If a company exhibits the personality of its leader, then Sweda (asi/90305) is the genuine article. If you called central casting for the role of a young, hip, preternaturally cool CEO, Jim Hagan would be the first one sent out. Unassuming? Hagan doesn’t even have an assistant, preferring to answer his own phones and e-mails as well as go out on the road as often as possible to meet with clients.

Most times, greeting clients face-to-face as the CEO of a Counselor Top 40 supplier (Hagan’s latest role after holding a variety of them in eight-plus years with the City of Industry, CA-based company) would be easy work. But about a year ago, Hagan had to do it under very different, painful circumstances: to offer a mea culpa for Sweda’s massive failings.

You see, prior to late 2007, Sweda had always been a solid supplier with all the traditional hallmarks: quality items at reasonable prices, quick delivery and great sales and customer service reps.
And then all of a sudden, it wasn’t.

Where Things Went Wrong
Founded in 1977, Sweda was a Top 20 supplier for two decades. It didn’t take much, however, to destroy that hard-earned reputation.

By all accounts, things headed south late in 2007 when Sweda implemented a sweeping new systems upgrade. When the infrastructure went online, the entire system – phones, computers containing order and shipping info – shut down and information was lost in the technological abyss. Even worse, the problem did not remain isolated, but worked its way through the order chain. Suddenly, clients couldn’t reach their normal contacts at Sweda. Workers at the company felt completely adrift with their clients’ orders perpetually put on hold.

For Hagan and the management team at Sweda, it was nothing short of a catastrophe of epic proportions – not only from a technological side (plumbing through the infrastructural morass to figure out what went wrong), but also because the weight of letting down their clients was crushing.

“During the worst of it, there was a time when Sweda, ‘The Name You Can Trust,’ just wasn’t,” Hagan says. “And that was horrible, because I knew we were damaging relationships with our clients. We let them down, and I completely understand how upset and furious many of them were with us. They were absolutely justified.”

And the problems have hit the company’s revenues, as well. Sweda had $84 million in sales in 2007 – which was about flat with the company’s results in 2006 – but felt the repercussions in 2008. Last year, the company’s revenues fell to about $72 million. Hagan, however, says the company is “forecasting a sales increase for 2009.”

Scott Pearson, the vice president of merchandising and a 12-year Sweda veteran, and Cindy Qin, who’s been with the company for five years as its CFO, among others, steadfastly stood by Hagan as others jumped ship. They don’t sugarcoat the problems they had. “A nightmare,” Pearson sighs, recalling the trouble. “The worst part is, we knew we were letting our clients down and we couldn’t fix it fast enough.”

Apologies: “Humbling, But Necessary”
The first thing Hagan, Pearson and the management team did was reach out to clients and explain what had happened – and go so far as visiting them personally to make amends. “I really hope and believe that honesty goes a long way,” Hagan says. “And for us to sit in front of clients and explain to them that we screwed up was humbling, but necessary.”

Hagan also poured “millions” into shoring up the company’s damaged infrastructure with implementations from software company Oracle to assure that a system-wide failure wouldn’t happen again.

With such a monumental disaster on their hands, most CEOs wouldn’t be blamed for playing it safe. Hagan, on the other hand, was not afraid to try out risky strategies at this most tenuous of times. He had the presence of mind to take the formidable, methodical Qin and turn her innate meticulousness toward the operations department. Under her stringent tutelage, Sweda’s departments now “talk” to each other seamlessly, and the on-time delivery rate is 98.8%.

Hagan then hired James Visperas, who – incidentally – made it to the 32 finalists in season two of American Idol, as inside sales manager Under his guidance (more really OCD attention to detail), calls to the customer service and sales departments are picked up by a live person after one ring. Most recently, Hagan hired Suzie Gunsauls – formerly with Counselor Top 40 supplier Leed’s (asi/66887) – as the company’s vice president of sales.

And a resurrection wouldn’t be complete without a new motto. Lou Nicolaides, Sweda’s new director of marketing, is spearheading the company’s rebranding effort with its “Simple. Style. Smart.” tagline. “We want to remind people about what our strengths are, and what we can do for them,” he says.

Looking Forward
Sometimes, things have to get worse before they get better. And make no mistake: Sweda is better now than it ever was. It’s easiest to judge simply by the distributor comments posted on ESP Online. When things went off the rails in November 2007, Sweda’s clients responded with a litany of vitriol and complaints. Now, about the same time the company regrouped, reevaluated, reassessed and reinvested millions into the business, its ratings began to rise and the comments have come around to be positively glowing.

Consider these recent comments from distributors on ESP: “Our customers ordered watches and were very impressed with the quality of the product! The order was delivered much earlier than expected… Great job.” “Sweda is our core supplier of choice. Excellent products, imprinting and price…and they always deliver on time. They’re number one in customer service of any supplier we use!”

Sweda, owned by the holding company Seidler Equity Partners, which also owns Counselor Top 40 supplier Magnet (asi/68520), now has a solid four-star (out of five) rating from distributors on ESP.

It’s not just smaller distributors offering words of praise. Larry Cohen, president of large distributor Axis Promotions (asi/128263), says Sweda has done a great job in the past year. In his eyes, the company has transformed itself into a nimble, customer-focused organization that offers well-designed products at aggressive prices. “Their art department does a great job developing custom renderings and their production department is now able to accommodate expedited requests,” he says. “And their new Web site is much more customer friendly.”

Sweda recently announced plans to expand its 24-hour service – at no additional charge – to include over 800 products within 18 categories in its main 2009 catalog. “The enhancements we’ve made in 2008 enable Sweda to give our distributors a level of service never before seen in our company’s 30-plus year history,” says Hagan. “Although quite challenging in its implementation, the move to our new 351,000-square-foot facility increases our inventory and shipping capacity by five times and allows us to offer benefits we know our customers will appreciate – especially in this economic climate.”

Since the launch of the 24-hour service in October with less than 10 items, Sweda’s customer service orders jumped more than 40%.

With a new facility, new processes and infrastructure and a new attitude, Sweda seems hell-bent on amending the mistakes made in the past. And clearly some distributors have moved on with them.

Rick Rayl, the vice president of purchasing and operations for BDA (asi/137616), the largest industry distributor, says Sweda has stepped up its game in two main ways – how they listen to their customers and how they’ve invested in their business. “Their capital investments, their computer system, their new building and their new phone systems all speak to their belief in doing their business right,” Rayl says. “But more so for us, they’re listening and helping us to serve our clients, which is our primary focus.”

Rayl acknowledges that the industry has become increasingly difficult for suppliers – and cites the changes at Sweda as an example of how suppliers can do it right. “Everything has to be faster and more automated and cheaper and safer,” he says. “There’s a lot of cost of doing business outside of providing products and Sweda has been willing to make investments in their business that brings the right product at the right time. And they’ve put a huge emphasis on safety and compliance, which is very important to us.”

And why did Rayl stick with Sweda, even after the infrastructure issues? “Because of their honesty,” he says. “They didn’t try to duck it – they faced up to what was happening and took immediate steps to rectify it. They told me all the details about what was going on, where things were getting jammed and what they were doing to fix the situation. I have a great deal of respect for their honesty. They had a tough time, but they worked through it and proved to us they were ready to service us again.”

Scott Siciliano, a sales executive with Counselor Top 40 distributor Geiger (asi/202900), says Sweda has been a preferred supplier of his, as well as Geiger’s, for 16 years. Siciliano says the management is one of the key reasons he’s stayed with the company and trusts it to handle his client orders. “I have had the pleasure of working directly with Scott Pearson for many years,” he says. “He has never let me down on anything I needed for my customers, whether it was quick turnaround, help on pricing, or details on a product. I know I can always count on him.”

A severe point of contention during the worst of its problems, Siciliano notes that Sweda’s turnaround time is now “outstanding.” “Now, they’re offering 24-hour service on many of the items in their line for no extra charge,” he says. “I’m glad they understand the tight deadlines our customers request of us and have programs in place to meet those needs.”

 According to Frances Martin, national account representative of ProGifts (asi/300270), Sweda’s new service fulfills a great need which involves crucial, time-sensitive orders. She recalls a situation recently where a client with a strict in-hands date needed a variety of items in a short time period. “We placed an order for 400 each of stainless-steel travel mugs, carry-all tote bags, notebooks, carabiner pens and valet key tags,” Martin says. “I tracked the order very closely, especially since Sweda’s 24-Hour Service was a new addition. They efficiently received and confirmed the order, got all of my items shipped out the next business day, and then followed up promptly with the tracking information so I could keep my client updated at all times.”

Better, Stronger, Faster
And sometimes, it’s the small, unexpected things that make the big difference. When they debuted their “little person” USB memory stick, clients loved it. When they found out it could be customized, they went nuts. That, coupled with the streamlined advancements, new, innovative items and over 98% on-time delivery rate, is going a long way to win back clients who may have left – and also helped generate a loyal following among new ones.

One area in which they’ve had to become experts is Proposition 65 – it’s part of the job when you’re based in California. Distributors haven’t been afraid to contact the company and use it as an educational resource on the act, which regulates the presence of toxic chemicals in items.

Because of that, the company is hyper-diligent about product safety and compliance, having its items not only checked multiple times overseas before they ever get packed on a boat, but also three more times before they leave the Sweda warehouse in the U.S. Again, Qin’s eagle eye is responsible for overseeing those finer points. Clearly, while the devil may be in the details, he answers to Qin.

Hagan understands that while some clients who felt burned during the crisis may not come back, he believes the company is on the right track to proving itself all over again. “With all of the upgrades and changes we’ve implemented, we really have our systems operating at a highly functioning, streamlined capacity,” he says.

Sweda’s been to hell and back again, and the decision to overhaul – at great expense – is now reaping the rewards. What’s critical to measure is the mettle of a company. Just like a person, you gauge how it learns and rebounds from adversity. And in that regard, there’s one thing to say about Sweda: it’s nothing if not resilient.

Michele Bell is senior editor of Counselor magazine.