BY PETER BRADLEY, EDITORIAL DIRECTOR
AUTOMOTIVE
verticalfocus
CREATING ONE COMPANY FROM
two after a merger or acquisition is a bit
like assembling a jigsaw puzzle in which
not every piece is designed to fit. Almost
invariably, the companies involved end up
having to rework a few of those pieces before
everything falls into place.
That was certainly the case when O’Reilly
Auto Parts, a large auto parts distributor
and retailer based in Springfield, Mo.,
purchased the 1,340-store Phoenix-based CSK Automotive Inc. in July
2008. From a geographic standpoint,
the CSK acquisition made eminent
sense for O’Reilly—O’Reilly’s stores
are located mainly in the Midwest
and Southeast, while CSK’s are
mostly in the Upper Midwest and
West. But the purchase also brought
with it the need to unite two disparate operations. And one of the
merger’s biggest challenges arose out
of the fact that the two companies had
very different distribution models.
Almost from its founding in 1957,
O’Reilly has pursued what it terms a “dual
market strategy,” serving both the do-it-yourself
market (customers who do their own auto repairs)
and the do-it-for-me market (garages and repair
shops). The two markets carry very different service
expectations: While the do-it-yourselfer may be willing to wait for a part, an auto technician with a car on the lift doesn’t have that luxury. He wants
the part no later than tomorrow. So O’Reilly had designed its distribution network to provide
daily replenishment to both its stores and professional installer customers. Among other things,
that meant it had a fairly extensive DC network (the company currently operates 19 facilities in
15 states), with sites strategically located within overnight reach of customers.
By contrast, CSK had built its business around the do-it-yourself market—a model in which
weekly replenishment was deemed sufficient. That was reflected in its distribution network,
which included just four main DCs at the time of the acquisition—DCs that were set up to han-
dle bulk picking, not the piece picking that typically takes place in O’Reilly’s DCs.
Merging the distribution operations of
two auto parts suppliers should have
been as easy as replacing a windshield
wiper blade. But it turned out to be
more like an engine rebuild.
Tick tock!
It was a given from the start that O’Reilly would convert the CSK network over to its distribution
model, rather than vice versa. The company considers its daily replenishment capabilities to be a
