Dg MacPherson – SVP, President – Global Supply Chain and Corporate Strategy
W.W. Grainger (GWW) UBS Industrials 1x1 Conference May 3, 2012 11:40 AM ET
Last but not lease this afternoon we have Grainger. Grainger is a $15 billion market cap distributor of maintenance supplies, MRO. I think this is actually a very compelling story. I think it's actually one of the most compelling organic growth opportunities across the industrial landscape right now. Grainger competes in a large, highly fragmented market with far superior financial and managerial resources relative to many of its competitors. Currently it only has about 5% market share and so I think the amount of organic opportunity is really just substantial. A couple of things that strike me as I looked at the company over the past year is just the kind of stepped up aggression with which the team is going after this operating whether its adding products, expanding the sales force or moving more aggressively internationally. And I think just a level of operational excellence within the business also has just clearly stepped up under the team which I think is really and it comes together over the last four or five years. Add to that an excellent balance sheet, high return on capital and superior cash flow and I think you have a pretty compelling investment opportunity.
Here-to-date can you tell us more about the Grainger story as Dg MacPherson, DG runs supply chain for Grainger. And when you think about a company that adding 50,000 products every year and has been doing that for a number of years, while keeping inventory turns flat and continuing into a service levels, I think Dg and his team deserve a lot of credit for that.
Also joining me up here is Laura Brown who is the SVP of Communications and Investor Relations. And with that, I will it over to DG.
So good afternoon everybody. I realize I am between you and the end of the day. I will spend probably 20 minutes giving you some background on Grainger, on where we've been, and more importantly where we're heading and then open it up to questions. I wanted to focus today really on what we are doing to grow the business, what we are doing to expand margins and I guess I would say I have three main points. The first point is that we have an extremely strong foundation, upon which to grow. We have perfect customer service; we have a strong supply here, a strong IT systems, all that taken together allows us to grow and to obtain leverage when we do grow.
The second is we have a set of fairly simple but powerful growth initiatives. These are initiatives that we have been executing over the last four or five years, none are new. The exciting thing is we have a lot of headroom with each of them. So we are nowhere near those initiatives. A
And the final one is that our expectations remain unchanged in terms of providing exceptional returns to our shareholders.
So with that, I will do the exciting forward-looking statements. You can read the ready prose on your own and I'll move on fairly quickly. So for those of who are not familiar with Grainger, we are an industrial distributor. We distribute industrial supplies. Our main reason for being is to help people who maintain buildings, facilities, operations, who keep them and running to keep the people in them safe to make sure that those people can do their jobs. So that's the whole reason for our existence. We saw pretty much everything, we sell pump, motors, safety viewers, lighting, cleaning supplies, you can probably not find it in an industrial category we don't have an offer.
And as Bob mentioned, our market is quite fragmented. When you go and compete in our marketplace, two thirds of the competition are very small distributions who have typically long lasting relationships with one or two customers and so there is a lot of opportunities here to consolidate the markets. And the company was founded 85 years ago in Chicago where we're headquartered today. And over that time, we had established an exceptional brand in the industrial space and that brand in the US stands for great service, high quality products. We also have the Acklands brand in Canada which is a billion dollar business. The brand stands for the same thing. So our brands have been built up over time based on providing exception service to our customers.
Historically we have been US focused and we've seen that change over the last 15 years, first with the acquisition of Acklands Grainger in Canada and then more recently a more aggressive international expansion. International, other than US sales have gone in the last 10 years from 10% to 25% of our total.
So a few step back and talk to customers, 10 years ago of ours and you then you talk to them today, what they said they cared about were largely mainly remains unchanged. Have the products that I want. Have them where I want them in the time frame, I want to help navigate from whatever this need is, something's broken. I have to get from that needle solution. Make it easy for me to do business with you and that would have been a theme 10 years ago when I think those things still hold true today. I will say that the (inaudible) station has changed pretty dramatically with our customers. Large and medium sized customers are now more than ever asking to help them lower then costs, to help them manage their cash, to help them prove that we add value and that is a consistent theme. And so a lot of the actions we're taking a really focused on serving that customer need.
The other thing you hear is that e-commerce has become obviously a bigger part of our business. Its 27% of our total business, we'll talk about that later.
The other thing I point to is the battle for market share, has moved from retail, wait for the customer to come, to go on side the customer's side. The battle has moved on site more of our customers are asking us to help figure their operations so that they can save that time, save that money and make things easier for them.
Some issues our customers care a lot about today. Virtually every market we participate in are safely, how do I keep my team members safe and the environment. How can I purchase products, use products in a way that makes me a good steward of the environment?
And finally I'd say that we are starting to get some early, initial request to serve some of our most sophisticated largest customers, cross border. So early that we're starting to figure how to configure ourselves to do that. And I would argue that our sense is really based on delivering to those basic customer needs and never failing customers have the right products, having the middle medium but also serving these new leaves very, very well into the future.
So in terms of customer end markets, we serve a very wide base of customers. We serve all industries. To some degree its unhelp to look at our industry mix because we also serve virtually every buyer within these companies. So a lot of the battles takes place at the individual buyer level. As you can, we have millions of customers. We do $8 million of business this year but we do that $250 at a time. So I think that's an important point today. As we view $8 million of business but we drove a 100,000 transactions a day. The way we configure transaction at our IT systems, our supply chain, all of that have to be built on having a tremendous transactional service. And we deliver that every day through a great team of customer service, and supply chain and sales in the entire organization.
So before I talk about what are our initiatives, let me talk about where we play. Job one for us is markets in which we had a leading share position, where we're profitable, where we're growing and where we can grow more. That would be North America, Canada, the US, Mexico and Japan we have a great business in Japan as well.
The second priority for us is to grow internationally and there are really three areas we have worked those upon. One is Latin America. In many of the Latin American markets we can leverage the products we have in the US, in the supply chain we have in the US to provide replenishments in those markets and help those markets achieve profitability and growth. We recently acquired a small business in Sao Paolo Brazil, that's our first foray in the zone; obviously we are excited about that market. We're excited about it because as a heavy manufacturing base, heavy resource base, we have a lot of success building those types of customers. They have a nice infrastructure and obviously it has nice growth (inaudible) since long term.
Another priority for us would be in Europe. In Europe last year and at the end of August, we acquired Fabory. Fabory is a business that stays out of the Netherlands. It is primarily a passion of business. It does business 55% of the revenue within the Netherlands and Belgium. A good portion of the revenue is also in Central Europe, particularly in Poland and Czechoslovakia and that business offers us a number of things. It offers us the ability to understand the passion of business and to improve our purchasing process. It allows us to provide expertise to Fabory to help them grow their product line and expand and it really allows us to get into Europe and European markets better. Our priority there is first to make Fabory a success, to help them grow, to help them improve profitability.
And finally I would point to Asia and two small businesses we have. One in China and one in India, both are very small, both are learning how to be successful in those markets but obviously given the size and potential for those markets, we want to have business with it. Well those are our priorities, that's where we play globally.
Also want to about results. Real quickly, our first quarter results, I am sure most of you saw this; we had a great first quarter, sales up 15%, operating earnings up 15% as well. I'll give more context to that, just a bit later.
So what are focused on? We're focused really on five things. The first, in most markets we participate, we want to have a product and availability of finish. So if you are a customer, and you are trying to figure out what you need, the interesting thing about this business is things break, all the time. And you ultimately know when they are going to break. So as a customer if I need to go find something, I need to go to a supplier who has a very broad product offerings and over the last five years we've really worked on that. So I'll talk about that in a minute, but that's one of our priorities.
The second one is customer coverage. We want to talk to customers in ways that they want to communicated with. We want to have the sexiest profitable customer care.
The third one is inventory management. And when I say inventory management, I don't mean the inventory management that my group tells you to figure it out what a good products. I mean customer inventory management. So helping customers manage their inventory. This is a very messy category. If we ever go into a tool clip, this can be absolute chaos. There's going to be stuff all over the place, stuff will have dust on it and we are really focused on helping our customers manage through that problem.
The fourth is e-commerce. Obviously e-commerce has become a bigger portion of all offer and a bigger portion of the world and we are working hard to make sure that we make the right investments there.
And the last one is supply chain and IT still. So we want to make sure that we get operating leverage and competitive advantage out of the moves that we make. So I'll talk about each of these in turns.
First product line expansion. I would say that we made a radical strategic shift about six years ago in the business. We had a bit of history where we're had product lines in the US, that was about 80,000 cubes. What we found was that in the product customers, we're very excited about working with us, but often times they went through our competitors because we didn’t have the breadth that they needed. So we have expanded our offer from 82,000 items to this year's catalogue of 413,000 items over five years and we have been aggressive in making sure that we add in areas that our customers feel about. The feedback from customers has been terrific. We are meeting more their needs, we're spending more of the time to our customer needs and we've done it in a way, as Bob was saying, what we haven't actually had reduced inventory turns. And that's been a combination of managing inventory and wasting on inventory better but also changing our deployment modules to making sure we don't take initial stocking list with new items.
So this is then a big driver of our growth. The exciting thing is there is lots of room to continue there. If I look at the ads we made last year, they were actually more productive than any year before on an individual basis.
So that was a good sign that we had a long way to go. We feel like we can get well over 1 million products in the offer for a customer units at stock price (ph). We want to make those available to our customers and we plan to do that over the next several years.
I mentioned a little about the inventory turns situation. If I look at our DC network in North America, the way we describe our DC Network is we have an advantage in terms of the recent opportunities. A few years ago we changed the way we thought about our distribution centers and we went from a time of absolutely availability to making that a competitive store. Basically we ask ourselves do we have more products close of the customers and our competitors, pretty simple, pretty basic but we did that so we had some gap diluted to create larger pools of inventory in a number of sites and you need a big investment to do that.
The Greendale South Carolina facility, in 2009 we made investments there and we went from being able to sell, we sold 100,000 items and now we can sell for 50,000 items at an existing 1.2 million startup (ph) facilities. In October we brought up an 825 new start up facilities (ph) in California. This facility completely changes our competitive position and the west coast to the U.S. needs to have a bit of advantage in terms of the breadth of offer that we have and that startup has gone very, very well and then we are in the process of transitioning from two old buildings in the Chicago area to one building that's 1 million square feet, who had the capacity to have 0.5 million or more items and it will certainly (inaudible) those slow moving items as well as serving the regional items that are regional tissue (ph) cargo.
So we're making heavy investments and the other thing I'd point out is our Canadian business very successful, over $1 billion, growing at 15% a year. That business, we have some investments to make to basically catch up to that volume. We're going to be adding capacity in both the west and east coast building, somewhere on the west, in the Toronto area and then we'll go into domestic (ph) building that, that's a business that is very resource income proof, meaning it's focused on the Alberta region, the Saskatchewan region focused on the mines, the oil sands, forestry, and we're centered until those volumes are there (ph) and we need an investment in both the west and the east to keep up with the growth.
In terms of customer coverage, I would point out that when we had a sales rep assigned to an account, we get more than twice the penetration for those customers when you, when you don’t have a sales representative. The point of course is that sales coverage works. Our customers are looking to navigate the different solutions that are available to them and one of the big changes in the business over the last 10 years is then changing the conversation that ourselves that we're having with our customers to sell the entire value proposition, the entire breadth (ph) of offer and to help push solutions at inventory management.
We have also been very aggressive in terms of adding sellers recently. We added five over the last two years. We've added 500 shelf stores focused on mid-sized customers. We have several tiers of selling. We have national account sellers, account managers and what we now call territory sales reps. These reps have given a larger package focused on mid-sized account. We love what we're seeing. Let the growth wait, we like the profitability outlook and a chance for us to have better conversations with those customers and provide more impactful solutions for those questions.
We expect the TSR, the Territory Sales Reps to add 1% to 2% growth over the next few years and they should be profitable very quickly. You should expect us to continue to add sales coverage. Sales coverage works. It should be consistent. It's going to be a huge amount. So we're going to continue to add sellers.
The third growth initiative in inventory investment. I think if you go back to what I described which is a chaotic tool crib, I think you'll probably hear most from customers that helped me with this, how can I live good (ph) and this is right at the forefront of that.
So we had a suite of solutions that are available for help. People get control of their inventory, maintenance workers who control their inventory. They can range from putting in bins of labels and each stock doing those bins on a regular basis to having dispersive machines to have a labeling system. There are simple. They are letting them stand their own and do it themselves. The point is we want to lead with conversations with customers, how can we make their life easier, how can we make it better and each stop is right at the forefront of that. We are very early in the process.
We have 14,200 customers in the U.S. on these stocks. We're going to have many, many more than that long term. This works in any geography. We have a lot of construction with installations in Canada. We have them in Mexico. We're putting on all over, every business we're in and this one but we have a solid inventory management system, the customer growth at twice the rate of those (inaudible). So this is a way for us to create value for our customers, to show value, prove value and become much tighter and more intimate with our customers.
E-commerce, obviously E-commerce has become more important in the world in the last 10 years. We were very early on in E-commerce. We actually started in 1995. So we got out in the front of this. A surprising factor, we are the 15th greatest retailer in the U.S. I don’t think we would have known that until we saw that to be honest but we see this is so integrated with our other channels that it's just part of what we do.
This is our most profitable channel. Every time we sell something for e-commerce we are slightly more profitable (ph) to 40 (ph) basis point than through other channels and the point here is that we have redoubled our efforts to become absolute best business to business e-commerce site.
E-commerce for us ranges from wiring our purchasing processing with our customers approaching the process. Sometimes customers want their front end to guide the process and we will do whatever it takes to make that simple for them to do to basically having the best experience in some of the direct loads into ranger.com (ph) to basically being in the search grid. We are also implementing, we've done a lot to invest both in the platform, improve functionality, things like guest checkout. This week when we life we had more consumer type functionality than we ever had. We're also implementing some mobile applications. So we now have the mobile applicable with customers to get on, they can find a product, they can hold the product. So we are investing in people, in capital, in resources to make sure that we win the e-commerce bid.
In terms of skill and leveraging skill, we have had a lot of success the last six, seven years in terms of driving profitability. Our operating margins would expand at 390 basis points during that time. The good news is that many of the leverage that had driven that are still in place today. We worked very hard to make sure we get purchasing leverage across our business. We're expanding private label, we are running the supply chain across North America as one unit and getting efficiencies there.
We're working hard to make sure that we take functions that could be consolidated and consolidate them making sure to have front end business for each of our businesses accustomed to that market so you could win in that market and we're serious about lien and saw continuous improvement. We have expectations for all of our processes that they will get more efficient every year and we have been very successful in driving that way, in improving the service we provide to our customers free through the continuous improvement process I would also point to the America's SAP project. I'll talk about that in a minute.
So in terms of expanding margins, there is a number of activities we have and one of the points, the first one is in purchase and sale. So we are relatively new to being a global entity. About three years ago we started looking across borders at places where we participate and looking at what we buy and how we buy and the cost we but it at and we have a lot of success in improving the assortment across borders and improving our cost position across borders.
So one example of this, we looked at the air compression market last year. We were able to save a little bit of money which was nice but were also able to improve shipping performance. We were able to leverage a supply on Canada to improve shipping performing throughout North America and we were able to improve the assortment. We added well over 100 in Mexico. The point of this is we are now doing this on a consistent basis, especially across Canada, U.S. and Mexico. We're looking at our assortment, we're looking at our cost, we're looking at the supply and saying how could do the best for all of our customers.
This has been a big benefit for the business. Global sourcing is the second thing I think I'd point to. Our private label is about 25% of our office way across the business. About half of that is what we call direct source with source from low cost countries. We expect the private label to grow 25%, up to 30%. We expect the direct sources to go from about 12.5% to 17%, 18%, 19%, 20% over time. We've been growing that about 1% a year.
The nice thing about that is we have a process in place to ensure that we have right engineering work on the front, we have quality suppliers give quality products and flow those into our businesses and those products are a much higher margin, 60% more margin to our business. So we have a lot of opportunity to expand gross profit. Taken together these activities have netted about 40 basis points plus over the last several years in gross profit improvement. Going forward we expect them to improve gross profit, not at that level, more like 15 to 20 basis points a year but we really are excited about our ability to continue to expand margin.
We are now in the process of taking a very serious look at our information system. Our businesses in Canada and Mexico require system upgrades to support the growth and size of those businesses now. In addition we expect to move to consistent processes across our business particularly in the supply chain. So as a result we're taking two actions. One is we are going to move to a single America's FAP (ph) implementation. We're going to leverage our successful ESSAP (ph) system into both Canada and Mexico, what could be done to spec that out now and we will implement that over the next several years.
We are also aligning two supply chain systems across the Americas. In particular we are already migrating to a common beta repository. We're going to migrate to a common inventory management system and we're going to migrate to a common warehouse system. All of those are actually critical systems for us and getting to a common platform will really allow us to leverage our sale to drive system processes to deliver value to our customer and ultimately to improve our operating profit. We're really excited about what we're doing on the system front.
Another thing that's relatively new to us, simply new to the global space is sharing best practices and again three years ago we saw started working hard to share best practices across the supply chain activity. For us that means getting the absolute best activity we can out of product management, inventory planning, transportation, BC operations and network design. I'm not going to talk about a lot of stories here. I will just say that we have aligned processes across inventory management, across Canada, the U.S. and Mexico and we have several examples that we've garnered and which help stabilize BC operations outside the Americas and help those businesses get the most of their space and get the most out of their operations and we really are capable now of helping businesses around the world with the absolute best performance that we can get.
So I'm going to go through relatively quickly the financials. We just did an update and there is really nothing new in the financials. For 2012 our estimate is that company sales will 12% to 14%. 9% to 11% of that is organic. Most of the remainder if not all of the remainder of that is acquisitions and really Fabory is the big game there. So that is not new news. In terms of full year guidance our expectation are the sales will be $9.1 billion to $9.2 billion. Our earnings per share will be $10.40 to $10.80 and what that implies from an operating margin expansion is about 50 basis points this year.
So just keep in mind that Fabory which we acquired at the end of August has lower than average company margins and so up until we get the acquisition day we're going to have a bit of headwind on margins in Fabory. In addition we made a lot of investments though the fourth quarter of last year and the first half of this year and those has also been a bit of headwind to earnings. So our expectation is that we will hit these results and our margins will be higher in the back half of the year than they have been in the first half of the year.
In terms of cash we have great operating results. We have strong cash management, balance sheet management and as a result we generate a lot of cash flow. We see here our cash generation for the two previous side of the period. I guess noteworthy as we are generating a lot of cash in the second five year which probably is more important in this group two thirds of the cash that we generated has gone back to shareholders and as we look forward we expect that to continue, we expect to fall about a third of the cash flow into the business, the bulk of those investments are likely to be in distribution centers, information to some and ongoing management of the business. There have been two thirds we have been fairly share buybacks having but we are just announced 21% increase to our dividend and our expectation is we will grow the dividend rate faster than our earnings rate.
We will continue to get two thirds probably higher share back over time what we thought in dividends. In terms of share buybacks we have a long history of share buybacks and we over the last five years we have returned 2.1 billion to shareholders, buying back almost 23 million shares at an average price of $91. The time here is that we are not finding the markets, we are buying back shares when we have access cash, we try to keep $300 million of cash on the balance sheet, plus or minus a $100 million until we have access cash we are in the market.
And our expectation is that we will continue to be in the market and we will buy back shares.
In terms of total shareholder return, obviously we expect a strong earnings, we expect to have, continue to have a consistent strong dividend and that not surprisingly puts the very good total shareholder returning looking forward over the past five years a total shareholder return has been 24%, so our expectation is that we continue that going strong for the (inaudible).
In conclusion, we have an extremely strong foundation. A supply chain, our information technology, our people, our customer service all give us the ability to grow this business, to grow this business profitability to get operating leverage as we rebuild the statement. We have a very short number of growth initiatives, those growth initiatives are simple. We have been executing them already, they have been successful and there is a lot of headroom on each and every one of them and we have an expectation that we will continue to provide very strong historical, very strong forward shareholder returns.
So, I will stop the formal presentation and take any questions you have now.
Maybe I will just kick it off with a couple of questions, one is that quick one on the distribution footprint, you mentioned getting to a million queues I think over the next three to five years or so, how much of that will be in the U.S. and you contemplate being able to handle that with the footprint that you put on the slide there.
So just a clarification so we have 800,000 used in (inaudible) offered today, we only saw about 400,000. So having more than a million is (inaudible) stock of more than a million these stock, these old stock (inaudible) so our expectation is that we will present a very broad offer and I don’t have to man these software.
And then I was wondering if you could give us an update on the TFR initiative the territory sales reps I know that it's so fairly early innings for you has been added for in a real earnest for a few quarters and I am just curious, A, kind of what’s the pitch that’s working, how is it resonating through certainly not kind of pitching price, what’s maybe now working is well kind of how we tweaked as you have gone along.
Yes I think the thing that we continuously hear and see that from our TFRs is that customer was very, very open and accepted Grainger as a brand, as a supplier often times they will say things I didn’t know I was big enough to get a sales rep and then we are excited to keep company show the first one, I think the pitch we have done in saying we have the largest customers we are going to help new save time, save money, say talk this and talk this and we do like something in this phase and so that pitch has worked very, very long. We are on at but it's not about pass so but it's the latter group we implement it. We have a passive property ability in growing that great, so we are really encouraged by what we see.
This is (inaudible), really good insight into what’s going on in the U.S. economy. Could you share as much as you're patent, what you see at the moment in terms of trends, strong errors but weak errors that are improving.
So, I can share it at very general level one thing I would say we are a good indicator of kind of the general economic level. We don’t have much exposure, I have been asked several times today about exposure to consumption and what we are mainly doing maintenance. So yet that we have learned we not really talk, I think the economy in the U.S. is doing reasonably well. You know we don’t expect significant tail winds from economic growth over the next several years. I think we expect modest growth and that’s where we are getting today.
In terms of statement’s, United Manufacturing had quite a run that it probably will tell whether that run was off 2009 and it's still just gone through that but certainly manufacturing has been strong. Many of the commercial accounts has been strong which includes things like cost developing and hospitality. So, I think overall the general level of economic activities to begin that not willing.
Could you maybe elaborate to the level you have been on your international strategy, your compared strength in the U.S. is also your distribution network which you should be closer to your customers. Will take the huge amount of capital I would thought that penetrate in Asia and Europe, so how would you do that how diluting the returns of the next few years.
Sure so I guess the nice thing about our advantage the way we think about it strategically is, we have I think we have more advantages and solutions that work in the U.S., it will be a great customer relationship, customer tendency (ph).
But on that specific advantage that really is a competitive sport so if you are on a smaller market, you don’t need to infrastructure, you don’t need to any items to have an advantage there its part of this. So we feel the Mexico business very strong business, great team, grown that profitable, they under stock 80,000 items and the top position isn’t quite as we are in Mexico so we have to see the volume rise for competitive step. So sometimes it's not as complicated as it might seem to get a competitive advantage on the distribution side.
My question was on pricing, how do you price your products when you buy something from the manufacturer then how do you sort of price them to be comfortable, because you talk in terms of margin expansion, you have talked of purchasing and you talked of IP systems and so on but how do you what all leverage do you get on pricing.
Thanks for the question, I think in general we price to the market, so we look competitively, we look at a lot of factors to understand what we think is a far price in the marketplace and we that is the way we do it, we are looking at the supplier cost as an input necessarily but we are looking at is a competitive marketplace.
There has been renewed discussion about price potential for price pressure with I think some of that prompted might depend on supply new is about how you peer pricing and you know comments that we kind of directionally on the percent of the customers that actually pay the price basically on the website.
So we have very tight relationships with customers, often times that includes pricing that is relevant to them and important to them. I would say this for the top six to seven tiers of customers in the U.S. that having that intimacy, having that relationship whether it's inventory management system or so that specific serves that’s where they really important role. So we feel like we are competitively priced to either customer sector.
Could you briefly touch on the Amazon supply launch and what that could do to your e-commerce business given your highlights as the important and growth pressure of that?
So a few comments on that, the first one is that the Amazon.com in this mix for about 13 mix (ph), they had the industrial and scientific business they have the smelltouch.com business, so they have been on our state is not new and in fact Google searches six months ago you will find Amazon all over the product for product and industrial product. So it's one of the new thing, one thing (inaudible) our online business is a lot of that business is very linked to our customer, so I meant mentioned time purchasing processes and purchasing system to our system, our e-commerce is into that, it includes customers who direct load into our site and can have their own product list, special services all included. So if you actually looked at the percentage of our business that was kind of random search it would be very, very low.
So, I can’t comment on the stat, I am not sure I fully understand it but what they thought we haven’t been squarely in what we do.
And maybe just taking just maybe a follow-up on that question, I mean I think we all been having a lot of conversation with this kind of rebranding effort is the better way to put trends on, I don’t think anyone who is necessarily concerned in the next 6, 12, 18 months but there is going to be P&L impact for Grainger but as investors are trying to think about how to dimension the risk kind of in the medium term I am sure Amazon has had reputation for a time, exhibiting trade of being an irrational competitor.
I mean just what are some of the things that we should perhaps be thinking about or keeping in mind if we are trying to dimension that risk.
I guess I will just point out to for priorities and I think if we execute against those I think we will be in a very good position, one is making sure that we have set it methodical, and availability, the second one is we sure have had absolute (inaudible) that we are creating a relationship with customers based on how they want to do business. All of this is sort of business action that we take. The third one is where is the expense if we take it to most of our customers make sure that we have an inventory management solution things that serve the customer best, that takes cost asset management dispatch and the fourth one is e-commerce and making sure that we have the actually best business to business e-commerce sites and I want to warn make sure that happens so that is our focus.
Dg, Laura thank very much for participating today and I think now we are moving on to the cocktail portion of the day.