Tom Gale, Author at Modern Distribution Management - Page 26 of 28

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Posts By Tom Gale

This time of year serves as a reminder of the incredible logistics infrastructure that now exists in this country and around the globe. But while we increasingly take for granted the ability to point, click, shop and select overnight delivery, let's acknowledge the distinct value wholesale-distributors provide.
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A unique set of capabilities, service functions and responsibilities defines how a distributor meets customer requirements (often including same-day delivery and 24-hour service). In addition to large customers, there are countless micro markets that depend on local supply services that go far beyond logistics expertise or product selection with a mouse and price-comparison sheet.
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Yet, as conversations often remind us at holiday parties, many ...
News that CompUSA will shut its remaining 100 stores and sell off its assets offers some insight for distributors and manufacturers feeling the pressures of consolidation. The downturn of the electronics retailer was not for lack of investment, but likely poor positioning.

Investing in the business in the late 1990s, Mexican telecom and retail store magnate Carlos Slim (now the richest man in the world) took CompUSA private, and the company grew its consumer electronics business through acquisition, including The Good Guys, a California chain.

The Wall Street Journal estimates annual sales last year at $4 billion, but likely to come in at $1.5 billion this year. Early in 2007, it said it would close 126 stores, more than half of its total then.

Anyone who ...
Many sources are predicting a more significant slowdown in 2008 than previously thought, as several articles in this issue address. Perhaps the only predictable certainty for 2008 is that the attention deficit disorder the mainstream media suffers from will be epidemic. Not only is it an election year, but the credit crunch and residential construction downturn will give most reporters severe whiplash. It will be even harder to get an accurate read on the real shifts taking place in the economy.

We don't predict the future, but we do try to offer observations and insight from our coverage of diverse distribution sectors in

North America and abroad so our readers can plan and react quickly. Our lead ...

As a good friend once observed, success in distribution is not so much hitting home runs or triples, but executing singles well and celebrating the occasional double. (The baseball analogy might be a little late but only because the World Series ended too early).
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It would be nice to apply that thought to the area of data standards in distribution, but we can't. There are some isolated sectors where there have been successes, most notably in electronics and electrical product sectors. But most areas in distribution have been striking out or at best getting an infield hit every once in a while. Not surprising really, when you consider how fragmented this industry is at every level.
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For more than 20 years, there have been efforts to connect distributors with ...
The STAFDA annual trade show offered some indicators about the emerging importance of tangential growth in distribution channels. The two-day, product-focused trade show wrapped up yesterday with more than 5,000 attendees and nearly 1,000 booths. Construction-related products -fasteners, hand and power tools, safety products -formed the core product areas. But it was what was happening beyond product that caught my attention (although there were some great new products displayed!).
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New residential construction is down, yet commercial and industrial construction markets are strong, and renovation markets look attractive. Distributors with core customers in residential contracting are more than motivated to grow the commercial and industrial construction side. The same holds ...
Some big pieces are in play in distribution M & A again, including European distributors with extensive North American operations. French-based electrical distributor Sonepar's unsolicited bid for Dutch-based Hagemeyer looks like the first low-ball shot across the bow in what likely will be a longer process of negotiating the price. Beyond price, the question may be whether the cultures of the French and Dutch-based companies can mesh.

With Hagemeyer teetering at the edge of a financial cliff just a few years back, its positioning looks better today. As our lead article in MDM this week notes, the big attraction for Sonepar is Hagemeyer's strong North American industrial business. ...
As our lead article notes, the big attraction for Sonepar is Hagemeyer's North American industrial business. Sonepar's U.S. customer base is 64 percent electrical contractors and only 14 percent industrial. Hagemeyer's North American operations are 85 industrial and 15 percent contractor. Sonepar would get a well-developed integrated supply business with more diversified products.
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You have to ask how the model developed for a century or so by Cameron & Barkley and acquired by Hagemeyer at the turn of this century would change& hellip; again -for customers, vendors and employees.
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Will we see more diversification across channels? Is it possible to buy growth in big chunks and combine different pieces to produce a profitable entity? Recent history seems to ...
The more you dig into technology issues in distribution, the less it seems to be about bits and bytes, and the more it is about process. That was reinforced two weeks ago at an industry e-business conference in Vancouver, sponsored by IDEA, the official standards-creating body for the electrical industry.

A panel session at the conference addressed the difficulties with getting an industry to adopt standards and collaborate more. The fact is there is no right answer for all the different niche vertical sectors across distribution. This is and will remain a highly fragmented industry. That's why certain software providers do well in certain sectors with their feature sets, while others do well elsewhere. Even more ...
As our lead article outlines, many distributors are trying to evolve a traditional sales model -where the outside salesperson owns the customer relationship -into a more flexible one. It's a tough transition that engages the entire company, not just the sales rep.

The payoff goes far beyond particular customers. It really shifts the way in which distributors position themselves with customers and suppliers.

Not only do these customer relationships become much more productive and cost-efficient, it is much easier for distributors to tailor services to specific customer needs across the organization. That in turn defines for the customer the real difference in the value your company offers versus alternatives.

Distribution management gains much better ...

We are at a point again in the business cycle where the national media hold a powerful tool and heavy responsibility when it comes to accurately reporting on economic trends. The danger is that one-line headlines and sound bites about recession can spook U.S. consumers into their shells and create the proverbial self-fulfilling prophecy.

The first three articles in this issue offer a few different viewpoints from economists on the state of the economy, the impact of the credit crunch," and what our readers might consider based on the current climate. We do not predict the falling of the sky. And as economist Alan Beaulieu notes in the cover story: "The U.S. economy is in better shape than most people think it is."

That's not to discount the very tough conditions ...

The weeks leading up to closing the deal on HD Supply has all the stuff for some kind of bizarre reality TV show that would even trump the Donald. The 18-percent reduction in the final price tag for HD Supply raises potential flags for distributors on a number of levels. Let's explore a few.
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All three panelists at our Distribution M & A audio conference in May agreed that the M & A market was even hotter in 2007 than the year before, but that we might be nearing the end of a strong ride. Did the bell just ring? That large a discount reflects a combination of factors; the easy ones are the downturn in residential construction and the credit crunch. There were a number of internal factors that we won't know ...
Even if you don't intend to add private label products to your product mix today, pay attention to what competitors are doing and how they position private label against your manufacturer brands.

As our lead article in this issue points out, private label really took off in consumer packaged goods when the industry consolidated. As retailers created national footprints, they gained the scale to effectively build out private label programs.
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And it certainly requires a certain amount of scale to support the investment into private label - to source, develop and market effectively while not damaging your current lines.
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In distribution channels, it's important to note that it's not just the national chains that are building private label brands. ...

The lead article in this issue offers an interesting example of how private equity has been changing the course of consolidation in independent distribution channels. Would a family-held company such as McJunkin try to execute a deal of this size if not for the new ownership?

In any given sector of distribution, you can often identify one or more market leaders who are so locked into their paradigm of success by their own competitive and cultural history that they may not see emerging growth opportunities. Or the risk/reward equation appears too severe when they look at how their model could change. That may not be the case here, but it points out the competitive outlook outside investors can bring to company.

At the same time, you often find smaller distributors who ...
A few events do not make a trend. But I've noticed a few instances lately where manufacturers have bought up distribution in select markets. Examples: In July, a Swedish manufacturer of seals, Trelleborg, acquired AFM in Portland, OR, a $13-million distributor. HVAC manufacturer Carrier Corp. announced in June it was buying a $150-million distributor serving northern California and Nevada, E.B. Ward and Valair, with 140 employees.

It stirs memories of the difficult balancing act and sometimes rocky road cutting tool manufacturer Kennametal found when it operated an industrial distribution division while also managing independent distribution networks. It finally spun off its distribution units.

The reason given by Carrier for its purchase of distribution: The ...

Despite pressures from commodity price increases the past few years, many distributors are finding it hard to raise prices. The traditional method of price increases has too often been to throw five percent (or another guesstimate) against the wall to see if it sticks.

The authors of the article in this issue argue that there is a better, more profitable approach. The solution is to develop products and services that target unique segments with very specific offers. For most distributors, this involves developing a range of offers from the high end (with all the bells and whistles) to the low end (no frills).

The key, the authors say, is to segment the market and build specific offers based on your unique ability to drive economic value (e.g. revenue growth or cost ...

The three Ps of process, productivity and profitability separate companies that are doing OK from ones that perform in the top tier of peers. That will continue to be the key differentiator.

The performance analysis reports many distribution associations sponsor offer a wealth of benchmark data about how well your company is doing in a range of financial performance metrics. Historically, a relatively low percentage of distributors participate in these data aggregation programs. Yet these types of tools are critical to make any kind of real change stick in your business. How else can you create realistic goals and then the specific short- and long-term steps to get there?

The report card in the area of productivity is better. Several studies have shown that distributors ...

Be careful not to get a sugar high from the HD Supply spin-off announced this past week. After a deal of this magnitude, it's easy to get excited about what it means once the dust settles. But the dust won't settle on HD Supply. If anything, the non-contributing or distracting units will be shed and a leaner, more focused business will emerge. It was not purchased to be gutted or dismantled. The remaining entity, while smaller in size, will likely continue as the lead consolidator in a narrower band of distribution verticals.

The deal will have a large impact in a few sectors, and virtually no impact in others beyond the perceived valuation halo effect. Some had anticipated the price for HD Supply might cool slightly due to the weakness of residential markets in North America. ...

Defining and selling value is a critical skill set in markets where customers have a range of sourcing options. Yet how well does your company analyze its market position in terms of value? How well are your associates trained in communicating and delivering this key differentiator that keeps you ahead of competitors?

The article on page 4 of this issue explores how manufacturers, distributors and sales representatives view the state of&nbsp ; value-add." It offers some tools to analyze your company's ability to perform extended value activities in key customer segments.

Survey results indicate that value-add definition and communication is just as tough a battle as five years ago. But there seems to be a broader recognition of its importance to staying competitive. ...

The mainstream media is poised to shout recession" from the rooftops, particularly as June tends to be a slow news month. We have heard consistent reports of flat to slowth growth, but no one is talking about cliff diving in manufacturing sectors. Some markets have stayed strong into May.

Even distributors into the tough automotive sectors are not exactly surprised, and have seen strong orders in other areas such as heavy equipment and aerospace. And while residential markets remain bleak, those distributors with commercial or industrial construction customers have seen those markets stay strong.

No one likes volatile market conditions, but if there is any consistency, it is that while some traditional markets are down, others are emerging to temper the damage. And ...

When a distributor loses focus on its relationships with core customers and suppliers, the company opens a door to competitors, new and old. It's often not a case of mistreatment as much as benign neglect or not keeping up with shifting needs at the customer.

Increasingly, new competitors from different product sectors have found some good growth in other distributors'back yards with tangential products. And in some cases they can pick up some of the longstanding business that wasn't in their core by packaging a better value proposition. But too often distributors tee up those opportunities and don't recognize that it's happening.

That model is at full force as more cross-channel competition grows, and consolidators look to package as much volume as possible into their ...

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