And once that manufacturer and many of our manufacturers started being able to deliver product more seamlessly again, all of us started looking at how much incremental working capital we’d put in place during 2022 and we started taking dollars out of it. So we worked down our working capital last year, and with interest rates high, carrying working capital is a real burden. It has a real cost to it, where when you’re in a much lower interest rate environment, you don’t really charge yourself as much for carrying that extra inventory. So we think that a lot of that overhang of working capital is worked through the system, and business activity levels are good across most all of our industries. And so the choppiness that we have felt kind of with test and measurements starting in September, and then through the semiconductor before that, and then with renewables delayed through the fourth quarter and the first quarter, it’s definitely put a bit of a drag on our organic growth objectives that we had put it out there for everybody, but it’s not put a drag on it in any way that gives us any lack of confidence in where we’re headed.
The other part that’s been really very much more reassuring has been and we just came out of all day, yesterday, we were – in the last two days, we had leadership from the three companies, mostly led by really the Gexpro team getting together, having the Hisco team there, working through how they’re tackling more cross selling and more shared customer relationships. And while that’s taken probably, it’s slower to get some of these bigger customers to migrate or to change where they’re buying their content from and leaning on for services. We’re seeing significant amount of interest and we also have a much – we have a better go-to-market message today about the consolidated ways that we can or the collaborative ways that our three verticals can work together when we talk to a prospective customer.
And that’s evolving even more now that we’ve got Hisco’s capabilities in the fold. Hisco really has a lot to share in terms of capabilities, both with Lawson and Gexpro services. And we knew that when we started chasing Hisco years ago and thought that it would be a critical piece, a linchpin piece to our broader DSG strategy. And we’re just in the last couple of days being able to listen to the way that the Hisco team is working with the Gexpro Services team, for instance, on specific customers that have asked for us to bring the three verticals capabilities together to solve some major manufacturers objectives. That’s been probably the most encouraging and fun for me to see.
Kevin Steinke: Okay, great. Just lastly, I wanted to ask about the organic revenue trends in Lawson Products. You mentioned continued good progress with strategic Kent Automotive and government verticals, but some softening in Lawson’s core customer base. The organic growth rate just stepped down a bit sequentially 3Q to 4Q. Have you seen a more noticeable softening in that core customer basis or anything we should be thinking about as we kind of move into 2024 here on that front?
Ron Knutson: Yes, Kevin, this is Ron. So yeah, you’re spot on in terms of where we saw most of the strength in 2023 was our strategic business. We continued to develop good customer relationships, servicing more of their locations. The Kent Automotive business continues to grow nicely. And so for us it’s a real balance, right. In terms of the sales rep productivity that we were able to achieve 15% on top of 18% in the third quarter. So we feel really good about that. Where we are seeing some weakness is within the core base, which does make up about 50% of Lawson’s customer base now. And I think, I would say it’s probably twofold. One is, as we’re signing more strategic accounts and more Kent Automotive business, we really have to have a focused effort on how that customer gets serviced.
And I think part of that is probably naturally taking a little bit away from probably a little bit of cannibalization from our core customer base. The nice piece that we’ve done, really, throughout 2023 is we’ve made really pretty significant investments in inside sales, technical sales specialists, lead development reps, really the infrastructure that can help support our sales reps. And we have them actively working on those core customers that we’ve not seen a sale for in the last couple of months, let’s call it. So, yeah, a little bit of weakness there. But I would say that there is a heavy, heavy focus internally within Lawson. Not only do we need to be able to support these other growing kind of pieces of our business, but really getting our way back into our core customers to make sure that we can see growth there as well.
Bryan King: Ron, I want to just add something. Kevin, the salesforce transformation that we took on last year was one that was very deliberate around trying to expand profitability of Lawson. And it was both to expand profitability of Lawson, and it was absolutely focused on being able to expand the earnings opportunity for our outside sales team. And so to do that, we had to make sure that they were spending their time where they needed to be, spending it to drive longer term traction and revenue growth. And a lot of the time when you really broke it down, a lot of their time was being spent on a lot of very small customers that we don’t want to leave, but we needed to manage how our outside salespeople were engaging with them.
And so when you really fully burdened their time and our resources, a lot of those little accounts were not profitable on a contribution basis. And so we knew that. That’s part of the reason why we’ve addressed them with some other tools on ways to cover them, so that the outside salesperson is not spending as much time inside of those accounts. So that core has got some movement in it. And so it’s not – so when I look at it, and I look at the drag in different pockets of it around organic revenue growth right now, I have to take some of the noise out of how we’re serving those customers differently today. Because we’re actually making more money on how we’re serving them on less dollars that are coming through that channel, that small, tiny end of our channel.
