Israel Schwab, the CEO of D&H Distributing Company (D&H), gave a presentation titled “Distribution, Sales and Logistics in the Computer and Consumer Electronics Business” at Elizabethtown College on Friday, Jan. 22.
Schwab said he had always been able to explain what D&H did. “I’ve never been able to explain to my friends the why,” he added. In an attempt to explain this, he wanted to go back to 1910 when one of the founders of D&H came to America. The founder was the oldest child in his family, and instead of going to school, sold newspapers on the corner every day. Soon after, he saw that there was a need for automobile parts and began to buy wrecked cars and sold the parts. This led to the formation of D&H in 1918 to sell tires.
The D&H owners then grew interested in radios, which had just become popular. Schwab said the owners were fascinated by the concept of hearing a voice from different parts working together in a box. “That’s more fascinating at that time than me seeing a man walk on the moon,” Schwab explained. However, radio distributors were very possessive of their product and product territory. “That still happens today,” Schwab said. He explained that part of the issue was that each distributer had to report the percent they sold of the company’s money. “You were responsible for your business and your marketplace,” Schwab said. As a result, D&H switched to ICA in order to widen their market.
During World War II, D&H kept afloat by selling whatever goods they could. “It was a case of trying to exist, and we existed,” Schwab explained. After World War II, the market began changing, and more companies were mass-producing and distributing their products. “The world was changing in retail in the 1960s, 70s and 80s,” Schwab said. Many companies did not know how to adjust to this shift in the market and went out of business. Schwab said that one company moved from France to America, but quickly became overwhelmed by the market and closed.
D&H moved to Harrisburg, Pa. early on and were able to get a foothold in the area before companies such as FedEx and UPS came. Due to Harrisburg being a smaller market, D&H had to sell more types of products in order to make a profit. “We probably closed and opened 25 markets during that time,” Schwab said.
Schwab then explained why D&H thought distribution would be the best market for them to enter. The company has 760 manufacturers and 5,000 customers on any given day. He referred to D&H as the invisible man because when people order products from companies like Amazon, D&H often ships the package directly to the buyer. “We now ship to our customer’s customers,” Schwab said. Microsoft, Dell and Bed, Bath and Beyond are all connected by distributors. At times D&H buys from other countries, but Schwab said they tried to keep as much in Harrisburg as possible. The areas they distribute to range from Fresno, Ca. to Chicago, Il. to Harrisburg, Pa.
“Nothing happens without people,” Schwab stressed. He added that even with the growth of technology, there will always be the need for smart people. D&H is a big company, but Schwab said that the employees always know what they are working for and feel like they are a part of the team. One way in which D&H works personally with its employees is by having 36 percent of the company owned by its employees. “It really is a people business,” he said.
D&H opened an ESOP for the employees owning shares in the company. Schwab explained that ESOPs have one big advantage: the company generally pays about 50 percent of the expenses so that the retirement fund for the employees grows. Without the ESOP, the employees would be paying the income tax for the percent of stock they hold in the company; however, with the ESOP, the employees do not have to pay this amount; they get to put that money into their retirement funds instead.
The final thing Schwab stressed was that the business world constantly changes. For example, the market is becoming increasingly international, and more companies are moving into or out of the United States. Importing and exporting has become a global trend as well. “Nothing is forever. It’ll all be about change. I can’t envision the change you’ll see in your life,” Schwab said. He added that with the right education and the right mindset, a person can make it all happen in companies.