Tom Gale, Author at Modern Distribution Management - Page 21 of 28
Posts By Tom Gale

If your company has no room for improvement in either benchmarking or contingency planning, then read no further. You have your priorities defined and are well-positioned to negotiate the next few years of volatility. I’m oversimplifying of course, but I believe the next 12-24 months will reshape many distribution sectors and markets. Here are a few reasons why.

As industry groups dive back into the fall meeting schedule, there is a sense of optimism not seen the past few years. But the pattern is tracking pretty closely to what we’ve heard from economist Dr. Adam Fein and others who track industrial markets closely. The rebound is sluggish and has the potential to stay so for a few years. A weak recovery doesn’t feel very good, as we all are finding out, but it beats what just happened.

Remember those first-generation efforts in standardized numbering, bar-coding and other ways to automate through technology or process improvement? Remember the quality movement?

For those engaged in independent distribution channels 20 years ago, there was much discussion about how the channel had to tighten up to remain a viable part of the supply chain. Too many redundant activities were taking place at the manufacturer and distributor levels, and customers would migrate to more cost-effective supply sources if their current suppliers did not find ways to be more competitive. Oh, and distributor margins were going to have to squeeze to pay for this improvement.

Beyond the core management team, how involved are your employees in the company’s annual planning process? Do your employees know what the business plan is for the remainder of this year? Many distributors would answer “no” simply because this year has been unlike most others.

With so much uncertainty in the first quarter, the plan was hope and survival. When results exceeded expectations, the focus shifted to generating revenue and managing demand …

It’s more than ironic that at a time when the economy is choking on high unemployment, many distributors are finding it hard to find good talent. It’s a warning sign you can’t ignore. How good do you want your company to be through all this turbulence? Pretty good? Great? The best?

You need engaged team members scrambling just as hard as you to find the right answers to deal with the upheaval right now. In most cases it’s not the same skills as five years ago.

The release of our first annual MDM Market Leaders and Distribution Landscape Report last week was the result of several months of research. Throughout, we noticed some recurring themes. Last year changed every distribution company’s paradigms, which historically have been about size and sales revenue growth. Anecdotally, very few distributors grew revenues last year.

I’ve been to more than a dozen industry events over the past few months – association annual events, technology summits, marketing group meetings. It’s great to see some momentum starting to build that’s great to see. There are also some common threads in the conversations taking place at these events. In one form or another, every distributor is rethinking the right model for 2010 and beyond – one that’s leaner, more productive, but built on the strengths, values and relationships that built a successful company in the first place.

I’ve been using a saying attributed to Warren Buffet this spring in presentations to groups about current markets: “It’s only when the tide goes out that you learn who’s been swimming naked.” At this point, the more appropriate saying might be: “You can drown when the tide rises above your head.” The Ch. 11 bankruptcy protection filing by Alamo Iron Works on April 5 was triggered by what the company alleges was non-payment of $1 million for work by a large customer.

This is not likely to be an isolated incident. Increased sales are great, but I’m hearing about difficulties with supplier lead times, financing inventory and cash flow.

MDM lost a long-time contributor and friend last fall. Bill Hodgdon, a consultant with a strong manufacturing operations and marketing background, died from complications with cancer. Over 18 years, Bill wrote many articles for MDM and spoke for many distribution associations. He consulted with international manufacturers who sold through distribution and helped them with channel strategy and tactics. Bill had a unique perspective.

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