In Native American legend, a vision quest holds special significance. It is a time of inner search to find the whole of one's being. Answers to questions are found that bring resolution to the challenges lying ahead.

In accepting the role as president and CEO of Memphis-based Mueller Industries seven years ago, Bill O'Hagan went through a similar journey. It was a moment of truth for the 32-year industry veteran, who was heading up the NIBCO residential division. His position was comfortable and secure, and O'Hagan was the least interested when Mueller began approaching him to take the helm. At the time, Mueller – which had been closely aligned with the refrigeration wholesale market since its founding in the early 1900s – was fast becoming part of the sinking Sharon Steel ship. Sharon, Mueller's then-parent company, was in the midst of bankruptcy proceedings, and Mueller's productivity and reputation had begun to suffer.

Following Mueller's spin off as a publicly traded company in late 1990, George Soros' Quantum Fund took control of about 50% of Mueller's common stock. Mueller stock began trading on the New York Stock Exchange in early 1991; Soros maintained involvement until mid-1993, when a secondary offering was made to new investors.

During the initial reorganization, Wall Street whiz Harvey Karp accepted the chairmanship of Mueller, and the search began for a president that would bring new life into the venerable old company. Karp felt it was crucial to gain the expertise of someone who had the right connections, the inside knowledge of product and customers, and a charisma that would drive employees to their peak performances. He found that man, after interviewing more than 100 candidates, in O'Hagan.

O'Hagan had been associated with the industry since 1960, first with the Phelps Dodge copper tube mill, then with Cambridge Lee, and later at NIBCO. "NIBCO taught me so much," he says. "I admired their commitment to reinvestment, and the trust they placed in their people. But I realized Mueller was an opportunity I couldn't pass up; a chance to put my own stamp on a company. This move has reconfirmed my belief of what you can do in an industry if you're given the resources and the people."

The first part of that equation has been masterfully managed by Karp through his recruitment of investors and the Mueller financial team, now led by CFO Kent McKee. Assembling the right mix of individuals to once again bring Mueller to the forefront of the industry was O'Hagan's challenge.

Focus on reinvestment
Financially, the company has realized an astounding return on its investments. Net sales have grown from $550 million in 1994 to more than $900 million in 1998 (and are projected to hit $1.25 billion in 1999), while net income grew from $27.9 million to $75.5 million during that same period, thanks in part to a very deliberate reinvestment and acquisition strategy. The Standard Products Division accounts for roughly two-thirds of net income. Virtually all of the company's earnings are put back into Mueller operations; no dividends have been paid to shareholders since 1991.

In fact, about $200 million has been poured into renovation and modernization projects at Mueller mills and plants over the last five years to ensure the company remains the low-cost producer. "We've established a dedicated preventive maintenance program in order to avoid a crisis-type situation," explains Lee Nyman, senior vice president-manufacturing/engineering. "We emphasize maintaining the equipment and factories because that's our livelihood. If a major piece of equipment goes down, results are going to reflect that and our customers will suffer."

O'Hagan echoes the importance of addressing inefficiencies in Mueller's equipment and facilities. His first priorities at the plants were increasing productivity, upgrading quality and ensuring reliable distribution, while at the same time becoming the low-cost producer. "We first concentrated on getting all of our facilities to what we call world-class operations so we could make a serious move into the plumbing wholesale market," he says. "lf we're not the lowest-cost producer in our core businesses, we're no worse than number two."

In 1995, Mueller embarked on an ambitious acquisition plan that brought access to new markets and manufacturing facilities. (See Chart at right) Last year alone, Mueller added Lincoln Brass, B&K Industries and Halstead to its stable. B&K brings with it an expertise in the retail and import channel (see below), while the acquisition of Halstead gives Mueller access to two additional plants.

"The equipment we bought and investments we made were probably pushing the envelope, but we felt they were good risks to take," says McKee. "We substantially improved the cost structure of the business so we could become more profitable than we had been. The results have demonstrated that success."

Thanks to these key acquisitions, the Standard Products Division has vastly expanded its production capacities over the last five years. All of these operations fall under the auspices of Standard Products general manager Roy Harris, a 25-year Mueller veteran. "When I came to Mueller in 1969, we were a very successful producer," he says. "Unfortunately, Mueller began experiencing difficulty in the 1980s, and closed several operations. By the time the reorganization occurred, Mueller didn't really resemble the company I originally came to work for. Thanks to the leadership here, we've experienced record growth and continuous improvement during the past seven years."

The primary plants for the Standard Products Division operate six days a week, around the clock. Approximately half are unionized; ironically in Fulton, the original tube mill has remained a union shop, while two new operations next door opened as non-union. Distribution centers are strategically placed throughout the country, although approximately 70% of customer orders are now shipped direct from the factory. "This is a major change from the old days, when we shipped roughly 70% of our product from the distribution centers," says John Hansen., vice president-marketing. "Shipping direct avoids the redundancy of double-handling, and allows us to be more responsive to our customers. Wholesalers have been pushing for this type of service because they want to lower acquisition costs, and the way product is distributed is a major factor in the end price."

Cultivating a core team
Besides Standard Products, Mueller has an Industrial Division that produces brass rods, copper and brass forgings, impacts and refrigeration valves, and a Natural Resources Division with holdings including a railroad and other properties. In total, Mueller employs more than 4,000, with approximately 150 at the Memphis headquarters.

"One of the major reasons we've been so successful is our people, "O'Hagan says. "They're very knowledgeable in their business areas, but always focused on the big picture. A lot of companies suffer from 'turf syndrome,' but we don't have that problem. "Part of the reason for that likely is Mueller's team-oriented compensation package, which is driven by total earnings. If the company improves in earnings, its employees receive significant gains in compensation. As O'Hagan explains, "Our people are the foundation of this company and they should be compensated as such."

When it came to assembling a key management team, O'Hagan recruited several of his trusted allies at NIBCO, as well as retaining a core group of Mueller executives and bringing on board several from outside industries. Greg Christopher, vice- president-supply chain management, had been closely aligned with O'Hagan at NIBCO and relished the opportunity to be a part of the Mueller turnaround.

"Mueller provided a tremendous opportunity for me to be a part of an organization that was implementing change in a big way," Christopher says. "I appreciate Bill's fundamental visions and core values. This company is run lean and mean, with operations focused on the customer and not on corporate. It's easy to get good people to rally in this type of atmosphere."

As the reinvestment began and the customer base continued to grow, Mueller's ability to be a reliable supplier was under a demanding test. It was crucial that the company not overextend its commitments and alienate customers who might not receive product on time. "Customers were standing in line to do business with us because of their respect for Bill; it seemed like every time we reached a new capacity milestone, the product was already spoken for," Christopher says. "We never saw daylight - we just constantly threw out personal challenges to our people and fortunately they performed."

O'Hagan admits that one of the toughest juggling acts during those early years was weighing the amount of production then possible versus the amount of business offered by some of his long-time industry friends. "When I came on board, Mueller lacked vision and direction," he says. "We had a laundry list of things that had to be done internally before we could do anything externally. There were many customers who wanted to shift business to us as a way of helping me get established. For the first three years, I had to resist those opportunities, which has probably proven to be one of the wisest decisions I made. We didn't over-commit ourselves or get caught up in taking orders at any cost. As a result, our relationships with our customers are very sound."

Record-setting production
Manufacturing capacity and providing customers with reliable service are two things Mueller likely won't have to be concerned with for quite some time. In fact, the company's copper tube mills are running at record levels. A newcomer to the Mueller team, Bruce Clements is vice president-copper tube manufacturing. He had witnessed the constant downsizing of the U.S. steel industry during his 30 years with Bethlehem Steel and, as a result, was very particular about the type of company he wanted to align himself with. After looking closely at Mueller's financial results and management philosophy, Clements decided this would be a perfect fit. "In the last five years, we've invested more than $50 million in our Fulton copper tube operation," he says. "The $33-million copper casting facility we added in Fulton will allow us to use a lower-cost mix of copper scrap and cathode, while improving billet quality. Further, the company is planning for substantial additional investments in its copper tube operations."

Once these modernizations are all in place, Clements says there isn't another manufacturer who can match the production capabilities these facilities will offer. There is also plenty of room for continued growth, thanks to a rationalization of production between the Fulton and Wynne Facilities. "Instead of making a full product line at both mills, each facility will instead focus on those items at which it is most efficient, " Clements explains. "This will minimize changeovers, reduce tooling costs and increase capacity. We'll be able to go for years before we reach the ultimate capacity of the equipment."Mueller bases its production schedule on historical values, and has been consistently achieving fill rates in the high 90s. "We drive our forecasts from the bottom up," says McKee. "Each operating unit prepares its own plan for the coming year, and its really amazing to see how motivated our people are. Our growth rates in each area have been upwards of 15% a year."

These targets are carefully dissected throughout the year, according to Larry Birch, vice president-North American sales. Each month, the company prepares a flash forecast to identify the outlook for the current month and following two months. This forecast analyzes sales by product, by channel and by region, a, well as providing total invoice information. "We constantly have a 90-day window to anticipate where the market is going," Birch explains. " We also do regular gap analyses, which identify what customers, regions and channels we need to target in order to close any gap between actual sales and forecasts."

Charting the course
Having access to such an outstanding production capacity allows the Mueller management and sales force to concentrate on customers and strategic planning. At the heart of the Mueller philosophy is communications – both external and internal.

Financial information is communicated freely at company meetings because, as O'Hagan explains, "we feel our people have a need to know." Every month, about 40 of Mueller's top management meet at corporate headquarters to strategize and communicate about various issues each department is facing, whether it be price, market trends, new business or a dissatisfied customer. There are no agendas, and no formalities; anyone is free to take the floor and bring up concerns or ideas for improvement.

"These meetings ensure we're not going to face any abrupt surprises in our business," says Birch. "It's crucial that we're all on the same page. Individual opinions are sidelined for the collective good."

In addition, there are quarterly reviews within each of the divisions, an annual management team meeting, and quarterly board meetings, most of which are held at Mueller plants. Birch also holds quarterly meetings with his 11 regional sales vice presidents.

Each region is supported by its own customer service "pod" in Memphis, a concept that was implemented in the last few years under Christopher's direction. The supply chain management team brought customer service, distribution, inventory management and production scheduling under one umbrella.

"We've come full circle since I took on this position,"Christopher explains.We're starting to see how centralizing these functions better uses our resources from the plants. Our customer service pod approach was developed to personalize communication between whole-salers and our inside team."

All strategic planning is done with the Mueller Balanced Scorecard in mind. This Scorecard, developed internally, outlines the company perspectives regarding finances, customers, internal business processes, and learning and growth. Each segment is analyzed in three ways: desired outcome, strategic objective and measurement. This formula has allowed Mueller to pursue growing customer share, growing market share and improving margins simultaneously.

Customers are the paramount concern of everyone within the Mueller organization, and because of that, key corporate and regional management spend an extraordinary amount of time in the field cultivating relationships with wholesalers.

"In a commodity business such as ours, it all comes down to relationships," Birch explains. "If you want to grow your share of business, you've got to have a solid foundation with your customers. I expect a lot of my team, because they are ultimately accountable for everything that takes place in their region. Our regional guys are the top of the line; they are the ones we trust to develop a rapport with our customers. They talk to the customers about business, market conditions, and the fact that we bring something more to the table than just price and product. If you get the business with price, you can just as easily lose it with price."

Looking to the future
Because of Mueller's push into the plumbing wholesale market, the company became concerned that its traditional refrigeration wholesale customer base might feel neglected. To address this concern, Bob Haskins will now devote his time to the refrigeration side of the business as vice president-sales. Haskins, who had been vice president-sales and marketing for Halstead, believes this will prove a positive step toward sustaining marketshare in that segment. "While we are continuing to grow the plumbing side of our business, it is time to once again place a strong emphasis on the refrigeration market," he says. "We feel there are additional opportunities to take advantage of with our expanding capacities in tube and fittings, as well as some of the refrigeration product from our Industrial Division."

No matter what the niche market, Haskins says that all customers have the same desire: consistency. Most are tired of the song-and-dance given by vendors, and just want a manufacturer to actually walk the talk. "We feel very strongly that we should not only meet our customers' expectations, but that we should exceed them," he says. "It's a continuous improvement process that we measure regularly, be it fill rates, lead times or delivery scheduling. We're constantly looking for ways to improve our performance."

As Haskins describes, none of this would be possible without the dedication of Mueller's top management. The Mueller culture is one that has been initiated from the top down. "It's been rewarding for me to join the Mueller organization because of the interest and dedication of the management team, "he describes. "To show that commitment, Mueller pledged $250,000 last year to the ASA Education Foundation Endowment Campaign. Our top executives are very interested in the industry and the position Mueller holds in the channel. They're visible at all of the trade shows and in the field with customers - they really enjoy that interaction."

With its sharply-honed focus, the Mueller Industries management is anticipating continued future growth in all its markets. Now that they have successfully made inroads in the European copper tube market and the U.S. retail and import channel, it's back to the drawing board to map out new endeavors. "Future investments are going to mean more external – and global – growth," O'Hagan predicts. "A natural extension for us to explore is the copper fittings arena in Europe, as well as opportunities in Mexico. Of course, no matter how large we eventually grow, our primary concern will continue to be our customers' interests."

B&K acquisition brings retail expertise

Strategic acquisitions have been a key factor in Mueller Industries' phenomenal growth during the past seven years, targeting companies with related products and markets that will be a complementary fit to Mueller's existing offerings.

The acquisition in August 1998 of B&K Industries is bringing Mueller's name to the forefront of the retail channel, which had previously comprised only a small percentage of the company's total sales. B&K, based in Elk Grove Village, Illinois, is the leading importer of residential plumbing supplies in the United States, primarily due to the stringent quality controls it imposes.

"We have been very dedicated to the wholesale channel," says Mueller president and CEO Bill O'Hagan. "But the rapidly growing home center and retail markets will provide us with another avenue of growth. B&K's expertise allows us to move product into that market very smoothly."

Peter Berkman, president of B&K, says the acquisition will be a great benefit to both companies. "It was a tremendous challenge to add 2,000 Mueller products all at once, get them bar coded, boxed properly, put on, computerized inventory, and just physically fit them into our facility," he explains.

B&K was founded in 1969 as a supplier of imported valves to the mobile home industry. B&K now imports product from 12 countries, with China, Italy, Indonesia and Taiwan providing the bulk.

In the mid-80s, B&K began putting together a strategy to sell to the retail market, expanding its product offering to include a wide range of valves, faucets and basket strainers. "We got our feet in the door by really filling a niche in the market that had never been there before -we had a better quality product," says Berkman. "At that time, people who bought imports were doing it because it was the cheapest alternative. Our product was in between the low-end imports and the domestics."

B&K services hardware co-ops, hardware wholesalers, home centers, plumbing wholesalers, mobile home distributors and the OEM market with a greater than 98% fill rate.

Berkman says the opportunity to partner with Mueller is a win-win situation for everyone. "Mueller made it clear that they didn't want to just buy a building with inventory in it," he says. "They respected our knowledge and experience, and wanted us to maintain our involvement. We were very attracted to Mueller because of their solid reinvestment strategy, their growth and vision. But I was especially impressed by their culture. It's not often in a company of that magnitude that you find top management who are so in touch with and accessible to, the customer."

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