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Home » Commentary: Cycles and Emerging Opportunities

Commentary: Cycles and Emerging Opportunities

By    Thomas P.  Gale 
September 10, 2009
More about:  Management/Strategy
The outflow of manufacturing to "low-cost" countries keeps resonating lately as I envision how this next growth cycle takes shape. Before the heady days of the dot-com era distracted many businesses from their core focus and presented others with opportunity, industry change centered on the dramatic shift many North American manufacturers were making to offshore production.

Today there are a number of indicators that manufacturing might migrate back to a regional or at least continental scale.

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The outflow of manufacturing to "low-cost" countries keeps resonating lately as I envision how this next growth cycle takes shape. Before the heady days of the dot-com era distracted many businesses from their core focus and presented others with opportunity, industry change centered on the dramatic shift many North American manufacturers were making to offshore production. That significant reduction in the traditional customer base for distributors fueled a consolidation wave in the 1990s.

Today there are a number of indicators that manufacturing might migrate back to a regional or at least continental scale versus the strong global trend that started 20 years ago – a weak dollar, security concerns, inflexibility of a long supply chain, energy/transportation costs, quality, total costs. The article in our last issue, Why Some Suppliers Are Returning, offers hopeful examples. It's a bit early to call it a trend.

However, I think there are some key issues distributors need to consider now as North American and global economies rebuild. Based on past recessions, large distributors can pick up market share with a number of strategies – acquisition, targeted sales blitz, product SKU expansion, global sourcing and managed inventory programs for both suppliers and customers.

Smaller competitors need to refocus on core strengths and compete on the value that sets them apart from their one-stop competitors. We are likely to see more polarization between small specialty distributors with a small number of lines but deep expertise and the global commodity product experts who will win the low-cost wars. Brand manufacturers have to figure out a functional way to reward both channels.

Conversations the past several weeks with distributors and manufacturers have centered on how hard it is to shift the mindset from defensive to forward-looking. This fall is when well-positioned, well-funded competitors will attack, as market signs improve. If your team is still shell-shocked from staffing cutbacks and revenue drops that every company has faced to some degree, find ways to lead them to higher ground.

Our next two Webcasts on Sept. 15 and Oct. 8 examine different angles of repositioning your company for this emerging business cycle. Mike Marks addresses growth strategies in this new environment on Sept. 15, while John Salveson, a human resources consultant with a focus in distribution management, will examine managing talent and rethinking "who does what" on Oct. 8. More information is at www.mdm.com/events.

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