Rubber Tree Systems keeps goods moving with WarehouseTwo deal

TOLEDO, Ohio—With the supply chain issues that have plagued all industries for most of 2021, two software firms geared toward industrial distributors and manufacturers have combined in a deal that may ease those difficulties.

Toledo-based Rubber Tree Systems recently purchased the assets of WarehouseTWO L.L.C., an inventory sharing solutions software firm headquartered in California.

Rubber Tree Systems is known for its sales force mobilization, customer relationship management and analytics/reporting software that integrates with customers' enterprise resource planning systems. The purchase brought "two strong and well-respected companies together," according to Brian Kazmierczak, RTS president and owner.

"We will continue to grow our softwares solutions, customer base and talented team of employees to serve our over 1,200 combined customers in the distribution and manufacturing markets," he said. "Both Rubber Tree Systems and WarehouseTWO are widely known in the industry for their distribution focus, outstanding customer service and easy-to-use products.

"Our vision includes continuous investment in the software and the people who have made both companies successful over the last 15-plus years."

In a nutshell, WarehouseTWO offers internet-based inventory sharing software created for manufacturers and their networks of authorized distributors. Members make their inventory data available to other members by uploading it to the software firm's server. Members then can browse available inventory to find items they may need to fill customer orders.

The company was the brainchild of Mark Tomalonis, who was principal and co-owner of WarehouseTWO and remains there in an advisory capacity. He started his career in distribution and later moved to operations. In 2005, he worked for an industrial manufacturer that sold its goods through distribution channels.

At the time, the manufacturer had lead times that were unacceptable, leaving its distributors scrambling for parts. "All those distributors owned piles of parts, but the parts weren't at the right place at the right time," Tomalonis told Rubber News. "So the distributor group challenged the manufacturer to come up with a solution."

And Tomalonis volunteered, launching the WarehouseTWO website that year with a simple concept. The software company hosts the database in the cloud, and participants in a manufacturer's distributor network populate the database with its available inventory.

"We allow a manufacturer and its distributors to create one big virtual pile of inventory, with the benefit being that every distributor can now act as if he or she owns all of the inventory in the network," Tomalonis said. "The theory behind it is that if everyone has access to more inventory, everyone is going to sell more."

While it was created to help one particular manufacturer, it since has grown to provide the service to many more manufacturers and distributors across a myriad of industries.

The site is set up with "communities" based around a specific manufacturer or brand. He said that only certified distributors of that manufacturer can participate in its community, posting both what inventory the distributor has available to sell, along with what other distributors have uploaded.

The WarehouseTWO site has significant participation in the rubber industry, as numerous communities are set up around some of the biggest names in the hose, belting and related markets.

And this is how it works: If one company is trying to fulfill a customer order but it doesn't have something in stock, it can go to WarehouseTWO and see if other distributors have what it needs. So it will buy the product through the site, and then in turn sell it to the end customer

"WarehouseTWO is merely a matchmaker between buyers and sellers behind the curtain," Tomalonis said. "The end customer typically doesn't even know the product moved from company A to company B. That's invisible to the end customer. All the end customer knows is he got the product when he wanted it."

He said it's similar to Amazon in that the majority of products sold on Amazon are for products Amazon never owned, with third-party sellers doing the transactions. Where it differs is that WarehouseTWO is committed to the mindset of the manufacturer/distributor sales channel, and end users aren't eligible to be members.

"We are not an open marketplace," Tomalonis said. "We are basically a collection of private clubs, and those private clubs are a manufacturer and its sales channel partners. WarehouseTWO exists to defend and support a manufacturer's sales channel—not to disrupt it."

The manufacturers benefit because the service mitigates the reality that a manufacturer can't ship everything on time. "We make the brand look better to the marketplace by allowing the manufacturer's distributors to have access to more of the inventory."

The goods that typically are sold through the site are less common. By selling through WarehouseTWO, the manufacturer can maintain the efficiency of its operations because it doesn't have to change its production schedule to make one or two of something for a rush order.

"If the distributor has access to more of its inventory, it will sell more of its products," Tomalonis said. "The manufacturer doesn't want the distributor to go find an alternative source. The manufacturer wants the distributor to sell its brand of product, so we help the distributor sell the manufacturer's product, even if the order wasn't placed with the manufacturer on that day."

Ted Henry has worked on both the manufacturer and distributor sides of the rubber business during his career. And he remembers clearly how he became a fan of the inventory sharing service.

"I first noticed WarehouseTWO in a distributor role where we had an order that required eight metric fittings that we could not get in time to fill the order," he said. "When we contacted the manufacturer, they gave us two to three other distributors that had that product in stock in their 'community.'

"We called those distributors, paid a slightly higher price, but we were able to meet the date of the end user," Henry said. "The manufacturer got to keep its product in the marketplace and we kept the order. This was a very critical order. If we hadn't got it, we could have potentially lost the OEM."

He also had a previous relationship with Rubber Tree Systems, and saw the benefit of both firm's services, so he came aboard as president of the WarehouseTWO business when the deal closed July 1. And he definitely sees his background as a plus.

"My understanding of how distribution and manufacturing works will enable me to illustrate the value WarehouseTWO brings to both channels," Henry said.

"I was in a manufacturing capacity where I made buying decisions, sales and marketing decisions, and I understand a lot of the value that WarehouseTWO can bring to a manufacturer."

He recently did a demonstration designed to show how manufacturers can better leverage existing assets, something he spent a lot of time on when working in manufacturing. "I understand if you can get more visibility with those assets, that's going to help your company gain market share and grow in sales," Henry said.

Likewise, when he worked in distribution, the company had the WarehouseTWO portal open daily, and it helped them fill customer orders quicker. "So I can tell the distributor firsthand what I saw and how it can help them," he said.

Tomalonis said he had a good run with WarehouseTWO, but that it was time for him to pass the firm onto someone who could take it safely into the future. He had known Kazmierczak for more than a decade, was familiar with what RTS did and thought the two firms would be a great fit.

He sees Rubber Tree and WarehouseTWO as two of many software companies that serve industrial distribution, catering to the same audience but providing different services.

"Rubber Tree and WarehouseTWO didn't compete with each other," Tomalonis said. "The synergy is an overlap of a lot of customers, and it brings a great opportunity for cross-pollination and cross-selling. Rubber Tree has a staff of programmers and software developers who can take the two products and combine the functionality and create even greater value for our clients."

Given today's environment of supply chain issues, he and Henry both said the services of WarehouseTWO can be beneficial.

"We mitigate lead times," Tomalonis said. "If the product is sitting on the shelf somewhere in the channel, we help redirect the distributor to another distributor who has that same product sitting on the shelf. That's the core of what we do."

Henry said the strength of WarehouseTWO is that the inventory availability data can be updated daily. "Typically, manufacturers can look at sales history, but that's old news," he said. "What WarehouseTWO does is give you current news of what is in the community today. It's not necessarily what you sold three months ago. It's closer to real-time visibility on inventory."

He added that they encourage distributors to include a price on what they are looking to sell, because ultimately the service is about speed of execution and allowing users to make a decision quickly.

"A lot of times a distributor will be on the phone with an end user. They don't have the product they need and they are looking at WarehouseTWO to make a decision on pricing and availability," Henry said.

"What you don't want to do is hang up the phone with your end user and tell them you are gong to call them back after you check stock. Because once you do that, they're calling somebody else."