Gregg Mollins has been a leading figure in the transformation of Reliance Steel & Aluminum Co. into North America’s service center behemoth, a company almost three times larger than its next closest competitor. He has, in many different roles, most recently as president and CEO, been instrumental in the acquisition of numerous companies that have pushed the Los Angeles-based company to nearly $10 billion in sales last year. And he has guided the distributor into new avenues of value-added services to ensure it keeps growing well after his fast-approaching departure from his spectacular corner office.
But ask him to describe himself and it doesn’t take long for an answer. “I’m an operator,” he states.
And a remarkably good one at that.
“He is without a doubt the most intuitive, passionate service center guy on the planet,” says COO Jim Hoffman, who will replace Mollins as CEO at the start of 2019. “He has a knack for doing things.”
CFO Karla Lewis, the third member of Reliance’s executive leadership team, has a similar assessment. “He has very good raw instincts about operations, whether it’s equipment or the customers. He’s very strong at that.”
Mollins’ performance throughout his career with North America’s largest service center company has earned him the distinction of Metal Center News’ 2018 Service Center Executive of the Year. Each year, MCN honors a leading executive whose career and business strategies serve as a model for the rest of the industry. The company Mollins leads, Reliance Steel & Aluminum Co., is not just a model, but can be seen as the blueprint for profitable operation for the entire metals supply chain.
Mollins becomes the 22nd recipient of the industry’s highest honor, and follows in the footsteps of his former boss David Hannah, who earned the distinction 20 years earlier.
Hannah, who retired in 2015, echoes the sentiments of his former colleagues. “I’ve never met an operational guy as strong as he is. He doesn't create complicated operational strategies. Just focuses on blocking and tackling,” he says. “Work your gross profit margins, turn your inventory and keep your expenses under control. It sounds easy but it’s not, especially in an industry where prices are moving all over the place most of the time.”
And it isn’t just the individuals who have worked side by side for decades that have reached that conclusion. David Simpson, president of Diamond Manufacturing, which Reliance acquired in 2010, has come to a similar determination about Mollins’ talents.
“The one thing I can say about Gregg Mollins is from anybody I’ve ever known in my business career – which is 33 years with Diamond and five years before that – his intuition far exceeds anyone I’ve ever met.
“I can sit here in my desk, in a little town in Wyoming, Pa., which is what I do every week of my life. He can call me and make a recommendation to do something, and I’ll hang up the phone and say, ‘How did he know that. How would he know what he just said when he’s calling from 3,000 miles away?’” Simpson marvels.
Mollins’ innate talents as an operator have manifested in multiple ways. He once served as the company’s fix-up man, charged with turning around underperforming operations. He has served to implement Reliance’s bedrock principles on inventory management throughout the organization. But perhaps his most insightful display of operational excellence was delivered in the waning days of the upcycle of the previous decade.
During the heady days of 2008, while the metals supply chain was euphoric over tremendous demand and rock-solid profit margins, Mollins and Hoffman began hearing some warning signs from the mills. Major producers were suggesting that some projects were being put on hold or canceled altogether. Warning lights went off.
“Everybody in the company was basically euphoric, they were selling so much metal and making so much money. In July we had our semiannual managers meeting, and Jim and I stood up and said we want inventories down to year-end levels by September. You’ve got two months,” Mollins recalls telling the stunned subsidiary management. “This isn’t a request. It’s a directive.”
A few months later, the phones in service centers across the country stopped ringing.
“We don’t give many directives, but when we do, we’re dead serious,” Mollins recalls. As a result of the proactive approach, Reliance got a jump on destocking, ultimately cutting its inventory levels from $2.1 billion nearly in half over a 10-month period. “We came out of the recession with a better balance sheet than when we entered.”
But instincts are just one half of the equation. There’s also the willingness to work.
Hoffman recalls the weekend when the board of directors announced that Mollins had been chosen to become the new CEO following Hannah’s retirement. The two were enjoying a celebratory drink on a Thursday night when Hoffman asked where Mollins planned to take the company, what his vision was.
“He said, ‘I’ll get back to you next week,’” Hoffman recalls. “On Monday morning, he shows up with a yellow pad filled with things we were going to accomplish. He did it all over the weekend.” Hoffman says the Reliance organization, a group now 15,000-strong, follows Mollins’ lead. “An organization takes on the personality of its leader. This company is full of hard-working, quality people. People who care.
“And we just happen to be really good at making money,” he says.
The Path Up
Mollins started his career in the service center business right out of high school, working for future Reliance company Earle M. Jorgensen. At EMJ, he started in the warehouse, but noticed the guys walking around in white shirts and ties and wondered how to get into that end of the business. “I went through all the chairs – you go into shipping and receiving, then you go into purchasing, credit and claims and then inside sales,” he recalls.
After moving up the ranks, he was recruited away by another metal company. “At Jorgensen I learned how a company should be run. At this other company, I saw how a company shouldn’t be run.”
The lessons were equally valuable. “You don’t appreciate what you have and what you’re learning until you go to some place that’s dysfunctional. Then you realize what you’ve learned is incredibly special,” he says. “The grass looks greener, but you find out it’s weeds.”
By 1986, he was ready to make the final move. “There were three different companies I worked for, then I sought out Reliance. It was 10 years of bouncing around, then coming to Reliance and I’ve been here ever since.”
His first job with Reliance, starting a pattern that would follow, was to run the company’s Santa Clara, Calif., operation. It was not performing well, so Mollins was brought in to fix it up. When that mission was accomplished, he was called up to the corporate office, where he could bring his Mr. Fix-It skills to the new companies Reliance was rapidly bringing into the fold.
Before going public in 1994, Reliance’s acquisition model was quite different. The company targeted underperformers and laggards in the industry and had its talented operations men lead the cleanup. First it was Joe Crider (former CEO 1994-99) who repaired the troubled companies. Then that responsibility was turned over to Mollins.
“We always bought fixer-uppers. They had some problem, whether it was financial issues, too many relatives on the payroll, lack of capital, etc. We would buy these troubled companies and they’d put me in there to fix them. That was our modus operandi for years,” he recalls. “(Former CEO 1987-94) Bill Gimbel bought a couple of companies per year. Crider fixed them, and I fixed them after Crider.”
That changed dramatically in the mid-1990s. Gimbel saw some companies coming onto the market that were better run and larger, but commanded higher sales prices than Reliance’s acquisitions of the past. The company needed an infusion of capital to keep growing, and Gimbel made the call to take the company public.
“We had two alternatives. Either sell the company or grow. To grow we needed capital, and he had a vision of taking us public. That was Gimbel driven,” Mollins recalls.
Once the company became a publicly traded entity, the acquisitions immediately shifted. The troubled fixer-uppers were replaced by solid, typically family-owned companies that were well run, but had estate planning or other minor issues that drove the existing management to want to sell. Reliance’s first venture into the Southeastern market, acquiring Siskin Steel in 1996, fit that new model.
Since then, that’s been how the company operates. Reliance finds (or more likely, is found by) well-run, established companies who want to relinquish ownership, but remain with the business. And the Reliance team happily welcomes them into what it calls, the Family of Companies.
When Reliance acquires a company, it doesn’t just leave the management in place, but the name as well. Some other large service center companies want a single brand, but Reliance is steadfast in allowing its new family members to retain their old identity.
Mollins explains the rationale. “We’re buying well-managed companies. They have a culture. They have a lot of pride in the culture and their individual companies,” Mollins says of the 65-plus companies under the Reliance fold, representing more than 300 facilities. “They’re typically family-owned businesses. They do a good job in their respective regions and markets. We don’t want to take that away. We don’t want to change their cultures.”
Of course, just because a company is operating profitably doesn’t mean it can’t be improved by the Reliance touch. The corporate office helps deliver Reliance’s operational excellence, a model characterized by rapid inventory turns, expense controls and strong profit margins. “We haven’t bought a company that didn’t improve their profitability once they got under the Reliance umbrella,” Mollins says.
Reliance delivers a few key fundamentals to its newly acquired companies. The company isn’t interested in simply moving tons or gaining market share. It wants a reasonable profit, because it will continue to support its operations.
“We’re investing back in our company so we can provide a higher level of quality, tighter tolerances to customers. We need to pay for that investment,” Mollins reasons. “We do this by expanding our gross profit margins to pay for our investments. We invest, but we expect a return on that investment.”
The Reliance model also revolves around a committed approach to inventory management. Company executives have preached the gospel of inventory turns for decades. “That was Bill Gimbel and Joe Crider. I’d love to take credit for that, but that would be wrong,” he says.
Still, Mollins and others in Reliance leadership stand by its wisdom. “We’re a service center, but let’s face it, we’re a distributor. Show me one distributor that doesn’t turn its inventory well and over time, they will be in trouble financially.”
Convincing the newly acquired companies is one of the tasks Reliance faces after a deal is consummated. “You walk into the warehouse and you’ve got all this metal, and it makes you feel good. Ninety-five percent of the companies we’ve acquired had that attitude. But it’s the craziest thing. They’re family owned and they need to turn cash, so why not focus on turning inventory?” Mollins says.
When Hannah announced his retirement, there wasn’t a lot of mystery as to who would succeed him. Mollins had been the No. 2 for the perpetually successful company for years, and had earned his chance to run the operation.
“He had all of the operational skills that he needed. As a CEO you need a lot more than that. I had him exposed to a lot of the public company type things along the way. I’d drag him along on investor meetings and road shows so he could get experience in that side of the business. He was the natural choice at that point,” says Hannah.
Hannah and Mollins had worked together side by side for years. Unlike his successor, Hannah’s background was on the financial side of the business. “We complemented each other. He appreciated my skill sets and I appreciated his. We were a good team for many years,” Mollins says.
As CEO, Mollins had the task of maintaining the phenomenal success Reliance has enjoyed going back five decades, while also adapting to the ever-changing metals industry. One area where the company has increasingly focused is on moving further downstream in its acquisitions.
An August deal exemplifies this move. In the third quarter, Reliance completed the acquisition of KMS Fab, LLC and KMS South Inc., specialists in sheet metal fabricating.
Mollins said the push toward more value-added operations was a conscious decision, and one that shows his adeptness at the financial side of the CEO’s job as well as the operational.
“We’re not in the industrial space, which get bigger yields for their stocks. Industrials are typically people like Grainger. Their multiples are greater than ours. What we were trying to do is get ourselves into that space, because our gross profit margins, pre-tax profits, after-tax profits, are very similar to theirs,” he explains.
Of course, the typical fabrication business is a much different enterprise than a distributor. So what from the Reliance business model could be applied to these businesses? More than you’d think, Mollins says.
“Most companies don’t recognize what value they bring to their customer base,” Mollins says, repeating a comment about a lesson he’s often delivered to acquired service center companies.
In both cases, Reliance executives encourage the new family members to focus on margin. And one way to improve those margins is to be unafraid to walk away from a bad deal.
“We can afford to lose some business. And about 75 percent of the time, a business you lost at a higher price comes back because your service, quality and relationship with the customer are superior. They go to your competitor and their on-time delivery suffers, their quality suffers, the people in their operations have to grind parts they don’t have to grind from us because our equipment is brand new and high quality,” Mollins says, noting that Reliance has averaged more than $180 million in cap ex investments annually over the past decade.
“We may lose some business, but it comes back at our price,” he explains.
Like every other step the company takes, the push downstream is being undertaken with utmost care and consideration. The company will acquire a fabrication company if it’s not in an area where it will be in significant direct competition with Reliance’s existing customers. “We’re very sensitive to markets. We’re not going to buy a precision sheet metal fabricator in Los Angeles. Why alienate 20 companies just to have one?” he reasons.
And those companies are the lifeblood of Reliance. Despite annual sales that eclipse the next two largest service center companies, Reliance’s customer base remains small jobs shops and fabricators, not OEMs. “It’s the guys supplying the OEMs that we’re selling to. Most of our competitors drive by the customers we’re selling to. But that’s why our margins are so high. Those companies, those job shops, need reliable service and they need to turn their inventories for cash. We do that for them. That’s our thing.”
And doing things the Reliance way has proved to be a very profitable way of running a company. The ultimate operator wouldn’t have it any other way.