Document 7OgJJQq59ad9LOJqrjBOG0zMV

INTERVIEW WITH FRED RISTOW SHERWIN-WILLIAMS CLEVELAND, OHIO FEBRUARY 11, 1991 INTERVIEWED BY PATRICIA ELDREDGE SHERWIN WILLIAMS COMPANY lt/2/28/91 JG/Edited/5-14-91 "**"*41*00 Beginning of Side A INT: Fred, could you start from the beginning when you joined the company? What were you doing? FR: /9S* I started with Sherwin Williams back in -19*r0, started with the company, hired by a fellow named Walt He was then the labor relations director for the corporation. He hired me for a project called Applique which was a new venture that we set up a separate laboratory for here on High Street. About six chemists and myself did all the experimental work to get -that ready for the marketplace. INT: So you came from a chemistry background. FR: No. I came from a brush factory. I worked for Cleveland '7"' Brush Factory out of high school and-is&nired me into this^ I was the security person on this Applique project to make sure that all the uil u iiW was maintained. I worked for Walt in that regard. About two months later, they drafted me. I went into the draft during the Korean War. aaHL^hey flipped the coin and I ended up in Germany as Chaplain's Assistant for two years rather nthan go over to Korea. I came out and they didn1t know what to do with me. So I went to^Newark plant under Bill Graham, who was then plant manager. -jCnd^I started out there as a shipping floor foreman. Si/?>*/*''/ **a y I worked in various positions in the warehouse, order- /\ 0007-SWP-0060194 filling foreman, warehouse superintendent, up SWfe what they called in those days stock-keeper in the office. INT: This would be about 1953-54? FR: Yes. And I stayed there in various positions about seven years. So most of the fifties I would say I spent -my iJUft,Mi. j . in the Newark facility. yyGpeneer and Joe f ] needed a store assistant stock-keeper in Cleveland to work with a fellow called Cliff .-EVoclc] who was responsible for a 1-1-the replenishing of the /JT>0 /- iwwpvw. liWu^" stores there were in those days. We force fed the -n stores rather than have the stores do their own ordering of replenishment. I was brought back into Cleveland mri Ji unarTnaft .n-r--f?.i -i f -f pvQ^ki whg rn i ii assistant branch stock-keeper. We were instrumental in mechanizing the ordering procedures and putting all those procedures on computer back in the sixties. -att^he first computerization of the stock-keeping system started with the stores in 1960. INT: But the computerization was here in Cleveland. It was not at terminals in the stores. FR: Here in Cleveland. And we used scanners. We used to send pj? the stores scanner sheets and they would }ust fill- out the *>**ff~ /)*/& <z tfLC, (Si'&+< ranna6, eoae back in, and we*d scan them gmd then wt.'d CUT* Lhc 0007-SWP-0060195 Tt# ft* .pcoecas--tiratr'-way. It wasn't from terminals like they * ZfF'KT #t stores today. That was the first semi-mechanization, t\ like to call it that. have in the if you'd INT: How did it work that you ordered for the store? FR: We kept track by item, by store, of their movement. We set what we called in those days order points and order up to levels. And based on the seasonality of the product we would then ~T*> determine what j the calculation of what the ., beginning inventory was, tho phyAltai xTlVSHTUl^ time, L*Ke!H'WM*. li'ym--uiiiLTi jthry r~lJ mM "HV'r l"i i point wr l'nrrr hflw iTmq^i fflypp -f---> 'i.T i k v ,-,+-| _ INT: Were they allowed to send back what they didn't sell? Or did they keep it for the next year? FR: One of the problems with that system, especially on low volume items, was that often we made wrong decisions of what we put -in there. A lot of it was one time customers coming in for a product, especially in industrial maintenance and the low volume painter items. AnflTCtBn^4'd have to go through a quarterly f balancing between stores and than even a return to the factory to make sure that they always had the proper stock without a lot of Or*C C^ f/J ^LJi &>-`ifr w u j i with-some " pBofoA-amPi Emdid a fairly good job of managing the volume items and keeping those in stock for 0007-S WP-0060196 all the promo's we had in those days. But the lower volume items it was difficult to force feed what the stores neededw M-M Ae ^ J4cc *stmo INT: This would be in the early sixties? FR: Early sixties. It was our first attempt at managing store inventories which were historically always out of control from the standpoint of .J^aps333BBB"nMi nri, long time supplies, and imbalanced materials. INT: How was it done before this? FR: Before then it was done by the stores making their own decisions on how much to order without a lot of guidelines, without a lot of tools. So basically a person would look on the shelves, look in his back room, and by virtue of -fefce business say, "I need something." It was kind of a catch as you catch can approach prior to that. INT: The store manager was essentially sort of entrepreneur-ish at that time. FR: Yes. INT: Did your stock-keeping consolidation, by taking away that option for them, did that make them less entrepreneurs and more 4 0007-SWP-0060197 branches of the company? ^ # J*S& FR: No, because once a year .we would set store limits, J,s wha-fr Ac*fT /&//&T ///ft**V. wo oalled them in thooc dajata by units. We would send that 0*%/ information to the individual store to make sure, because of U>c#L i-Mt /N)f ^j'ui+i knowledge, that they didn11 -have' aom^^djustments they wanted to make to that seasonality, to that history, and to the-y- J^sr/TO '* limits that we established^ So we always tried to keep the store manager in the loop so he felt, even though we were doing the THAf' SvPP*jT ordering for him, we were just kind of an appendage helping him A do his job better. INT: Were they also allowed to buy their own specials at this time? Seasonal furniture and stuff like that? FR: In those days we didn't have as good a control on the associated products area. Thoy could -buy a lot of the materials and they could get into what I called the gimmick area5of other than paint, the basic core business, awd-gofe-aid enameled wi-teh f1i^r>,~|- t"r>n11y ............................-|ii.,.Lin,,fa. We had a lot of control problems in those days in that area. *>*d^ir function *. ... wasn't for that area^ It was just for the paint side. I }ust want to clarify that. All the ordering we did was for the paint products, not for the associated products, fvrif/T\sA floor covering, razor blades, whatever. /\ wall covering, 5 0007-SWP-0060198 INT: Is this that big mainframe computer that I remember hearing about? FR: Back in those days I can't even remember what the name of that computer would be. It was a mainframe, but I don't recall the type of computer it was anymore. INT: How long were you on that job? FR: I would say probably 1966 to 1967. Then I transferred to the other side of the business, which is what they called factory stock-keeping in those days. I worked for a fellow called Joe .frRawleawoki], who was the factory stock-keeper for the corporation. In those days, plant managers or production managers controlled what they made, when they wanted to make it, and how much they wanted to make. /historically it was interesting. During the off-season months, October through Jnchfuai'y and March, our plants, especially up north, always A /</&//?// looked for work. 4e6ur plant managers had a good way of paying Tim rjnin3 ii)iltnniirjn making all the whites. And in those days we piK'WC, Ttf'C pjff- 54could force feed the stores with those products^ Sar(A would dump on the stores the volume items during the off-season months just to keep our factories at^aaee production level. It was not a very good system, but that's how we operated in those days. So in the late sixties under Luther Schroeder we became more concerned about the growing inventory and the lack of velocity in 0007-SWP-0060199 our working capital. Our inventory was growing disproportionately as a corporation to our sales growth. In other words, was looking for ways to get our inventory turns A improved. So we said, the first thing we have to do is liu.-vl t get control over what the factories make. A3S0 "fiat's a traumatic experience when you have a plant manager out there pretty much making what he wants, when he wants, and then have a method of getting rid of it by force-feeding it through the store system that1s A ideal from a manufacturing standpoint. A strictly manufacturing philosophy in those days^ The more you make the better, lower that cost per gallon, and somehow the -rwr consumer out there is going to buy the product. It was laiSfe kind of mentality.^ I've got to be real honest- For many years it A^ s, worked. We were the biggest-' We were the best- We were / cct/i.0 gialnyr- We were known for our quality. Our pricing wasn't that import*rmfe. And pretty much what we pushed out there we were able to sell. That's in the sixties. That changed in the seventies but--in--thce--ssiixxrtiiGoDq--t^htiaawt was--prettytaiuuucullj turu'u e%i. Souo_wwtes hxiaadu tl o.u gyeet^t _acx . 01/K. CfiV/z/ft?L (jv//ol5'9-l- Lgis&L? v*- Sft>A l~ttsL handle on qgpMjf first job was to get 0 controlj because in those days distribution centers were all attached to plants, for the most part. We might have had a few regional tfu-t rJe>7~ distribution centers around the country^ They were more sales centers, under the control of the sales department when they <?*nsicA F&esrt S0 felt they needed a regional location La 'ftuve H3ehie^tB5Bfaw**fe"-"**r- Ffrcfv/iK/ p/STfil&vrjw (*/#-$> wT where-^thdy- didnlt have time to got it from tho-factory- oy\f 'F'l/ . distribution ce^agr But basically, most of our product was kept . / 7 0007-S WP-0060200 at what we called factory warehouses. So the first thing we had to do was get some type of forecasting system that mirrored what our shipments and saalleess were going to be. So my first job was to pt Put NOW; forecasting system in place. I'm going to jump to the AA early seventies. -Walt Sponnor-ramp iWO^wm Re_nt^M^jaft^yec;ident. ^mfU4ie hired a fellow oall-gd A .< Milt Alle was then my boss. And it was Atf/6/u charge to take us, from a computerized standpoint, from only look/V/ at accounting applications, -as thKa^uiupu-Cgiu-j^s- uuflctfii<Jd,~ 7'vptsffm// OUK A. . . ., -S3C9*fcos^t^operations on the computer. jifc/^y first job with , ~t- was to get control of whole factory distribution center ordering routines. 2S3 I helped develop the first 7H forecasting system, i&k first production control system for the plants^ svn we-knew hgw lauciv-^Q -nydei-^--rwh^p --wttat-fete cap* jsn mT. 111 .^s^gntsT^BfeBc mak.fl,-fm= =*Sip^ txan thru\n i yyTM*- rf ~irt j y i fir . -thhrroeee--shhipit&ta=^bla^s&fcr woi.k -JUuknarrrfeeealrT. ~M3: -M/J T- ux^sablv did that--Qht~il- the mid- A seventies. ArKt^We~^ot^jj^-thii&o---c^tomg up in plaoo undOb-^tfie /?S, w// loadorsh-ip gf-llilt-Allah. Then in the mid-seventies they wanted TP6 /pisrf770/lS' me to take a look at data processing^ In those days data processing was corporate and ^11 centralized. But as we got bigger and bigger fehey wanted to take a look at accountabilities^^'*^ -And-thei-e-woro J?=ggn3U."'5l-I@nfi5 of a^ And . W'they said, "Freddie, A want you to work with Herb Swift from ft Put Canada," who was'-then the corporate controller, "and^ want you 8 1./ / 0007-SWP-0060201 to take a look at breaking up corporate data processing,M for what we now call the consumer division. It wasn't called that then. It was the coatings group. "I want you to form an MIS group." So the first management information systems department broken away from corporate data processing was under my control. /5^/V MVSf/sseJ xs/ff 7~& -A Li Et vf tKoao cays wat> what-we called integrated systems. In those days every application had-their V* t/AJ/4u * own master files and their own data^aiaiA=aid. But when you brought information together across functional lines, from personnel^to operations^to accounting ^to material management^ to distribution, everybody had their own systems applications and their own data files. But a lot of the data is common across functional lines. So what we would try to summarize data up to a division level, the timeliness and the consistency and the accuracy of that data was terrible. So my first job was to do what we called in those days integrated systems. If there's a data element needed for the cerptmHratwL n, that data element is maintained on one database and used by any application, regardless of the functional area. Wianrntfrd LUat irrrttkjgaHefea* So the first thing that I did was develop a common tff. product file and customer file for A go we had consistency. vfr'' * " ^ -w-fnrgpy-^KM ,i 1 T t&Xs. f x.rhr>o^pT;HTfi?fH,arl anri-TlgflH r fnr^Pna\js~-rrffln tafft1 m/f^rr WTH! Trh?rb-wTr~~TTr|ri firnt jnh ^So I formed the first management information systems group for the corporation. A 9 0007-S WP-0060202 INT: It had been so autonomous that there was not a common product? FR: Not a common product database. You could have a product called something different on database^, You could have a different number identifying that product on a different database. You could even have a different price. We had a real pricing-billing control issue. We had no control over consistency across all distribution centers of what they charge a customer. .Any customer, depending on the sales person out there, could change that database. So you had no control of your # 7margins All was after the fact. ~had to centralize that to get control and consistency of what we were charging customers, the discounts we were using, `'Ll y tremendous undertaking that we accomplished. A etc. That was a INT: Fred, that sounds so important and elementary. How did the company get by without something like that before? FR: In my view, and not being critical, because I've been through the good times and the bad times with this company, you get so caught up I think in being the biggest, in being the best, #~f' ftN)f /Aic and always being able to sell your product in the marketplace. /K But that changed in the seventies. The OPEC crisis came up on us iA/ittf ft (y&'f . 10 0007-SWP-0060203 INT: Excuse me, I want to come back to that. FR: upSf^s=-=gM $ lot of our raw materials are flAS/t e> /c ^6# derivatives from ~MOur raw materials costs started to n escalate. We thought we were on an expansion plane, that we were going to all grow at some phenomenal rate---We built plants accordingly. We put a lot of additional asset into our total system with that anticipation of excellent sales growth. All of a sudden, we woke up one day in the seventies. Our costs were out of control. Our competition was much smarter. They were looking at the marketplace, seeing the changes out there. Consumers' buying preferences weren't the same. We lost touch with that. And all of a sudden, I would say by the mid seventies, we woke up one day and said, "My God, we can not just pass on our cost increases to the consumer and have them take it." They're not taking it because our competition is finding ways to control their costs. The Gliddens of the world, the Benjamin Moores of the world, the PPGs of the world, in those days the Du Ponts of the world -- they were finding ways to keep their costs under control. Yet, we were not. We were thinking we could just pass that on to the stores divisions -- our saviours always -- and somehow they're going to get that from the consumer. No longer was that happening. That's when the crunch started. So we borrowed. We've to borrow for long term / sr/#izz1l pay "fVJi nl i * llhif u h 'Vi'1 i mrj QijjicgnB prided / ^ on Luther Schroeder. a very conservative 11 0007-SWP-0060204 financial guy,, always knew how to manage cash and always could __ make payroll. W6cdl'ah-*-tr~have to~~bc3a&w-for-psycoxi noraH^lfy-. 14-PS* @c j 4m H A^/jl pA-ogL^tn ------ /< -ftu-k^hgg; ~fte-cjiaa=fee- boae^aw sTusafg^Cg^r____Jbssd I guess we got to the point when Mr. Breen took over in 1979 that this company was just about ready to go under. If it wasn't for insurance companies tfoT~ *7wanting to call in the/^covenant they could have brought us down in 1979 if they really wanted to do that. Writ* , could jpeafee us go .Chapter 11. We were in serious trouble. /[ ^-r*rrs They If you ask me why that happened, I just think we got caught up on not r Not t-oxtfp/^C recognizing what our competition was doing, not recognizing the A changing buying habits as far as the consumer is concerned, and the competition becoming much sharper and our consumer 43 much more aware of looking for value. We got caught up in all , It's unfortunate. A lot of good people got caught up aar:.JFHyfc-- Tymg-^yr~ nr ~-------- -----VoJ fi-LL tff/J * INT: Oh yes, it really makes sense. It ties in to what other people have been saying. You've said it very well. The last time you were putting together the integrated systems. h /1 / ) ?** FR: The MIS. So then they wanted to break up in divisions. I forget the timing on that. INT: It was 1977. FR: 1977. So under Bob Tschannen they wanted to take away what 12 0007-SWP-0060205 we now call material management, or distribution, from factory operations. So I was brought back to work on that assignment, to develop a material management^ distribution organization separate from the traditional manufacturing organization. That was fun. And if you can appreciate, when you take something away and you make vast organization changes like that, from the top right down to the plants, it was a tough job. But we did it. We formed the material management/clistribution organizations separate from the reporting chain through to the operations factory side, U/k. wanted to get a focus. We thought it was so critical to get a focus on the logistical^material type of operations, because we are a very material intensive company. The cost of our product, justly distribution csS5er alone, just from a handling and storage standpoint, in those days was like thirty cents a gallon -- that's a big number -- in addition to the transportation costs, which could be another fifty cents a /sc* H gallon. So you **** iitVin fast approaching a cull-- x t##~T logistical related cost of a dollar a gallon^ And wy needed focus- Wo noorlcH to got a--1 J 7^ 1 uiid'.wa. We c-s/T/ CtX/fAoL needed to find a way tu-=fcfiy. A mirg&g--. And more importantly, in the early eighties now, if I can just jump ahead, it was the time of customer service. That was where ttye consumers wanted XvjtL/'ty more than just a product on time, A- they wanted value added types of h&ssg&r A but 6 P/Zo# /j AiwfcjBi-0''a aommodityr We like to think that Sherwin-Williams is a wonderful brand, and it is. But still, by and large, paint is a commodity, low margin 13 0007-SWP-0060206 business. And v&Sn price is very important you can't always sell on price, which we don't, then what other values can you give to that customer for buying your product t'/LS, y PA.*4S#8''/ who has an equally good product quality-wise, 4etc. Ass9/Uwre /94^ wanted to get more of a focus on this nebulous thing called customer service. How do we, from the customer's /- a viewpoint, get them to perceive at 1<j aat. that we ha^ra value added service to them. ne of the real benefits this corporation had, and there's a lot of forefathers that had foresight on this, A is our stores distribution network. Thank God for that base of 2,000 stores/ &&& I call them from a logistical point of view VsTra & A oos< CiUgjgk 2,000 mini-warehouses. contractor i A And that's why u ii gw'. *751 of that ^ A That's one of the big advantages we have that helps us compete with the local grinder 6 and the regional couldn't do it. guy. ~-r- f we didn't have that network we A Strategically we have distribution centers across the country that are well positioned which can take care of the direct business.and can also make sure that we on a consistent basis deliver on a schedule?to our stores. So I think $/d / out* out- umperttenj; the^advantage we have^ from a materialyTLogistics point of view, bui' nwig" Uu .any uumptrlttigEP, is our logistical/Material management capability today. I think that's recognized by our competition. I know it's recognized by a lot of our customers. When Scott King today goes out and tries to sell a Wal-Mart, tries to sell A? CLU& Home 1tries to sell^K-Mart or getting all the Sears business because of the acquisition^ all of these top retailers 14 0007-SWP-0060207 in the country demand service, they demand consistency^ And they look to us to help them solve their dSJtti ILmlULVir'/ & L 5W*/ problems. So how we receive material in tkowe stores, how we get A that material put away, how we display that material on the shelves, they're looking to us for value-added service, to be the experts on how to do that. And that's some of the way we're loZ/j'A/c-J -------- trying to focus on what I call today^material management, customer service^ to try to differentiate ourselves in the marketplace. INT: When you were doing this back in... FR: I jumped in. Back in the late seventies... INT: This is the late seventies when you were doing this materials management... FR: Right. We formed the first material management/distribution -fz> / organization back then when we had ^ focus. And I ended up being the distribution operations manager. The analogy today would be Bill I ), the vice president of operations for TSS 7~~c> O' djiii 1 Uigur That's the job I had in those dayp. INT: How did you get that approximately one dollar a gallon materials handling cost down? 15 0007-SWP-0060208 FR: Well, the first thing we did is get a separate distribution organization and we brought people in with the skill of material that had material handling GL.jiu.lril'iA.ji, So, they could look at alignment 1 They could look at the utilization of racksT 7a r( 7 They could be unique on looking at batch picking systems which are semi-mechanized systems for .receiving^ f #L50 og&taa? and shipping orders^ j^td ^the type of equipment we use in the warehouse for getting us more productive. So we had a ft!) /i.4z c>$ professional fm*isfof people who underst^pijl the physical handling A of products. That wao*ang h.-'iii.ijiii'j Ihi- r-irdil- niinnki i* dif See. historical lv. stock-keeoina in fo* S'feSL*; tufa the old day?^Sag=3aaa^^^r=r aj n+-w-fai4--inri tiffinr, it wrvr kind pf fnr nnfiigfrrg grnnrifl When we had people that we didn't know what 'tj4'f Fk o ^ to do with, whether fefaaegSjpc marketing or came from accounting or A they were an alcoholic or whatever, a good place to put them u t' historically was in stock-keeping. Wo-gguLUl- find a--jub Lu a --them. tjf . &BS.W& had to change that mentality. /> >< &/&* And that's what we -fceawfcstoo &*/ P/JtW&vT/ctU So bringing in the right people and focusing I think .are the A two key issues. * INT: Then after this were you doing that when Jack Breen came in? FR: Yes. So after that we were divisionalized. And then I think the first division manager we had in consumer -- I worked for him -- was Wendell Gillen^). 16 0007-SWP-0060209 INT: So you reported to Wendell. FR: Yes. He put another fellow in charge of A the operations and he put me in charge of what we called then material management. So I had all the customer service, order rf~C . , ' ^ entry, ordering on the plants,^frwr*- wen-t t b iafcgafesgd. All the material that we would order on plant, a batch size of when to make and how much was under my control^---So I did that side of it. hired another fellow to do the operational side of running the We kind of switched^ Then -fcrx* develop/?"/? systems in the eighties that would improve our forecasting capability with marketing and improve our production planning capability with the plants. So we did a lot of enhancements of systems, and procedures, to make sure we dwE^gSW*tJtitti JiSb of-And just to give you some idea, in the early eighties we were giving service I would say for the stores division, which is just an example, that were in the low eighties percent*^- Our product availability were running in the low eighties. Our inventory, velocity for finished goods, or 77iX4Z T-o inventory turns, probably \mj b o If. any better than four aawl. a A turns a year. ThaiL-agmib ww-Hra tuirrriny JdtaL^awentory.,- -fesoBLJi sJc^wQpoint, ft iit4.T~~turns. What we've done from then to now, if I can just jump ahead, our service levels in 1990 fa-saw tho low ul^litrlTTS for the stores were running ^ .O -ZT5 7P&T 96%. Our inventory velocity from that gg tteij^n ipMtiajCygtt--w*r'~ - now turning at better than six times a year. So we're getting a 17 0007-S WP-0060210 / (I tf lot more use and goodness out of our inventory with a lot less inv e stment. That1 a- sMamplo. INT: Okay. That is merely by fine tuning the systems? FR: Getting better input from marketing, doing a better job of forecasting your product needs with marketing, having systems in place that allow us to do that, doing a much better job of... And a lot of it I have to give credit to the plants for. If you go back into the sixties and seventies when we had that r< manufacturing mentality, we're going to make what we want to make tt and they're going to find a way to sell it, since the early eighties we've been desperately trying to change our focus to be a marketing pull company rather than a manufacturing push , ty Hrt / S& company. And come a long way. .Ctf' pmirtplemd part of this ZAr/ytyC* A is what I call attitudinal in the plants, where no longer is their number one goal.cost per gallon^where bigger is better. Now their number one goal is customer service. have to A make the mix of products, whether it's a little batch of sky-blue pink that might be only 500 gallons, as opposed to a 10,000 PAo-WH/l gallon batch of f|'-H'1**-1 \ 700 white, which they love to make. It's as important now that they make on time that 500 gallon batch of sky-blue pink to service that customer as it is to make the 10,000 gallon batch of that white paint. hs/Z/cff "1?hat' s a tremendous cultural change fefa*t also had to take place in the / plants 18 0007-S WP-0060211  ^OrEa^- Bi.uUi.mt miac So I have to give the plants a lot of credit too from the standpoint of flexibility and capability. INT: How did that cultural change happen? Do you have any idea? FR: It didn't come easy. Wendell GillenPapd I think it starts -- I'll go back to Ted Hopkins, .hjgfcQ^hI..wogketl^-^furr all of them.1.. Ted.Hopkins. tftA-? - JPfagg^we Every one of tafasur paijj uun1 and general A managers had a philosophy of the customer is king. They all had a different approach to it, but their basic philosophy was that the customer is king. And every one of them -- even though we change guards and a lot a changing philosophy*---- but -fffTtW every one of them made sure that the. organization understood strategically their direction andTww^^^ c. cs -A- t $ A/tU-rf*/*/?)/ A plnnn i n .p1 i. nun ^......... tuni I>'i.i riy^hftt"wmarlp thn4,_ h'appr>r>. Aati~TTOfi--cf tlrr key element# was the measurement system 20- incentive system for frrrr^Frrrplni thrit nrr_ irrmtirr. thn Irry A rnuiraimmei'i 1 1 1 r r, m rHfl3Lh^r~" Li 1 . i rffyp^-?^r). if you IrmenL thorn. C-esiw. yiAvrU C^ojf-LS A A}-CC-^c^k /TAh?/LT^Y & cc-^st ~'Ajf-jr f ftsT-att 1 y r^'Vii -jy opi n inn r ^.1 fjjjfcsfe-fefec.-- rsa 1 gaalfrc ne and i-H-A whether Witty'are- gffrhi^irto ^j'u-L pub:! in JJte^y&efastbookr that vs 1 going te=^^^wtTr-rhnna& W-tcr aLLiLudn. I'm not saying that's the only thing. We had a personnel philosophy, human resource philosophy, aA that as we looked for different people to go in the plants as plant managers, and the first level underneath ? 19 0007-SWP-0060212 --UtaiilJUfte uiasg^Sssretq^-.^ we were looking for people that had a business point of view as opposed to the ?Htft AS A 5/ old technical guy thn rtrnt fir~m yrnrr rTM *~V|Q l-innr.^ hwiaunq^Big * // got to be a technical guy to be a plant manager We experimented. Take Bill Antonase. We got Bill Antonase from the accounting side pf the business. He was a /fidA&W pLJijjT -------- u4N*/ft4? o controller. And we put him as ul2ruji,L manager,, IivMnniui-f* nvilinaiid of win Llii riTrTV An accountant? He did a heck of a job because he had a business perspective. neyc ir - ?W tfeSfc--_ WWoe''rve looking for the business perspective in people as / "PolU" opposed to the technocrats ft And-1'm-nofc poo-poeinq..that &t~-app;roach-to how""We=3dSOk a -far--fcKrr~>,i i n 4^ o5~sp= j think that selection of people again was critical tiSSt caused that change to happen. A INT: Just to finish off your career, has your job right now changed? FR: Yes. Last year, in 1990, I was put on the acquisition team for Desoto. So about August, Frank Butler said, "Fred, you're going to work for me and you're going to be my facilitator to cause this integration to happen once we sign on the dotted line," which we did in October. So my full-time job just about, since last summer, has been to integrate the operations of Desoto into Sherwin-Williamsr syafeeats prptmdCTiuu "uml cta4=u=ge-jgiiil alT~ rni~l.tna=*nq<af pnr^ *~Mg 20 0007-SWP-0060213 <c^grg^:too. Jr^iT^matke--sure--ax that^ hap^ns--aror we yeu our return on l<nvgb> UiifcOLC--t=hfe vuiy--Lliu'L this nas to<fe6-.-----That-Hj=wha-c -J-J-ro -etolng^ nowj?^ INT: Could you just elaborate a little bit on that? How does one integrate something that had its own identity? FR: You have to make some basic decisions up front. During the process of due diligence, which went on I would say since April of last year, we were fortunate with Desoto in that most of their line opt erating people werg very open with us. So we got a jump on 4&U tu& Jome of the other pctfeiiajfc^HL acquisition teams that I A worked on, tiserc was not the case. But in this because it//}} A Ksrttf 'SM.HftY, T/Jy wea?e very disenchanted jatawga^Desoto> paaggscr yr-- i n my n~t $ k j ns n Tnnnngomrnt nnrl cs/a/z_ hnpp^nr'i vi^n thn4- fri'i1 i `jmil \\ i n irid the loss of flaars,,huniriet.s'`aiid lack of attention to why thafeewna L/^j lorti from frlii-iv...'.'inpaint, fchoy-^cr'fr-Vggy1 offSh l'Ol d saviui. *^hey could see Sherwin-Williams as being just a wonderful savior * that would get JAesst company back up to what it used to be. A Us tliL rira^Hfc "bcrai^ able to get real good information of how they operated from a systems point of view, a financial point of view, * #L$*, an operating point of view^ ^2asS- we had a very good feel then of their people. I spent a lot of time in their plants. I spent a lot of time in Chicago with their headquarters people. A lot of Us {-/## ft j us did. a fJ jng ~f">> ^heir peSBfarr- We had a good feeling for their systems^ We had a good feeling for their 21 0007-SWP-0060214 operating policies and procedures^. and from a marketing viewpoint of what they did not do that they should have done-to let this ? .. /-A/a business deteriorate as badly as it did. So with tetest background and knowledge, we could say, "Okay, we're going to have to make some hard decisions." And Butler said, "Okay, this isn't just going to be a one person problem." He focused himself and his staff, 'ptiuplfUIi hi*, -j^ufif, and we set up starting September -- it was my suggestion -- that the staff must meet weekly for one hour. "So at eight o'clock on Monday mornings Yoo MfMY /c?isT~ don't care what Tj^'iyering^jbo you're going to be here," *n Butler said. we're going to review all the issues I surrounding the Desoto integration. Fred's going to be the facilitator. Fred's going to bring the issues to light. He's &iu: going to develop the plans. But we're all going to input ftr/t/tosCT together. And we're all going to have our organizations then do what they have to do to make things happen on schedule." The first major decision we made was systems. We decided that their systems were so antiquated, la5^*d no control for the business, that it would be senseless for us to try to bring those S-td* systems into^tlw acqu-iuLLioo-. So the first major decision we made, and it's major, was we're going to put all of that two - hundred million dollar business on Sherwin-Williams^systems. .That ~Ttreans~~T-he.ir operaLie>ln'~ptafiTrrnrg Gyot,gms-,~-tate~ and bi^iirfff-^vstamr , in at1'the, wynrfre--bugiHesS t n nd-eroisS^syafeems, -MRP-systems^--auslr the wftpl g-hnnanocg eyet.QTns ti^taatt -wwre>~" rgagwe lL.nu ritasa So decissnion, then, that I have the AA I pulled 22 ^ .. 0007-SWP-0060215 together about eight people, full-time, reporting to me from various disciplines^ financial, &tn material management, f^tsst distribution, Jasem. accounting, personnel. rult--faimis., ^og]cia^B&n-^hi^-etTTbogr papetjieot/^hey all had, c ~t/Qk/ appllu j ibiun--wise, specific responsibilities. 7ynd=&tea /they each developed their own plans. We just developed an overall perlf* chart of all the activities thal A lube ddne-, wUtt_luu3*ta du ttsSSbr -/uid when we taj jafiflderl Bupporfc-frgg^a'te uiguniAateiun,! iooo<L* ST# />* 7 would feed back to the weekly meeting with Butler. ^A 'i lolsk to the functional heads and say, "We're going to have to give Fred the support in this area. We'd better provide three people for the next month to do such-and-such." -- -- Sf f ^Y INT: Those people have moved in here have they not? Desoto is slowly moving in? FR: Yes. We didn't bring that many people from Desoto. We A . -a** brought the marketing and sales people intact, for the ones that would move, and most of them did. We brought all the plant and distribution center field people intact. But most of the headquarters are people we did not bring. We didn't bring any of the R&D people, didn't bring any of the accounting and support people. The-orrly CITlnq -we-did was bring three peopleI.Tre 1 Tn^ + n-ri al npora-h^on side Of thg-feUgTTeSS f rOfiTPeSOLu. -TlxaL's all Wfe^Bl'OUgliL. 23 0007-SWP-0060216 INT: Now, by not bringing them, the ones who were not brought are gone? FR: Yes. They were separated. With nagHtrr rmrfr `7hrTirrt~nj-vpf-l 1 i nm~ we had a separation package for all those people. But they are gone. They're out of the system. The other thing that I think was important as far as how this integration happened was focus by the^staff and Butler's ongoing concern weekly that everything was on schedule. It was interesting to note that the organization in total was able to take this on in addition to keeping the regular business, running. y&S. stressed right now? " ------ - And do we have people P/P we see a little.motion once in awhile? Absolutely^ But as of January 1 we were off <?G'/Z p<xs&x& Ijh&xr systems, which was ttesfer goal. fully /I _____ operational in Sherwin-Williams methodology^i-proceduresj -2r r that's plants, that's headquarters, that's the totality of the business. It's going to take us this year now to look at the ?t b&sA. things that have to be done to make UIj t L integration a /&& success. if5gr are: we have to get formulas compatible to Sherwin-Williams iin,,"iiwilwu ----and wgjhavo fee-- be careful...who we- oay a JLot c t C-J.1i Lu^t<"ti-^nr raw materials 1~~arR!t=U;o wr, // ^/$/ Because that's where we're going to get the leverage tf /' A and the bang for the buck. And we've got to do this in a way that we -1mo quality. Because Sears is very, very ^ PJ'/'oT' concerned about their quality levels^ So Home 24 0007-SWP-0060217 tn.ifrr? tlrH We're going to make these changes and uut iTF*-g<=>lpg to hoaeCtri^^- they're going to be transparent to the customer^.wJse*e A t&x%5y^j3^T\cr. flP'uulCfeaJbarOfta-are atill Moinu- -lo by^aet. vre ' t'g..^eL teha-bong f or_tha buck is gettTfigr^omiubn with"oar raw mafprials and aiwH^iilmuluj^ "That'S the-biggest Jb&xOZt&T I'm working on a logistics plan to take advantage of /f P&S7* g-tcj bringing together all of &f&r products with -ggsc products and thatjaa distribute them in a way that optimizes all logistical^, U/ /7/}^ j4 >49/7/*j 4L Sty*/? PL /Zsi rP/P' /?#/<"* costs. So^rl-haste--a--model -that r~tree.-_a logistical- modal. ArtcP-fU' pP-f^KAh /*/ P Iu /j z iP wlfiEfc. we need are distribution centers where those customers w<abe serviced from whsl^&Ls-tjzxbvLtiuu--egfi^es%r. and then what ' tup plants are going to make is& products for what distribution l-OAtyf/uif-i A centers, efl /that plan is already finished. We were able to A close the Berkeley plant. We didn't buy the Berkeley plant of Desoto. We didn't buy the Garland plant. I moved all the Garland distribution @s&4er from Desoto to Waco. We moved the Berkeley distribution into a new facility in Hayward. We have a Bakersfield center in California that handles Home Depot and PE. g&j&L had that all completed last year. This year we're going to PPf'TZ close Chicago Heights, which is another n&*' - r imi; plants^ And that will be accomplished, including the distribution, by the end of the first quarter, hnnnugn Tiii---n Hint1 m rd thnt arrnfr ton-sr t/A Aa //'Z/tZ/y'S And"+jint^asset base was in turn sold to <#xs Rohm & Haas, one of our major raw materials suppliers, because they needed resin capability in that area. Se==fehrert^==^^b5 dorrs^-by"thg^nd=of--jfehe^ . _____ -f^gstSqud'f'Cel'. #*4* We're going to change the mission of the A 25 - 0007-SWP-0060218 Greensboro plant/ which is architectural broad based today, to *?e- that a small package/c^g&^manufacturing ^ecauso-ageddi, wg--db3T5trTF&ed==&jt^&haT: .addltiurml U>r?*/T ^-arch.ii.tpntnrn1 ^goatinga. And wwn A asset" base f-ejj-r- do in. t.lir. mintakes ver-mad&sin- the- aeventaas. We had too much &CsK fixed assets sitting out there l h t l,h?g^oapabirl-ity" there" wtr^iradC-/te#Tl\J ls*iUO^JC y^T/L/ J. _&. frmn n gMrii "tandsgfcgt. We don't want to dosfcfewfe-.and make that mistake again. INT: So that will be tinting or that will be small batch? l y Vi * M ^ If FR: It will be small batch, small size, quarts and less. I call CoLo/ttfsit/ it small package. And it will be s^^r manufacturing*, cass*' -tidytrrgg^ That's-what LUk -n^nr-^mj gg^n nf thnt will h^tr^th- rrnrl r>-e-gjrl4*`-In addition, we're going to open up a new facility in Orlando. We have a wonderful plant that we bought in Orlando which is strategically located, just perfect for us. And we're going to put a new distribution center down there and begin fl*/</#?? /> servic^ >XL-i^r-d546jr*,nni|uJaMl.L.. which is just going to be tremendous capability for Wilson of the Southeastern Stores P/u/P/f+i/'. pv t IIP I'rvn mliy 'r'-riflui l-^nt fflnrTTrH'~"*nrr~1 And he's very, very excited about tfagt possibility <? /j C~ Ao us PM ^`Z.C.^-LL 7*^' INT: Orlando was a Desoto plant? FR: Yes, Orlando was a Desoto plant. And the other Desoto plant 26 0007-SWP-0060219 that is strategically well placed for us is Columbus. JSfS that's 77/ P/&stJp*/p*W/V--A^/<W a plant that has^emulsion and^poggnoat-'i c-^Wn^.4- capability of manufacture. $4 're going to be looking at that C/ZOKs/pi d/P whole facility to really help us out with^industrial maintenance ^^Because--one- uf tilif^pretosme^----that^we-, vear^rS- our==^Tlitry,^~Tfesp{Tna~t:o a-^sry-^~ -~rrr^cpze=ssrr^e nctivr markrdrplTinr^TTn inrTnntrl n 'l mn1 ntHtrmrr J-Vii g i-e- ettccellssfc.. End of Side A Beginning of Side B FR: So with that Columbus facility, that will give us additional capacity for industrial maintenance type products. And we're going to really look forward to having that additional capability. The other thing we're rationalizing is our east C coast distribution. We have a distribution tihxnae in Hunt Valley A , that is getting crowded. And with the acquisition we have a t+'/d /er^2T & P S*?*?!*. lease at Lancaster^ And they -d~> r-t--i-iVm+-r.ri privnfr.a 1 nhnl hn-)ini-- oub-^grrfTTpra,.-fcgY--being- Dacotcu We're going to close that facility and we are in the process of taking over a York facility f'M/J &//{<- /(" formerly used by the automotive division. ^ -- - y PfWPP & PPP'P 'thsy-3^tTa==e5e______ aqgp_ t___V__f_iw__.._'___1_1*_1_1 ___(__M____ ijTLEL, /Pol/Pp?-7~ j-rt-npoK. rm+- nfi.^Vin VnrV fPIC j 1 A +Y~ J^a-Ti&SCSSd mOlTC that , _ atwr^6o with thr-^transpoj. l^tjxm=^servr! s ion we' re -no inci tn 1-aVtcS^r?Rp> V^-rlr --r:l rn=Ha--r,n III II I l I Xj 27 0007-S WP-0060220  -take- ggardlffcE&dugt. LIictL-rjeas ngya^-diarfarifeuted-ip- 'hp-^rf* s-ife- jrfag^raj^ya^is^pA^ul-^rl out of-Columbus and Cy^smslAiirii -- is^s to=crot Ba zSEEBt. Wei^^^fl^-ItaU'rllJuLion^ols firu~n fLL_m1titft^-i.r| hhp, also putting Sears business >1 kig&ft into this York facility, which is going to be a great -XV 7/2/*Y6/*v'f advantage 4e^sei*g^down our logistical costs. S&-~in-=t3igt=-gense, u Ah n n IQ^n, Sfea^f^7 y,ivh_j EJ^+x**, Oust /<?<?/ <s #L upri n -^#l^is to get our distribution straightened out so we optimize all our faffSPl logistical costs. gherr~ong=r^a^harvo the- foaaglac^gihaTiqgCr~9ien 1--caw* in bho end v'Ciri1 / &u l .u h i1. and- ^hird qnnrt^n,---havc-all the distribution-in place right-now. rPha*e-gnL---?J rr.^nnn--gnitixK&tt pnrrvo-Ho4ujc-+t-sc -rT:r-Lr^l- frr.rn a ma^]-Fari-hi^r-i ng &/ y^/t ~~ /?t t S-W products that should be made in Desoto plants will be A , tfLl' made in Desoto plants- 1 ; f>^lundoL^h'-rnnrn T'm | "~tTrr~1------hr /3< Ja ( /'**v 2T$ h // i-L F*V jn Orlando. AmTl'a goirvg~-ta moke p^11 ^^rr, JtiuiHhjin 'wii,v4^wng products.---camrari^^fc,--in nwkis tfa?ypr p~ty g^TTnel prndnoto ealled Roa-rg ,=J,,hev-l.r^ g^ncr to maVo ^"^ustrial--giaiaitenance,^aad-they con al^o-mak^--Kg-Ma-rt n-rnHnr-t-g fuxwi --products, whtfiu xt" beitmy s- lls 6v/t C frr d-j^nk into th<r=nSdmyii-. * let their plants . /I ' where it makes sense to make our products and our plants to make their products. jchat1 s A plan for the third and fourth quarter. Because again, w| these >7 costs down and make this acquisition a real winner for us. *aser 'rhese are the things we have to do to make it a winner. AM /#/*- going to be. exciting forx1991 to accomplish all A A V*/-r 28 That's v t" 0007-SWP-0060221 INT: That's right. You're a busy man. FR: But we have fun. INT: Fred, you have gone through Steudel, Baldwin -- you didn't say much about him. FR: I didn't know him that much. INT: Okay. Steudel, Baldwin, Spencer and Breen. Do you see any differences -- was your job affected by the different administrations? FR: I have to get personal a minute so you understand what I'm going to say. I'm a late bloomer. It took me awhile to really get going in this company. I got my education the hard way, at O tr /^- night. I was40 when I got roy undergraduate degree. I went back for my MBA when I was 48 and graduated vd3S5b- when I was 50. Significant jobs and really being able to contribute, in looking back, probably didn't happen to me until the seventies. I started on a career in the seventies. I'm 59 years old, so I was in my forties before I could see myself,., 1've got a lot to thank^for^ tS8& because he gave me Bte^opportunities back in the seventies that allowed me to grow, d eHwajjiaAuwd^lRe. So with that as a perspective, yes, I see a big change. I .5u LKaL^o" contrast the Breen era, which is the last 29 0007-S WP-0060222 ten years, versus the Spencer era, which I really would be knowledgeable about, I think in the Spencer era -- and I don't mean to be critical -- but it was tough to break through and to see clear paths for people. It was fraught, in my mind, with cronyism. When you had people that grew up over the years, that went through Chicago over the years, you almost had only one channel you could go through. You had to wait for your boss to die and hope that^you're U=thafc There wasn't a lot of cross-fertilization. There wasn't a lot of opportunity. Now, Spencer used to have what he nonirl rrTl^a junior achievement where he tried to take key people and do some cross fertilization. I suppose if you asked one of them they would say fiisrf-S Z9- T&A/z/ f^/t But that was a very select few number of people that had -tehst^opportunity. The masses of people didn't know what channels were available to them for promotion. The other problem was that we got too paternal and we got too ingrained. There wasn't a lot of outside people coming into this / organization. I don't mean there has to be jfc=Jrqfc^- But I think A you've got to have a balance because you can get stodgy^--You can / get stale^ You don't see the forest for the trees. .So I think ZsrheMjfi-H'V tint got caught up in what was happening^ which prevented us from really understanding what was going on in the marketplace^in my opinion. We got caught up in thinking that we're going to / /' weather any storm and we a just pass those panes on to the consumer and they're going to keep accepting it. thffETs aTl--ugri^gg==g^fe=paf*t of r,Tha.fc-Appgr|g><4- Spencer was a 30 w 01.SWP-0M0223 brilliant man. He was a visionary in a lot of ways. Strategically, when you talked to him, I think he knew the right things to do. I just don't think he knew maybe how to get them to happen. So when Breen took over, the radical change that everybody saw immediately was accountability. And he broke the pieces up a little differently. He said, r I'm going to really hold these divisions accountable." nr We had the automotive division, the conssuummeeir division, the stores P/Kfcsc-y-S P/Cs/Sr/fti/ division, international division. A I'i^EP33me~tu InsliL Lhai.ii -people accourtfeatoirrr" And I think the testimonial to that is Tom Byrd. He was very close to Mr. Breen. Aad.U came from Gould^^gbhink^ ufacrg--Mr ttrrrn T^nti nt~ -`TnnT /*y f/ftt/t/VT C(/l/L& he troops egst the ranks, fair-haired boy, Tom S' Byrd am do no wrong. Dufa-Tearj, /t,// </\f /P/(^/^/rpx/ >/& a /*T appnaaMtHy ini`11 gait_jzaueihlrsm i a- h-fer"--n *[rny nf ilii ny 1111ITH , ,_ , /P7JC. ///#& appajjantl^--arnd -M=v^BregTi'~had- the aBxlitv- tePUrgha thalrtraid W&TyTTY fo su # /<< /-//< /J^c-/s/^sv*-- 4agapabon. Now, that's an example. So I think when people know 4-1*0 that they're going to be held accountable, and they crfftren know ^ that they're going to be rewarded^ yerg~ggB57- that's the good side. I^TTTW'j-viiil-ii'--a^shaa-fta-agr--&rlH-^i-iry^p-zr=^.e.Tja-i-l-'ip.^-- wcidr And ----------' T-owar-^e people well, but he A also carries the big stick and makes sure that you know^in doing your function you're going to be held accountable' And that has )7 permeated down throughout the organization. && I think *&58t f/n/Pt*- P#H4Sofl//y, co(s/?L<? As/ff/ / nnltrirq nhanije^feha---wac drnmata r^ fny. this company that has allowed us to be as successful as we have in the last ten yearst 7 -9' <7 /O' <T 31 0007-SWP-0060224 -pj-gnr--IIe-~aad'~^-iat--<>i of stealthy r^npl r Thank God for him. So that's the change -attar fAX^&fa--J ' v-=awtjn. A Hi y INT: You don't remember Baldwin at all. FR: In those days we used to say that Schroeder really ran the company. -Tfcun^i^gr) . 5Ed Schroeder was really the power Hfje.otvni" Afien/T in the company back in the Baldwin -- I don't A really have any clear vision|f. INT: Fred, what haven't I asked you? What haven't we covered that we should? FR: I talked too much about myself. INT: No, no. We got a whole different perspective from that that's very valuable. FR: I think one of the key things is that the traumatic Of ^ ^ ^ 7^r, /f /V/// /*/ gTPWth .. had to be attributed to a lot of good people that wer^here. That might be self-serving from my standpoint, but I truly believe that there was a middle management cadre that was & A- t< " CJ-t good management pagqste. And I heard Breen say that one time- He /frc/(<7 J even naaaapEuLacd that that's one of the reasons he took the job. 32 0007-S WP-0060225 -ttj* - ilMtT^rtri im. whpl-hflr tu*-i i1< . I'li> jnhr: 4^asCgjrt5^netf~77,bh&fc it~ vmn't thi <* mviHurrrtiTffrcnwTKii ^p-vight flTslm fit HiU.--yan Vnfflfi *t T.rn--Tn-->yV,n r-nmr>~uM>e-***>--+r.p And I really believe that, because a lot of the people are the same from the seventies.*-- They're still here today. There are a lot of new people that have come into the ranks and I think that's healthy^ But I think it's that mesh .and ifest ability to work together with J > A t/t&f &UaKss? r, 7 Zh/V/^Ut- Q&xs common goals and objectives nrt-T~Tfni.d> hninghuli -aeeoaafcnblii -and wlH'Jrng to be held..uccoui liable Lu auliiovo what we c&n We've done tremendous things. It just started. We wanted -a*architectural business. With tds* acquisition we're * Z) about 19% market share. We want to be 30%, 35%. There's no reason we can't be. There is nothing that can stop us from doing that. And that's what's exciting to me. Winning only breeds what? Winning. It makes people feel good. What's the -2- alternative? JHte don't like the alternative. / iBa ..don't like to A lose. 1 `UiH'i1 be lys^_. I like to come to work and be excited, get ^Ste^paaayke excited^ Let's get on with it. Wa con s&laee-Ai'mte=pgCbi<iint alTcfxtu' uommthiny'glBe'; And that's the atmosphere I think you find around here today. So, winning is / A/a wonderful. Because there is alternative. cr^e __ . A "tXw" Wrt'vw again. I'vefeeKi too many^cycles ^ d-egss* I want to stay on the track going up. And I think there's no reason why this corporation can't do that. It's all people. It's people and it's trust aad^i^s^BaafifelitaoB hn~rinrr yo^ZL <ynn *v \/ * +/^ j<^isiPy,~daDLes^^^TlI7C ^e^^aeael. If you can't get tiacfe job done 33 0007-S WP-0060226 then sometimes you've to make the hard decisions. I don't like to make those decisions. I don't think anybody likes to make those decisions because you're effecting people's lives and their families^aml nil Uni" youil But,for the entity and . <j the perpetuation of the entity and for the good of everybasi^, sometimes you have to make hard decisions. And I think we're willing to make those hard decisions wirth today, where I don't think we were willing to do that in the sixties and seventies. INT: Do you have any pictures? We've got the book coming out too. Do you have anything? Pictures of meetings? How about the setting up of the management information system? Do you have any candids or something like that that we can show some of these people? FR: I could look through my scrapbook. INT: You've got scrapbooks? FR: I don't know. There may be some work-connected photos I can pull out. I'll take a peek at them. 7 INT: Good. Then we could copy them and give them back to you. FR: Let me look. I'll be glad to look. 34 0007-S WP-0060227 INT: Great. Fred, this was really helpful. FR: Was it really helpful? INT: It really was. 35 0007-SWP-0060228