Harley-Davidson Motor Company’s former director of communications Ken Schmidt told participants at the Power Transmission Distributors Association annual Industry Summit this past week that they cannot compete successfully if they are doing business exactly the same way as their competitors are.
Everyone says they offer the best quality, reliability and service. Who doesn’t?” he asked. “From my perspective, competing with words like quality and reliability is next to impossible.”
The key in his mind, however, was simple: People do business with people they like or with people they were referred to by people they like. Schmidt argues that customers don’t make logical, rational decisions, but instead their decision to do business with you starts in their gut. So, …
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Deloitte recently released a survey about how decreased earnings and falling stock prices are eating into companies’ annual incentive and long-term incentive plans.
This at a time when it’s more important than ever to make your employees feel valued and motivated.
The survey found that 59% expect their annual incentive plans to pay out below target, while 11% believed they would be no pay out at all. And among those companies offering stock options, 63% report that all or most of their stock options granted within the past five years are currently underwater.”(That is, the exercise price is above the current stock price.)
Among the companies that have implemented or plan to implement retention programs, 33% will create a stand-alone program for …
Alan Greenspan has gone from irrational exuberance in his description of the stock market boom of the 1990s to a once-in-a-century”credit tsunami in 2008. The subject lines of my Wall Street Journal news alerts daily look increasingly like tabloid magazine headlines -“Dow Plunges!”But as we are seeing, wait a day and the news is reversed.
Sometimes a wake-up call is healthy; panic never is. Anyone who experienced the media’s lack of understanding and coverage of the last recession at the beginning of this decade have a large and healthy degree of skepticism about what we see on TV and read in newspapers about the current crisis. But the reality gap is at its greatest right now. Fear and speculation are driving sound bites about how bad it might get.
As the lead …
A recent survey by the National Association of Colleges and Employers puts the spotlight on employers’ hiring plans for the next year. NACE surveyed employers who had provided projections in August 2008. Compared with their earlier projections, employers expect to decrease hiring levels by 1.6%. In comparison to their actual hires from the Class of 2008, respondents expect to hire about 1.3% more graduates from the Class of 2009.
NACE’s executive director says that hiring plans are essentially flat, and that many employers are looking to cut back. In August about one-third of employers said they would trim their college hiring, but in the latest poll 52% said they were planning do so.
Manufacturing hiring expectations remained flat, while construction firms plan …
Two researchers from the University of Tennessee and Xavier University in a recent article in IndustryWeek addressed the ever-debated idea of sharing information with channel partners.
The authors acknowledge that there is a perceived “dark side” that can possibly outweigh the benefits of sharing information with channel partners. But the authors also argue that both buyers and suppliers benefit from sharing information, and that even if one benefits more, it still helps build efficiencies in the entire supply chain: “If managers see relative gains as more important than absolute gains, it can undermine long-term cooperation within supply chains. There is a saying that, …
I decided to take a look back in the MDM Archives at the advice that was being offered up the last time the U.S. was dealing with a downturn. Here’s what I found:
David Gordon and Neil Gillespie in November 2002 provided perspective from GE CEO Jeffrey Immelt:
- Prepare for five years of slow growth. Plan accordingly.
- Price pressures will continue.
- Innovate now. Your basic strategies in a scenario of slow growth with never-ending price pressures are either cut prices or innovate with technology solutions for customers.
- Hit singles as well as home runs. Focus on smaller frequent innovations.
…
In a tough economy, industries with tight margins are looking for new ways to save money. Talk about lean is on the rise (see the recent MDM case study Lessons Learned on Lean) and experts are chiding some executives for not taking the need to make changes to heart. (Here’s what economist Alan Beaulieu recently said, as published in the MDM Blog this summer.)
Even in that light, R. David Yost, CEO of drug distributor AmerisourceBergen, has taken cost-cutting to a whole new level. Yost’s efforts to keep spending in line -including answering his own phone rather than relying on a secretary -recently were featured in <a ...
In my recent interview with Robert Kaplan, he addressed how he feels about firing customers. He says it should be the last option. He recommended examining your own processes first, ensuring you are efficient in dealing with these customers. Then try pricing special services, which may prompt a change in customer behavior. And then talk to the customer about ways his behavior can change -such as increasing the average order size. If all else fails, suggest the customer find another supplier or raise your price.
“But there are a whole series of things you can do to transform unprofitable customers to profitable ones,” Kaplan says.
Read the interview with Kaplan, Take Strategy to the Front Lines, <a ...
Many leaders understand the importance of matching strategy with operations, but few companies have systems in place to actually do so, according to Robert Kaplan and David Norton, creators of the widely used Balanced Scorecard performance measurement tool and leading advocates for customer profitability analysis. Kaplan recently spoke with MDM Editor Lindsay Young about the challenges inherent with effective strategy implementation in a wholesale distribution company.
In their latest book, The Execution Premium: Linking Strategy to Operations for Competitive Advantage, Kaplan and Norton present a formal systems approach to implement strategy at every level of an organization. The authors’six steps, as shown in the graphic on page 4 of this issue, …
As a pivot point in the flow of products from the point of manufacturing to end use, distributors have several key roles -scout, gatekeeper, product and solution provider, marketer, arbiter. Every successful distributor combines these roles into a unique set of skills that creates value for customers as well as suppliers. Distributors create the most efficient market system into highly fragmented industries and local economies by effectively managing these market relationships both upstream and down. It’s a fairly simple equation that is complex to execute well.
Not that most distributors have time to sit around and ponder their place in the universe. But that’s just it. The interview that leads this issue touches on a key differentiator that separates a relatively few …
I recently interviewed top management expert, Harvard Business School Professor Robert Kaplan, one of the originators of the performance management system the Balanced Scorecard. (Here’s his biography on the Harvard Web site.) He’s come out with another book (with David Norton) –The Execution Premium: Linking Strategy to Operations for Competitive Advantage.
The concept behind the book is to show organizations how they can mesh strategy and operations to attain corporate goals using a deliberate six-stage management process. Kaplan says that many organizations try to …
Every business tends to put on a full-court press to get customers in the door. Many have processes to build existing customer relationships into larger ones. Fewer businesses have a process for saying goodbye or retrieving ex-customers. But in tightening markets, distributors often see customers jump to a lower-price competitor. How often do you experience a customer returning after a year, or after they realize the better value your company delivers? What percentage of lost”customers return?
These issues came to mind following an unpleasant experience closing the account with our credit card processor. I switched to a more cost-competitive service after four-plus years (three-year agreement with automatic annual renewal) with an Omaha-based affiliate of my local banking …
This article looks at five key issues distributors and manufacturers should watch closely in the next year.
The U.S. House of Representatives plans to adjourn for the year on Sept. 26. And, with the August recess not over until Sept. 8, Jade West, senior vice president for Government Relations for the National Association of Wholesaler-Distributors, doesn’t expect much more to get done before a new Congress takes its place in January.
However, distributors and manufacturers may want to keep their eye on a few critical issues going into the next session.
Energy
The prices of finished energy goods -including home heating oil, gasoline and lubricating oils among others -increased 28 percent from July 2007 to July 2008, according to …
Barnes Distribution, distributor of maintenance, repair, operating and production supplies and a business of Barnes Group Inc., launched its new master catalog, adding more than 4,200 new products to its regularly stocked items. The new products are in the welding, hose and fittings categories.
We’re tailoring our product line to customers of our Vendor Managed Inventory services,”Brian Koppy, of Barnes’investor relations and communications, says. The addition of products in welding, hose and fittings also reinforces the vertical marketing strategy the company announced last year in the transportation, manufacturing, government and natural resources markets.
“As part of our market segmentation strategy, we are focusing on fewer market segment,”Koppy says. …
Here’s one potential downside, if you want to call it that, to adjusting your pricing strategy: It makes it more difficult to sell against competitors who may not have taken that route. One of the comments that stuck out in my interviews for the recent pricing article in the Aug. 10, 2008, issue of MDM, Pricing for Profitability, was that poor pricing practices can cause not only an erosion of margins at a single company but in an entire market.
As Robert Graham, president of Engine Warehouse, Houston, TX, told me: “We don’t have exclusivity on every line we sell. We have exclusivity on some, but on other product lines, we have competitors selling the same product and offering similar services, and they are …
Implementing an effective pricing strategy can be one of the best ways to achieve better gross margin. This article outlines a pricing model developed by Texas A&M University's Supply Chain Systems Laboratory and provides a look at how some distributors are using it to update their pricing strategy.
About three years ago, F.W. Webb, a regional distributor of plumbing, heating, cooling and piping products, took a part of its legacy IT system and dedicated it to improving the customer and product information available to salespeople.
About a third of our prices were being set manually by salespeople,"says Lawrence Mohr, the distributor's now-retired senior vice president of information technology. "We needed a way to provide information to inside sales so …
About this report: This is the inaugural report of the MDM Public Distributor Report, provided on a quarterly basis to subscribers of Modern Distribution Management. The report is available online only.
Click here to download this report in pdf.
As distributors see more price increases from suppliers, they are faced with the challenge of keeping prices manageable to their customers while maintaining profitability.
In the most recent round of quarterly earnings calls, few distributors avoided the price discussion. Here’s how a sampling of public distributors in various sectors are approaching the issue.
Impact of Housing Decline
“We are kind of caught between a …
For years, manufacturers have used the concept of lean to improve efficiencies in their operations. Now distributors are moving forward with their own lean initiatives – looking at ways to reduce costs by improving internal processes. In this article, a dental supplies distributor shares its experience with lean.
At the beginning, going lean seemed so simple to Chuck Cohen, president of Wilkes-Barre, PA-based Benco Dental: Assign someone to identify waste and work with employees to eliminate it.
But when some employees seemed unable to overcome the "We do that already" attitude, he realized it wasn't so simple.
"Lean is the most seductive yet complicated process I've ever been involved in," Cohen says. "It's really easy to do OK at it. It's …
The idea that a lean operation -one that continually identifies and eliminates wasteful activities to reduce internal costs -can be a more profitable one has long been accepted by manufacturers. Distributors are now starting to apply that idea to their operations. Dr. Perry Daneshgari, president of MCA Inc. and co-author of Lean Operations in Wholesale Distribution, now available from the National Association of Wholesaler-Distributors (www.nawpubs.org), recently spoke with MDM about how the distributor mindset is changing.
MDM: Is lean is something that you’re seeing a lot more of in distribution?
Perry Daneshgari: I see more sparks of interest, but is it being applied more? Not yet, but there …
Evergreen Consulting CEO Brent Grover recently interviewed Andrew E. Randall, president of TriState Capital Ohio, Cleveland, OH, about distributor relationships with bankers in a tough climate, where credit markets are tight, and financial institutions have become cautious and conservative.
Randall says this environment may continue for another 12 months or so but will create opportunities for banks not affected by current economic challenges to look at well-structured and well-priced opportunities. Randall offered up a recent transaction as an example: a senior debt financing for an acquisition by Supply Chain Equity Partners, a private equity group based in Cleveland, OH, with an exclusive focus on wholesaler-distributors. The transaction typified the type of borrower …
