View from the C-Suite: Grainger CEO James Ryan

View from the C-Suite

View from the C-Suite: Grainger CEO James Ryan

W.W. Grainger is a $7.2 billion Fortune 500 industrial supply company, based in Chicago, Illinois. The company, a behemoth business-to-business brand, offers more than a million products -- motors, lighting products, fasteners, tools, plumbing and safety supplies -- from over 3,000 manufacturers, including major brands such as GE, 3M, Rubbermaid, Ingersoll-Rand and Honeywell. Grainger markets these products to over 2 million customers in 153 countries. Their largest markets are commercial, government and heavy manufacturing.

Since joining the U.S. Green Building Council in 2007, Grainger has focused on sustainability in two primary areas: improving its own operations and expanding the number of "green" products and services they offer. GreenBiz.com's Heather King talks to CEO James Ryan about the broadening sustainability focus in the heavy manufacturing market, Grainger's catalogue of 8,000-plus "environmentally preferable" products, and how product innovations such as Georgia-Pacific's enMotion paper towel dispenser yield surprising energy, waste and labor savings.

Heather King: Grainger partners with a large number of Fortune 500 suppliers -- such as Diversey -- and a vast universe of manufacturing and commercial customers. Are your suppliers or your customers more instrumental to Grainger's sustainability commitment?

James Ryan: It's actually all of them -- suppliers, distributors and customers. Our customers are the people that keep workplaces up and running. Whether it's a government institution, a manufacturing facility, or a commercial office building, our customers are looking to get more efficient. They're operating in a more competitive environment, wherein greater efficiency helps their business become more productive and profitable. The reason sustainability's important is the combination of the economics and the recognition that it's the right thing to do. Because efficiency and sustainability are good for our customers, they are good for us.

We are also working closely with our suppliers, especially on products relating to energy and cleaning chemicals. Many, like Diversey, have been driving the shift in their own business and have pulled us in on [sustainability] customer councils to understand and evaluate ways to reinvent our products and services.

HK: Can you give examples of products that offer significant efficiency and sustainability gains?

JR: We offer over 8,000 'environmentally preferable' products. It is one of our fastest-growing product categories.

Lighting has been a big opportunity for us. Most office and manufacturing facilities have significant lighting needs. For years, we've been one of the largest lighting distributors in North America. Now, we help our customers reduce their energy consumption through more energy-efficient lighting. We've become one of the largest distributors of energy-efficient lighting.

In fact, we do more than sell energy-efficient lighting. In 2009, we bought Alliance Energy Solutions, an energy service business that helps companies reduce their energy consumption. Now we'll go into an office building or a manufacturing plant and we'll do an assessment of their lighting. We'll help customers figure out how much they're spending on lighting and what the potential for costs-savings is if they go to more energy-efficient light bulbs and fixtures. We assist with installation as well as help customers capitalize on local utility rebates, and tax incentives.

In terms of chemicals, we will launch a product this year that we have been testing at our corporate headquarters: Tough Guy's Ionator. The Ionator uses ionized water -- an effective direct removing cleaning agent -- instead of cleaning chemicals. Customers can just refill water from the tap. It is easy to use and greatly reduces the need for chemicals in the workplace. This product saves customers money and helps preserve the environment while still cleaning facilities as well, or better, than traditional, chemical-based products.

Some innovations offer greater sustainability benefits than you might think. We recently conducted a test in our own facilities using a Georgia-Pacific's enMotion, a motion sensor paper towel dispenser instead of traditional folded towels. Our tests indicate 30-70% savings on multiple fronts -- product costs, waste, emissions, and labor. Georgia-Pacific actually earned our Green Supplier of the Year award this year.

HK: Grainger has recently launched an e-commerce capability. To what extent does your e-commerce support your efforts to make your business and your customers' businesses more sustainable?

JR: Grainger.com better enables us to streamline our distribution, and get smarter about our shipping operations. In 2009, we became one of 170 companies recognized by EPA's SmartWay Shipping Program for efficiency and sustainability improvements in our shipping operations.

Grainger.com makes ordering and fulfillment easier, more efficient and less carbon intensive for us and for our customers. Our customers can order products without a trip to a local branch. It helps them source more of what they need from one supplier, which also saves on driving. In order to keep shipping and packaging in check, we have set up incentives to consolidate orders through the website. Customers can place orders for one item at a time or they can wait to fill up their cart. Through the checkout process, we encourage customers to place an order after they select all that they want. They can create online personal lists by product type, application or functional area, and share those lists with fellow employees to consolidate purchasing.

Fewer shipments mean less cardboard, less fuel, less transportation expense. We've also enabled paperless invoicing. and now have 30,000 customers using it, resulting in a cost savings of close to $400,000.

We use the website to help users find greener product alternatives. Our "Green Resource Center" provides information about products that reduce energy & waste, conserve water and support greener cleaning practices.

HK: What are the greatest challenges in your effort to green your supply chain, your product lines and your customer base?

JR: The biggest challenge is in defining "green." "Green" means different things to a different people. Our customers are asking for guidance in running a greener facility. Not all of our customers are current with the trends around environmentally responsible carpet cleaning or floor cleaning solutions. Not all of our customers are in tune with how to save water through more efficient plumbing fixtures.

Think about a person that's managing a facility. They have to deal with the heating and air conditioning. They have to deal with lighting and plumbing systems. They may know a little bit about a lot those systems, but they may not be deep experts in any of them. What we can do is find the products that will help them be more efficient and environmentally responsible. We provide consultation to help them figure out how to define their sustainability and energy-efficiency initiatives. We give them ideas on projects and metrics to reach their goals.

We are investing in capabilities to help our customers navigate sustainable choices. We are training our sales force and we have built an internal consulting function that will support our customers in these areas. Five years ago, we did not have a team of sustainability experts; today, we have a team of 30.

HK: How will Grainger change over the next 10 years?

JR: We're in the early phases of running businesses in a more efficient, sustainable way. We currently have 12 LEED-certified facilities. By 2016, we want 50 percent of our real estate LEED-certified. We have 612 branches and 22 distribution centers. It's a big job to get our sites up to LEED standards.

In terms of our customers, there's a lot more attention being paid to how companies run their facilities. It's our intention to be the go-to source for companies that are looking to run their facilities in a more productive, sustainable manner.