Commentary: Beware the Sound Bites

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 article in this issue outlines, financial and credit market bubbles burst, and every distribution sector is starting to feel the impacts. This is an unprecedented situation. At the same time, our surveys and conversations with distributors and manufacturers offer some insight on how executives are responding to this challenge. And there are some sectors staying strong while others are flattening, not falling off a cliff. Here are a few common threads we are hearing and a few takeaways that may be useful.
 
This next year will push lean efforts -whether formal or not -to much deeper levels. It will push distributors and manufacturers to find ways to get even more efficient in how they conduct business in every way -demand visibility, marketing, inventory, logistics and financial.
 
The next 12-24 months will be about positioning, protecting and building market share. As the announcement (see the Industrial &Construction Markets Update in this issue) of Stock Building Supply's closure of 86 branches illustrates, there will be some major market shifts taking place.
 
Some large distributors are shedding unprofitable branches; others are waiting for bargains as some smaller distributors run out of cash and deal with much more limited financing options.
 
Every business expects a tough year in 2009. What will separate successful from struggling for distributors will be close and careful management of assets -cash, inventory and accounts receivables. I'd also add human resources to the critical watch list. No business in this climate, regardless of size, can operate with less than peak efficiency and productivity from its team.
 
Where sales traditionally could cover up flaws in service and performance, there won't be room for "adequate"when it comes to how customers view your company, and in turn how you set the bar for performance internally.