SPS: Success Burgeons from Small Beginning

California's famed giant sequoias start out as a seed no bigger than a grain of wheat and often grow to a towering height of 300 ft. with a basal diameter of abut 35 ft. Likewise, SPS, Alpharetta, Georgia, started small-occupying only a closet-and has grown to be the largest orthotic and prosthetic distributor in the United States-by at least one outside estimate, possibly ten times larger than its nearest US competitor. How did SPS grow from a Lilliputian to such gargantuan proportions? The distributor, a wholly owned subsidiary of Hanger Orthopedic Group Inc., Bethesda, Maryland, can be said to have been built on a three-sided platform of customer service, sales expertise, and business savvy. The 55-year-old company began as part of the J.E. Hanger group of Georgia, also known as Hanger Southeast, as a bulk purchaser, since manufacturers sold more products direct to facilities then, said SPS President and COO Ron May as he traced the history of the firm in an interview with The O&P EDGE . SPS began purchasing for all Hanger Southeast-owned facilities at that time, but began to grow as demand increased from independent O&P companies as well. Transportation from major manufacturers and suppliers was slow in the 1950s-often taking several days in transit, so a central warehouse, located in Atlanta, Georgia, at the time, made very good sense. May joined the company in 1978 and the company opened remote distribution centers, with the first being in Dallas, Texas, in 1979 and a subsequent center in Chicago, Illinois, followed by facilities in Paso Robles, California, and Orlando, Florida. Thus began SPS' first growth spurt, since these centers were strategically placed to serve customers more quickly in various geographic regions. J.E. Hanger Acquired The history of SPS took another dramatic turn when J.E. Hanger was sold to Hanger Orthopedic Group, Bethesda, Maryland, in 1996. Though unrelated, both companies trace their lineage back to James Edward Hanger of Churchville, Virginia, the first amputee of the Civil War. In 1996, the Thranhardt and McKeever families, owners of J.E. Hanger, agreed to sell the company to Hanger Orthopedic Group for $44 million in cash and one million shares valued at $5 million, reported Dean Anason in the Atlanta Business Chronicle October 4, 1996. Senior management team members Ted Thranhardt, CPO, and his uncle, Dan McKeever, CP, also served on the Board of Directors of Hanger Orthopedic Group. Thranhardt still serves on Hanger's Board; McKeever died in 1998. Together the companies then had revenues of $110 million-$120 million and operated 174 patient care centers in more than 30 states. The two companies overlapped in only six cities, the Atlanta Business Chronicle reported. J.E. Hanger was actually the larger company, with 93 patient centers in 15 Southeastern and Midwestern states. New Strategy Drives Growth In 2001, SPS embarked on a new strategy. "We wanted to differentiate ourselves, have our own personality," May explained. "We focused on where we need to be as a distributor in the future. We realized that relationships are the keystone of business, and we wanted to continue building solid relationships." SPS created a distribution sales team of about six people. Up to that time, Connie Withers, vice president of Sales, had "pretty much been handling that on her own," May said. "We also wanted to become more of a partner in education to our customers." To that end, SPS offers in-house training sessions, often in conjunction with its supplier partners. The company also has an American Board for Certification in Orthotics and Prosthetics (ABC)-certified prosthetist/orthotist on staff to support customer service by answering customers' clinical and technical questions. "Our sales force calls on independent companies, not Hanger facilities," May said, "and represents SPS at the local, state, regional, and national O&P organization meetings, plus making 35-50 calls a month on independent facilities." How much of SPS' sales revenue comes from independents? "About 33 percent," May answered. "For the last three years SPS has averaged 13-15 percent per year growth in independent customers." This year has been a particularly good year for SPS, which saw sales increase by a whopping 30 percent over the same period last year. SPS has grown sales to independent facilities by 50 percent since 2003. At the end of 2003, SPS had sold $35 million to independent facilities; by the end of 2005, independent sales had grown to $45.6 million, and are heading to a $55 million year in 2006, May said. Sales to Hanger facilities in 2006 are estimated to be around $75-80 million, he added. Other than some growth in Canada, May does not expect growth in other countries. "There are two reasons," May said. "First, there's plenty of room for growth within the US; and second, many of the suppliers we represent have individual distribution agreements in other parts of the world and we might be infringing on those." "Our emphasis is not only on great customer service, but we are also building SPS around proprietary products," May continued. "So for the last several years, we have been forming partnerships with companies like Ossur, Freedom Innovations, and Medi of Germany-their products are only available in the US and Canada directly from the company or through SPS." The company also provides workshops on Hanger's new proprietary products, such as the WalkAide® from Innovative Neurotronics. "We show why products such as the WalkAide are needed in the marketplace and how these products can help these companies grow their practice," May said. As the future, May sees industry growth in orthotics "across the board," plus growth in prosthetics from advancing technologies. Internal Technology SPS aims to be a technology leader not only in its product offerings, but also in its efficient and sophisticated internal system, May said. "We have been fortunate in obtaining a state-of-the-art wholesale distribution software system that basically can make us a freestanding enterprise. This system enables us to look at our inventory in all warehouses, where our levels are, and also the custom pricing for each customer in regard to individual products." Sales, Savvy, Education Sales-having an energetic, knowledgeable sales team, savvy-acquiring exclusive distribution rights and building solid relationships, along with an efficient internal system, and education-offering product and business workshops to customers-have all contributed mightily to SPS' growth. SPS' formidable distribution power gives it strong leverage in distribution agreements, including some with large manufacturers which give SPS exclusive US distribution rights. The company's size and customer base of both Hanger facilities and independents can assure manufacturers and suppliers of a vigorous market for their products. SPS also is able to "obtain appropriate discounts" from manufacturers in view of the volume of business, May said. SPS offers customers volume purchasing discounts. SPS' value purchasing plans are a tier of discounts based on quantity bought for companies that don't commit to a certain volume, May explained. There are also volume purchasing plans based on annual purchases. Guidelines are posted at SPS along with catalog orders, he added. The company also is willing to negotiate on large-volume purchases, May said. Logically, Hanger-owned facilities obtain higher discounts than independents, although Hanger Orthopedic Group did not confirm this. However, May noted that "There are good independent business people who have put together large independent facilities or multiple facilities under one ownership who have really good purchasing power. We want to reward those customers who bring a significant volume of business and pay their bills on time. There's a lot of pressure on our customers in the industry, and it puts pressure on business aspects as well." Customer Service Cornerstone But the story doesn't stop with size and savvy. SPS has built much of its success on outstanding customer service. SPS customer service follows two channels, May said: the first being building a good relationship with the customer through SPS' sales team and customer service team on phones; then the second, which is "delivering what we promise." SPS inculcates commitment to outstanding customer service in its employees. "When new employees come in the door, the expectation is for them to live up to what has been established here," May said. "I preach in orientation sessions that customer service really starts with every position at SPS-'360-degree service,' we call it." SPS pays attention to detail, even in small things. For instance, it includes tasty buttery chocolate mints in packages it sends to customers. SPS also values its employees and rewards them with recognition for accomplishments. Scholarship awards (see sidebar below) are set up for them and their children. Not surprisingly, employees tend to have long tenure with the company, with sales, operations, finance, and IT senior management averaging 15 years each, and the customer service team members in three locations averaging almost seven years each. Formula for Success Thus, SPS' success can be summed up as "3-S's": Sales, Service, Savvy-along with perhaps a fourth: Serendipity-and one "E": Education. And not to be overlooked is SPS' commitment to customers. As May says, "We do what we say." SPS Awards Scholarships The Operating Committee of SPS, Alpharetta, Georgia, has announced the recipients of the 2006 SPS Scholarship Awards: Jolie Davis , an SPS supervisor in the Receiving Department, received the top honors, a $1,000 scholarship. Davis will be attending Lanier Technical College, Oakwood, Georgia, majoring in management and supervision. She is projected to graduate in spring of 2007. Dorothy Taylor , a material handler in the Alpharetta Distribution Center, received a $750 scholarship. Taylor attends Georgia Perimeter College in metro Atlanta and is pursuing a degree in nursing. Brittany Ann Kvalsten , daughter of Per Kvalsten, SPS' purchasing manager, graduated from Milton High School, Alpharetta, in May 2006. She received a $750 scholarship and is attending Kennesaw State University, Kennesaw, Georgia,pursuing a career in neonatology. Her goals are to care for and help heal premature babies and those born with health issues. Recipients were chosen on the basis of their cumulative GPA (for college students) or highest combined math and verbal score on the SAT exam or converted ACT scores (for high school applicants). Eligibility is restricted to full-time employees or their children who have either matriculated from high school in 2006 or were actively enrolled as full-time students in an accredited college program. "We are gratified to be able to honor the high achievements of these individuals and assist them in the pursuit of their personal education goals," said President and COO Ron May. May continued, "SPS takes great pride in recognizing their successes and celebrating their achievements with their family and friends."

SPS: Success Burgeons from Small Beginning

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SPS: Success Burgeons from Small Beginning

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