Decisive Steps Can Lead to Growth
Positioning for growth is a challenge that most distributors share. Economic volatility, competition, and a range of industry advancements demand that distributors not merely expect to grow in the coming years, but that they plan and strategize for successful maturing. To help distributors analyze and prepare for uncertain business trends, Guy Blissett, wholesale distribution lead, IBM, in partnership with the National Association of Wholesalers (NAW) Institute for Distribution Excellence, wrote Facing the Forces of Change(r): Decisive Actions for an Uncertain Economy.
"This is not my perspective or IBM's perspective of what will happen in the future of wholesale distribution," noted Blissett. "This series continues to be a reflection of what the leaders and innovators of the industry see as top-of-mind issues."
The six-chapter book and accompanying webinar center on the expanding role of services, differentiation with analytics, leveraging human capital, and the role of information technology.
"These are top-of-mind issues that I ran into with CEOs countless times," explained Blissett. "It is important, however, to begin with the economy."
RIDING THE ROLLERCOASTERThe initial drop in the economy sent economists scrambling to predict if there would be another drop or if the last of the trouble had been felt. Talks of a double-dip recession, slow growth, no growth, and a bevy of other uncertainties left many companies in the HVACR industry scrambling for a plan.
"The economy has been a rollercoaster since the initial drop, and it is not predictable exactly where it will go," said Blissett. "There were certainly many distributors who were feeling overwhelmed by the events going on around them, and they were unsure of the correct actions to take."
To help gain insight, a survey of 1,500 CEOs was conducted in 2010, 80 of which were wholesale distributors. According to this research, the only thing certain about the near future economy is that it is expected to continue its volatility, complexity, and uncertainty.
"While magazine covers show that we have already been through a period characterized as volatile, complex, and uncertain; as CEOs look down the next three to five years they only see more of the same," explained Blissett. "This has important ramifications for distributors as they go through their strategic planning process. We need to think differently about the business because the notion of stability and predictability has really gone out the window."
Despite the uncertainty, distributors looking for continued success are challenged to decide their next steps. To advance successfully, Blissett urges distributors to think beyond business as usual.
"Given the lingering uncertainty in the economy, wholesaler-distributors must continue to take decisive actions," he said. "Gone are the days of overly cautious and slow decision-making processes. The business world is moving too fast, and distributors must be informed, intelligent, and nimble enough to make rapid but prudent decisions, and then adjust and iterate as necessary."
EXPANDING SERVICESOne of the ways distributors continue to grow is through the expansion of their services. Providing solutions to customer problems in unique and creative ways helps set distributors apart from each other. It can also help build customer loyalty that competitors often find tough to break. As distributors continue to evaluate the role they play in the supply chain, they may find new ways to participate in, and profit from, varied customer transactions.
"The traditional role of the wholesaler-distributor is going to continue, the traditional benefits will also continue, but we need to think a little more expansively and broadly about what we can do for our customers and our suppliers," said Blissett.
He explained that many of a distributor's suppliers and customers are going through process evaluations as they redefine their roles in the supply chain as well. Some of what is being uncovered is that certain processes are more cost effectively outsourced. This can provide new opportunity for the distributor seeking to strategically grow the business.
"Distributors are going to be candidates to reach further into their customers' businesses beyond selling parts and customer services," said Blissett. "They will likely be reaching into pieces of customer operations as well."
Services are predicted by Blissett to double in importance to gross margin by 2015. For distributors looking to strategically grow in new markets, Blissett recommended that they get much closer to customers, craft a comprehensive strategy for services, and actively manage their service and product portfolios.
ADVANCING TO PREDICTIONSAdding services and reaching further into customer process can be the key to strategic growth, but it is important for distributors to remember that they can still say, "No."
"We are all doing more with less in terms of personnel and capital," noted Blissett. "The traditional shotgun approach of trying to be all things to all customers and always saying yes to customers, regardless of what their request is, I think those days have to be put in the past. We really need to focus our resources moving forward."
Analytics help distributors to focus their resources, and the advancement of technology is enabling these analytics to reach further than ever. Overall, it can be said that there are two sides to analytics - analysis and implementation. On the analysis side, distributors are able to plug in and gather advanced and timely information. According to Blissett, this level of information is helping move information reporting into more accurate predicting of business and customer profitability. This can help distributors to further understand the profitability and pitfalls of customer requests.
Blissett warned that simply gathering information isn't enough to make analytics investments a profitable expenditure.
"It is imperative that the people who are actually supposed to do something with this information have access to it, can understand it, and in many cases are able to play around with it, allowing them to work with scenario planning," he said. "There are a lot of different variables now that we can pull into the analytical engine to drive a much more meaningful forecast of where the business is going, rather than having just an understanding of where it's been. I think that's the key switch we are going to see with relation to analytics. It is not so much understanding what happens, but becoming much better at understanding what's going to happen."
No matter the amount of information provided and processed, it is impossible to predict the business future without error. Distributors that are reaching to improve themselves decisively and strategically, however, are beginning to find new paths to likely success.
"Operating in this new economic climate requires new ways of thinking, innovative business models, and creative leadership," said Blissett. "Adjusting to these changes and capitalizing on new opportunities will be essential for survival in this new business climate."
For more information, visit www.naw.org. The complete Facing the Forces of Change®: Decisive Actions for an Uncertain Economy is available for purchase at www.naw.org/publications