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Lab Safety, Grainger combining supply lines

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JAMES P. LEUTE
November 20, 2008
— In an effort to prop up an underperforming Lab Safety Supply, company officials said Wednesday they will combine the business with another that operates warehouses across the country.

What that means for employment levels at one of Janesville's largest employers is unclear.


Officials of Chicago-based W.W. Grainger, which bought Lab Safety Supply in 1992, told industry and financial analysts Wednesday that the company will combine its Lab Safety Supply and Grainger Industrial Supply businesses.


While it doesn't manufacture anything, Lab Safety markets and distributes safety and other products to more than 800,000 customers in North America through catalogs, flyers and Web sites targeted to niche markets.


The company is a subsidiary of Grainger, which supplies facilities maintenance products to businesses and institutions in the United States, Canada, Mexico, China and Panama through 600 branches, 18 distribution centers and multiple Web sites.


"As you know, our Lab Safety business has underperformed," Grainger President James Ryan told analysts. " ... We're going to take more aggressive action to unlock the potential of that business."


That action includes combining Lab Safety and Grainger Industrial Supply from two supply chains into one.


Officials said the move will put more Lab Safety products into Grainger warehouses, which will improve selection and delivery efficiency for Lab Safety customers on the East and West coasts. Lab Safety, which in April employed 920 people in Janesville, also is expected to have better access to products exclusive to Grainger.


The combination will consolidate the companies' supplier networks and improve logistics and transportation efficiency, officials said.


Ryan was asked specifically if the combination should be interpreted as a phasing out of Lab Safety.


"The best way to think about this is that we're going to hold on to the Lab Safety brand, and we're going to create one infrastructure," he said.


That means Lab Safety and Grainger Industrial Supply will have one product line, one supply chain, one e-commerce operation, one catalog operation and one sales force, he said.


"What we'll end up with eventually is that almost all of the product that's in the Lab Safety warehouse in Janesville will be in the Grainger Industrial Supply warehouses across the country," he said. "When that happens, the service level on the products goes up immediately."


That statement could be interpreted two ways: Lab Safety products in Janesville will be duplicated in Grainger warehouses, or Lab Safety products will be moved out of Janesville.


Grainger spokesman Robb Kristopher told The Janesville Gazette the reality probably is somewhere in the middle.


"This could rekindle growth for Lab Safety at its core," Kristopher said. "The two companies will leverage each other's strengths."


When asked about future employment in Janesville, Kristopher said: "Based on what we know, we will maintain a presence in Janesville. We have no details and made no announcements (Wednesday) on labor levels."


Larry Loizzo, Lab Safety's president, could not be reached for comment.


A Lab Safety worker who listened to Wednesday's meeting characterized Ryan's comments as cryptic and unnerving to employees.


In July, Lab Safety bought Fort Atkinson-based Highsmith Inc., a direct marketer of library equipment, furniture and supplies. It also acquired McFeely's Square Drive Screws of Lynchburg, Va., a business-to-business direct marketer of specialty fasteners, hardware and tools for the professional woodworking industry.


Lab Safety markets Highsmith, McFeely's and other products as independent brands.


"Lab Safety is a strong group of companies, and those companies will continue to market to their customers," Kristopher said. "In Janesville, people are employed to service each of those brands."


Lab Safety got its start in 1967 as Science Related Materials, which Don and Gerry Hedberg started in their Evanston, Ill., home. The company was renamed in 1973 and opened its 614,000-square-foot facility at 401 S. Wright Road in 1992.


The Hedbergs sold the company to Grainger in 1992.


The purpose of Wednesday's meeting was to discuss Grainger's financial outlook. Ryan said the recent deterioration of several economic indicators makes it increasingly difficult to predict results.


The company said 2008 fourth-quarter sales will range from 2 percent below to 2 percent above 2007 levels, while 2009 revenues are expected to range from 5 percent below to 5 percent above 2008 levels.


Despite the slowing economy, the company said its geographic reach, sales and service network and supply chain position it to gain market share.


In 2007, Grainger posted sales of $6.4 billion.



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