Tom Gale, Author at Modern Distribution Management - Page 26 of 29
Posts By Tom Gale

In the movie Groundhog Day, the main character wakes up each morning doomed to repeat the exact same day, until he realizes he can change his life and do better.

That movie might be a useful management tool as we move through the current downturn in the economic cycle. As noted in an upcoming interview in MDM, Al Bates has been conducting financial performance surveys of distributors for nearly three decades. He has a wealth of data on how distributors have done across multiple business cycles. So is this cycle any different? We are going to come out of this recession the same way we came out of 2001-02, he said. Distributors will give up the same ROA they have in every cycle, then rebuild sales, add too many people and overhead, then cut when the next downturn …

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You wouldn’t know the troubles in U.S. residential construction markets if you were at the CONEXPO-CON/AGG and IFPE expositions last week in Las Vegas. From what I heard and saw, people were buying and shopping hard. The two biggest impressions I came away with were the quantity of international exhibitors and attendees, and the increased focus of energy-efficient and hybrid technology, both on the construction side as well as hydraulic and motion control products.
 
Without question, the vitality of the show indicates there are some growth markets even while the national focus is on the housing markets. Manufacturers and distributors at the show said their industrial sales were strong. Those selling into energy-related sectors and any markets with export were reporting …

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A funny thing happened on the way to a recession. Data keeps getting in the way, at least in certain markets that the mass media don’t pay a lot of attention to. Case in point: January trend data by the Power Transmission Distributors Association shows an uptick in sales for the month in the U.S. and Canada.

So while broad-based needles continue to point down, it’s important to keep the market niches, customer segments and top ten customers that define the long-term health of your business front and center in your perspective.

The MDM Survey on the Economy in this issue offers a few interesting indicators within wholesale distribution. Nearly a quarter of those who responded are planning an acquisition in the next six months. More than a third expect to have …

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When one of my mentors in this industry emailed in December to say he just left his office for the last time at the company he had been with for 48 years, it struck me how much impact he has had on so many people in this industry.

I first met Roy Otto, former owner of Machine Tool Supply in Eagan, MN, 25 years ago. He has been a teacher to many people in this industry and beyond. He has been generous in sharing his knowledge and enthusiasm for the industry, and has been a strong role model for hundreds of employees, peers, suppliers and competitors.

Roy started in the warehouse of in 1959, worked hard and moved into inside and outside sales. It was natural that he ended up with an equity stake. Roy built a well-planned exit strategy, sold his business a few years …

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When one of my mentors in this industry emailed me in December to let me know that he had just left his office for the last time at the company he had been with for 48 years, it struck me how much impact he has had on so many people in this industry. Those who know him will appreciate that he included the exact minute of his departure, not because he couldn’t wait to bust out, but because of the well-known attention to detail he brought to running and growing his business over several decades.
 
I first met Roy Otto, former owner of Machine Tool Supply in Eagan, MN, about 25 years ago, when he was the chair of a publications committee for the state’s tooling and machining association. He has been a teacher without seeming like one to many people in this industry and beyond. He …

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The recent National Association of Wholesaler-Distributors Executive Summit in Washington drew one of the largest audiences of wholesale distribution executives together in years. I have attended nearly every annual NAW meeting since 1993, and this one can best be summed up by one word: Focus.
 
My key takeaways from sessions and conversations: The executives at this conference weren’t obsessed with economic news they can’t control. Rather, they were focused on collecting great ideas on how to get leaner, improve profitability and finetune strategies. They were benchmarking their performance against the case studies they heard, and probing to find ways to improve internal processes.
 
Economist Alan Beaulieu got everyone’s attention as the first speaker when he …

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The role of master distribution has shifted significantly. That’s why we wanted to understand more clearly why United Stationers diversified with the acquisition of ORS Nasco in December.
 
Dick Gochnauer addresses (see page 1 interview) how United adds value in two places: marketing and logistics. Different forms of support services have evolved to fill these two needs in highly fragmented and consolidating markets. These include buying/coop/marketing groups, master wholesalers, hybrid catalog/master distributors, independent logistics providers (CoLinx in power transmission) and joint ventures between manufacturers (PTPlace.com). There’s a mix of competition and cooperation across all these entities.
 
Distributors and manufacturers have leveraged these tools to …

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Home Depot bought Hughes Supply in January 2006 with an EBITDA valuation above 12X, a number still ringing in the ears of many distributors. A scant year later HD announced its intentions to focus on retail and explore alternatives for its $12-billion distribution unit. It sold the unit this past June.

As distributors ring in this year, the competitive landscape looks vastly different than even six months ago. While there is still a lot of private equity money searching for deals in distribution, debt markets have tightened.

As a result, valuations are dropping fast, and the level of deal-making activity dropped significantly in the last quarter of 2007. In 2008, we will likely see strategic buyers execute smaller add-ons, rather than the blockbuster deals spawned …

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Distribution M&A markets have changed significantly in the past six months. Deals, especially in the last quarter, have started to dry up and valuations are dropping fast. Yet there is still a lot of private equity money looking for a place to land. Yesterday I had the pleasure of moderating a discussion with Brent Grover of Evergreen Consulting and Jim Miller of Supply Chain Equity Partners. These two gentlemen have complementary perspectives with strong distribution expertise, but they did not bear much good news.  
 
We clearly are on the back side of the peak of valuations. With tighter debt markets, financial buyers won’t be driving the market the way they have the past few years, but they will be a factor, Miller noted. His take is that there will still be add-on …

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Employees who care about a customer? Valuable. Employees who take ownership of making customers happy and initiative in making your company more profitable? Priceless and perhaps increasingly extinct.
 
Distributors aren’t ignoring the issue of human resource development. In fact, the University of Industrial Distribution, an annual program that a few years ago went begging for students at its annual one-week session, has been quickly selling out about 500 seats the past two years. But it will take a lot more than annual off-site training to keep your company competitive and growing in turbulent economies. A team of motivated, resourceful and creative problem solvers can make the difference in a company’s performance.
 
People with great skills are in short supply; …

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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 …

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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 …

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

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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 …

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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 …

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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 …

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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. …

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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 …

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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 …

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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 …

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