Encompass Services Corp., Houston, one of the largest electrical contractors in the nation, is in the midst of a company-wide consolidation of its purchasing, and by year-end, hopes to have alliances with electrical distributors that can service its electrical supply needs on a national basis.
In a statement accompanying Encompass' first-quarter-earnings announcement, Joe Ivey, the company's president and chief executive officer, said the company expects to save $20 million to $25 million by naming strategic suppliers and buying in bulk.
Jeanne Buchanan, the company's vice president of corporate communications, said Encompass wants to pick up synergies through the 200-plus businesses it has acquired over the past few years in the electrical, mechanical and cleaning industries.
“Certainly, volume purchasing was a place to do that and reduce the total cost of procurement. There are a lot of synergies if we consolidate the number of suppliers,” she said.
Buchanan said the company is now negotiating with suppliers, but that it's too early to name who will participate in these strategic alliances. She did say Encompass is looking at distributors that could meet the company's needs on a nationwide basis, and that these distributors will “make up the vast majority of our wholesale distribution spend.”
Originally, the company was planning to phase in this purchasing initiative over the next 12 to 18 months, but Encompass has fast-tracked the program for completion by the end of 2001. Ivey said the purchasing initiatives are part of the company's plan to continue growing the business in the slow economy.
“We anticipate that the economy will remain sluggish throughout the second quarter and stage a modest recovery in the second half of the year,” he said. “We believe we have taken the necessary steps to effectively manage our company in this uncertain environment.”
Led by double-digit revenue increases in first-quarter 2001 in its Electrical Technologies, Mechanical Services and Global Technologies groups, Encompass increased total revenues by 9% over the prior-year period. Part of the increase was due to several sizeable contracts, including an $18-million agreement to provide electrical construction and installation services for Reliant Stadium in Houston, future home of the National Football League's Houston Texans, and $100 million in revenue from national accounts.
Encompass was ranked as the second largest electrical contractor in the United States in CEE News' 2000 Top 50 list. In 2000, the company's Electrical Technologies division had $1.76 billion in sales, 43% of Encompass' total of $4.09 billion in annual sales. With the merger of Building One and GroupMAC, a provider of HVAC and mechanical services, the company has 30,000 employees in 250 locations nationwide.
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