Semler Industries Inc.

Reinvention moves family business forward.

How does a 103-year-old family-owned business not only maintain its strong presence in the market, but find new markets, new avenues for growth? First, it has a visionary who understands customers’ needs and listens, really listens, to their questions. Next, it offers solutions to their challenges. And it continues to scout for new markets and new growth. Some call this reinvention. Semler Industries calls it moving forward and responding to customers’ needs.

COMPANY SNAPSHOT President: Loren H. Semler Year Founded: 1905 Year Joined PEI: 1958 Headquarters: Franklin Park, Illinois Web Site: www.semlerindustries.com

In 1905, Metal Specialties Manufacturing Co. opened for business in Chicago, Illinois, making buggy-whip holders for the horse and carriage trade. As the automobile replaced the horse as a means of transport, the company’s owner, John Lee, saw an opportunity and started producing taillight holders and in-dash mounted cigar lighters for Ford’s Model A. When John Lee died, his son took over the business, but soon decided to sell.

Loren H. Semler Sr. was an employee of the Lee family. He worked in the mailroom by day and studied accounting by night at nearby Northwestern University. He worked his way up to become the company’s chief financial officer, and when the Lee family decided to sell the business, Semler purchased it and changed the name to Semler Industries Inc.

Now the owner of a manufacturing business, Semler relied on his experience with his mentor, John Lee, who studied market trends and moved quickly when opportunities arose. During World War II, Semler saw an opportunity and changed the company’s focus from manufacturing automobile parts to manufacturing products for the war effort, including signal flares and parts for machine guns. The company also manufactured paper punches and staplers.

In the 1960s, Semler’s son, Loren H. Semler II, (known in the company as “Loren H.”) joined the business as an accountant upon graduation from Carthage College. Loren H. called his job “recording history,” but he really wanted to be in on the action. With his father’s blessing, he moved into product application, design, sales and marketing. The main focus of the business during this time was the distribution of hydraulic and pneumatic fittings, heat-treated alloy screws and steam traps. “It was strict logistics distribution; just buy and resell,” explains Loren H.

With a strong industrial customer base, Semler, in the late 1960s, purchased the Blott-Robb Company, a petroleum equipment distributor whose customers were the major oil companies. Loren H. describes the strategy: “We thought we could take the products—pumps, meters and liquid handling things for the oil industry—and apply them in our industrial accounts at much higher margins.”

Today, Semler Industries focuses on industrial liquid handling and fluid purification equipment for everything from blood, water, inks and paints to chemicals, chocolate and oil. Petroleum equipment products are sold up the pipeline to refineries, bulk storage plants and to producers of alternative fuels, among others. In all, more than 4,000 customers span over 250 industries across the globe.

Developing Semler Solutions
Like his father, Loren H. Semler is always on the lookout for new opportunities, and it was around 1992 that he realized outside influences were creating threats to his family’s business. “If we used our heads,” he says, “we knew we could turn those threats into opportunities. But in doing so, we had to change the way we approached sales. We had to change our internal strengths, and we had to bring some new disciplines to the company.” Semler believed that with new and better tools with which to communicate, with quick jet transport and keystroke buying, the pure logistics reason behind having a distributor was starting to disappear. “The game shifted away from logistics distribution to value-added distribution.” So while some petroleum equipment distributors diversified into servicing the products they distributed, others into constructing c-stores and car washes, Semler Industries chose another route altogether. Individual products could be put together to create proprietary systems for customers. But in order to do this, the company needed to re-focus on engineering.

Loren H. Semler (front) passes on the tradition of hard work he learned from his father (pictured) to his children Kathy Felton, treasurer and chief information officer, and Loren W. Semler, vice president of operations.

All of the Semlers attended Carthage College, where Loren H. is now a trustee. He has tapped into the college’s resources and works with students and faculty in the microbiology and chemistry department to help develop solutions for his customers. “When a customer brings a problem to us and there is no commercially available solution, we invent one,” he says. “And then we ask if there are other people with the same problem and we take the solution to them, getting a return on our investment.”

According to daughter Kathy Felton, who serves as company treasurer and chief information officer, “We seek out new problems related to liquids, and we figure out a way to create a product that will fill that market need. All of the products that we distribute are merged into a solution by our engineering department.” Once the system is developed, the Semlers find a value for it. “We can’t just come up with these wonderful inventions and nobody wants them. We see a common thread, put the machine together, and do the product push.”

Loren H. Semler is reluctant to talk in specifics about the systems they develop and the applications they are used in. Suffice to say that over 6,000 inventory positions are currently stocked at the company’s headquarters in a 20,000 sq. ft. footprint located on the southeast boundary of Chicago’s O’Hare airport. He does, however, tell the story of a customer who was having difficulty with delivery drivers stealing diesel fuel. Semler had a friend in the Chicago Police Department who introduced him to an ex-convict who spent time in jail for stealing diesel fuel from bus garages in Chicago. Semler saw an opportunity, and hired the ex-con as a consultant to teach him how he stole the fuel. “With his help, we designed a system that prevented him from doing what he did. We sourced and incorporated all of the components that would prevent someone from being able to heat up the diesel fuel and expand the volume, or add water to it and sell the customer water instead of fuel; or cavitate the pump and create foam so they metered foam instead of fuel. There are all kinds of tricks these guys use to indicate to the buyer that they’ve made a delivery of so many gallons, when they haven’t. Then they take it down the street and sell it to somebody else.” The Semler solution was an opportunity that paid off in the sale of many more similar systems.

The Diesel Fuel Unloader System offloads fuel from tanker trucks at 400 gallons per minute and shuts down if the pumps sense no-flow for more than a few seconds.

“Sometimes,” says Loren H., “the only value we can add to a product is application knowledge. In other words, the only value we can add is our brains. And if we’re going to add value by using our brains, we’d better have some!” Education and training are high on the list of priorities at Semler Industries. Recently, a classroom that can seat up to 35 people was added to the building. Up to 105 training opportunities take place in this learning center in a typical year. Classes range from product application to employee financial planning, i.e., 401(k) investment opportunities and saving for a child’s college tuition.

Third-Generation Succession
Two of Loren H.’s children, Loren W. Semler, 33, and Kathy Felton, 41, joined the business after college. Loren H. Semler recalls his father’s unexpected death at the age of 69 and the “catastrophic succession plan” that followed it. “I don’t want my children to go through something like that, so I committed to them that we would do a better job.” He meets regularly with his son and daughter to go over business issues as well as his plan for succession, a plan that started four years ago when he was 61. The children now meet regularly with the company’s bankers, attorneys and accountants. Loren W. adds that his experience as a member of PEI’s Young Executives also helps him learn business strategies while networking with other young leaders.

“Our philosophy as a company,” says daughter Kathy Felton, “has always been: ready, aim, fire. We come up with a plan, research it, get ready to launch it, make sure it’s going to fly, then implement.” For more than 100 years, this philosophy has succeeded. As the company transitions to its third generation, Loren H. Semler describes his company and its future simply: “Find a need and fill it.”

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The PEI Journal • Second Quarter 2008 • Volume 2, No. 2 • Contents are Copyright © Data Key Communications, Inc.
All rights reserved. • Nothing may be reproduced in whole or part without written permission of the publisher.