a very decentralised company in the sense that the people closest to the customers make the call.

Yes, we have made some changes. In 2012 I knew I was joining a good, successful company that its customers liked. However, we had not grown since 2008, for various reasons. That was an issue, not so much as a financial imperative, but rather because this industry is in a consolidation phase. To become even more relevant to our customers we need to grow – geographically and in importance with customers, to be at the top of their supplier ranking, otherwise we risk becoming the one that is rationalised.

We put in place a growth strategy that we have maintained for five years and we feel has worked. We have grown around 9% a year, so in total approximately 50% over five years. That is a good clip – although we’d like to do even better. We have grown organically, taking share in the market. We have grown on average faster than our customers have grown, which means we are becoming more relevant to them.

As we saw our growth strategy working, we said ‘now we have something to offer’ and we restarted our acquisition pipeline. Today we are in Montrose, one of six companies we acquired over the last three years. We aim to find companies that share our values, our entrepreneurship, and believe intensely that the customer should always be at the centre.” 

Jörgen Rosengren is emphatic the acquisition must work for both parties. “When you acquire a trading company it is different from a manufacturer where there are physical assets: There is really nothing in the company other than the people. So, cliché that it may be, it is really true that we have to ensure a win-win situation. The sellers are often deeply involved in the company. If they feel badly treated, or they feel the company or the people in it are badly treated after the acquisition, the company will not perform as well as it should. In bringing these companies on board we want to help them grow, so they can help us grow.

There is another dimension. Successful acquisitions allow us to speak with confidence to the next candidate. That is a very wholesome thing. We can give the names of the managing directors, and say, ‘feel free to call any of them and ask about their experience with Bufab’.”

There have been other initiatives in the last five years, uppermost amongst which is ‘digital best practice’. “We have replaced the ERP system in most of our sister companies. It has not been an entirely painless process, but it certainly has not harmed our customers, suppliers or staff. We prepared well for it and have now rolled it out to many of our companies, so each new one becomes easier.” 

More significantly, says Rosengren, “we have gone through our 35-odd sister companies and identified the best practice in doing certain things – in auditing a supplier, ordering stock, organising a warehouse. We have learnt as much from them as we have taught them. We have collected all of that into what we deliberately call ‘digital best practice’, a reminder that these processes should be digitised and an integral part of our global ERP system and related tools”.

Three of Bufab’s latest acquisitions have been in the UK, including market leading stainless steel wholesaler, Apex Stainless, and highly-reputed OEM specialist, Montrose Group, into which the latest acquisition, Thunderbolts in Portsmouth, has dovetailed. The UK, however, arguably faces an unprecedented period of uncertainty as it tries to engineer its exit from the European Union. Does that not cause Jörgen Rosengren concern? 

“If BREXIT negatively affects UK industry that will, of course, on balance be bad for us. But we operate in 25 countries and there is always something bad or good going on in each. We do not believe we can be experts in forecasting macro trends. There is strong industry here and we believe there will be strong industry in Britain going forward. We’d rather talk about how we improve our business than fret about things we cannot influence. So far we have not seen any negative impacts – if anything we have seen the contrary. Knock wood!”

Recently Bufab opened a green field operation in Mexico, “a significant market and operational country for many of our customers, where we already have a lot of business.” The new operation is “about being the best partner to our customers there – giving us the ability to be closer to them, to know first-hand how things are going. To do that we needed our own team in the country, something we have seen work well with other green field starts, the vast majority of which are doing very well and contributing to our growth.”

When it comes to acquisitions, Jörgen Rosengren says Bufab ‘is not super strategic about the geography or industry sector’ – far more important is that it is a company that will prosper amidst Bufab’s culture of entrepreneurship and decentralisation. “Investors quite often ask which industry sectors we target. Four years ago, if we had made a strategy to target specific industry sectors we might well have had more sales from some – but we would surely have picked oil and gas as one of them and invested a lot of effort to achieve a larger presence – for all the good that would have done us!

We believe it is far better to let the people who know the customers and local markets go out and build closer relationships with them – then good things will happen. If I sit in a Swedish ivory tower and say, ‘now guys let’s go after oil and gas’, the worst thing that can happen is they do that, and they neglect perfectly good customers they already have.”

Which brings us to ‘wide desks’. “In Bufab we say our sales people have a wide desk. The customer should only have to come to one person – not to a bureaucracy where someone says: ‘No that is not my desk, you have to go to another one’. A customer should be able to get an answer to anything they need and a resolution to something that has gone wrong, without being referred elsewhere. 

Customers like that. They do not want to focus on fasteners or think about C-parts; they have other things on their mind. If they call, they want an answer there and then. So, in Bufab everybody takes responsibility for their own chunk of the business. Put people like that together and you have a Bufab sister company. That’s why, when we bring companies into the group, we are not looking for ones that need direction in their daily business. They must have the same entrepreneurial, go-getter culture.”

And being a solutionist? “We have a formula that distils core and long-standing values of Bufab into that single word. ‘Dedicated plus fast and flexible plus trustworthy equals solutionist’. Dedicated, because when it comes to C-parts our customers do not have a lot of energy so to be the best supplier partner you have to make it clear you really love this stuff. Trustworthy, because our customers need to have complete belief these parts will arrive, at the correct quality, on time, in the right place, every time – or else everything stops, and so very quickly does our business with that customer. Fast and flexible, because many of our customers get around to these products ‘in the afternoon’ so they are in a bit of a hurry. We always want to be the first to say ‘yes’. However, if they then say, ‘your answer is good but we need it in round packages not square ones’, we want to be flexible. We won’t spend time asking why they want it like that – of course they are going to have to pay for it – but we will deliver it exactly as they want. These are not values identified since I arrived, they are deep rooted strengths of Bufab, which we have distilled into the single word – solutionist.”

Bufab also has a long-espoused mantra of ‘quality and customer first’, something Jörgen Rosengren acknowledges could also be seen as a cliché but is nevertheless a prerequisite to success in today’s market. “We take it very seriously indeed but in one sense it is easy, because if we don’t deliver that then we have no business to be in this business.”

The quality commitment literally starts and ends at the top. “We always start our executive meetings with a point called ‘red flags’. Ideally there should not be any but it is something we put in place in the last five years and I like it to be so, because our C-parts customers rely on us being spotless when it comes to quality. It means should a customer call me to say: ‘I am not happy’, I can respond ‘I know and this is what we are doing about it’. It also links to all we have achieved as part of the best practices initiative, and reinforces our trustworthiness. When the customer asks how we will guarantee quality, we simply say come and look.”

There was a time when Bufab talked about improved cost and capital efficiency. Now, Jörgen Rosengren is far keener to talk about ensuring Bufab has ‘the world’s best supplier base’. “The actions are in some ways the same but cost and capital efficiency was important to us but, perhaps, not really to anyone else. When we invoice a customer for, say, some washers we are selling them far more than the metal components – quality assurance, sourcing and logistics amongst other services. At one stage our customers were consolidating the supply of fasteners. Now they recognise there are at least as many, often more, other C-parts with similar characteristics and challenges. Each customer has a completely different parts profile, so it is crucial Bufab provides them with access to the world’s best supplier base and confidently says: ‘No matter what you are going to show us, we are going to be able to source it’.

That is not something we do to improve our gross margin – of course it is nice if we can – it is something we do to become more relevant to the customer and to grow with them – and therefore become even more relevant to them, and therefore grow even more. Developing the world’s best supplier base is a means to grow and that growth in turn further improves our supplier base.

We are putting growth at the centre in order to become the preferred partner to the customer and to achieve leadership in the market. It might be a rather unSwedish thing to do but we now clearly state our ambition. We have just adopted a more ambitious target of 10% annual growth and by 2020 we want to be in the position to really be the leading supply chain partner for our industry.”

What then about the impact of an apparently sustained trend of increasing raw material costs? “It lost steam for a while, but it is certainly picking up now. This is an area in which we believe we should not be too accommodating. Large cost increases in metals are bound to hit the prices for fasteners and other C-parts. We do our best to improve internal efficiency, and seldom pass on all the costs, but we do have to pass on some. So, we have to go to the customer and be clear that input costs have risen, now we need to increase our prices too. If we cannot do that, what kind of partnership do we have? It becomes a measure of the relationship we have with our customers and their ability to value the complete package we deliver.

We believe they are looking for a partner that can competently and reliably deliver that complete service. One of our customer’s factory manager once told us: ‘I want to be able to put out my hand in the dark and know that it is there.’ That is why we are solutionists.”