Reinvention Featured

7:00pm EDT March 29, 2006
When Darryl Hart co-founded Detroit’s Commodity Sourcing Group (CSG) with Robert Schummer in 2000, they were “two guys with no money and great ideas.”

The following year, Hart was forced to reinvent his customer focus, and in 2005, CSG has an estimated $40 million; Hart expects 2006 revenue to surpass $50 million.

“It’s a good story, one that really points to perseverance and doing what you say and saying what you do,” says the chairman and CEO says of his sourcing and procurement company. “That’s really what it’s all about.”

Smart Business spoke with Hart about how he implemented change at CSG and learned the value of empowerment.

Why did you change your customer base from the auto industry to the health care industry?
Because we’re smart. (Organizations within the auto industry were) not willing to make decisions quickly, nor were they willing to outsource programs to quasi-start-up companies because of a lack of experience. We found some opportunities (but) they were not very robust.

We didn’t want to stay in that space, so we migrated over to health care and have done very well since.

When we got started (in automotive), it was toward the mid-point of the dot-com bomb, so their focus wasn’t on outsourcing (but) on consolidating, purchasing and e-procurement opportunities ... and we really weren’t a player there.

It took a year and about $300,000 of losses, so guess what? If you’re losing money at that rate and you’re hiring people and you’re building systems and you have no real revenue to offset, you’d better change what you’re doing quickly.

How did you make that change?
I started looking at other industries that had layered materials handling and/or purchasing systems — a lot of people doing little work. Our plan was to go in and consolidate some of those operations — less people, more work.

The outsource and in-source play wasn’t exactly what health care was looking for. You can make it more efficient, reduce the redundancies, guarantee savings, and drive out costs. Timing was everything and still remains everything.

Typically, large health care organizations are all in different phases of restructuring their business. ... We have to figure out how they can become more efficient in meeting the expectations of reimbursement expense while trying to manage their business.

Some of the things that we do aren’t necessarily critical to patient care but are critical to the internal operations of health care systems. For instance, our courier transportation system moves items or materials from one location to another.

(Health care systems) are not in that business, but over time, they’ve built their own independent businesses within their organization. They recognize they can’t manage that burden because that’s not what they do well, so they bring a company in to do that, and that’s where we play.

We have nine different lines of business that support everything we do — print management services, medical supply distribution and the assembly and manufacturing of medical procedural kits, packs and trays — and at some point, it all ends up being in a distribution plant or a materials handling plant.

How do you plan to grow your company?
We’re going to expand from the local market ... into Illinois, Ohio and Indiana. As we continue to leverage partnerships with our national partners, like FedEx Kinko’s, Owens & Minor and Kimberly-Clark, we will slowly migrate to new markets outside of the region.

We’re not just a couple people sitting over here on Ralston (Street) anymore. We have hired talented people who are very strategic in nature, who are helping us map, plan and implement our strategy. Before, it was just fly-by-the-seat-of-your-pants. We can’t do that anymore.

How did that change the way you manage the company?
I was doing a lot on the financial, operational and customer acquisition side of our business. Now that I’ve had the opportunity to recruit talent, I have been able to divest myself of some of those daily tasks and decision-making opportunities.

How difficult was that for you?
Extremely, because I own it; it’s my baby. It’s one thing to empower people to do it; it’s another thing to trust that they’re going to make the right decision.

I had to understand that the growth of our business required that I become more hands-off in certain areas because I could not impede the process. I had to step back and allow those whom we’ve charged with managing and making decisions to effectively do that.

HOW TO REACH: Commodity Sourcing Group, (313) 366-0660 or www.csgbuy.com