The 2022 recap for distribution reads the same as nearly every other industry: Labor recruitment and retention is more challenging than ever, inflation pressures are intense and economic and political uncertainty are making leaders cautious. Distributors went from not having enough inventory in 2021 to being overstocked in 2022, creating working capital constraints. Rising interest rates and the political climate are other concerns distribution leaders are navigating to understand the real impact from these disruptions and what they could mean for their business.
Surely, those major 2022 developments will remain highly relevant for distributors in 2023, but how will they evolve in the year ahead? To discuss what’s in store for distributors, I spoke last week with Chris Blaylock, a partner in Wipfli’s manufacturing and distribution group, to discuss strategies that he’s helping distributors and supply chain leaders prioritize to prepare for 2023.
Madison, Wisconsin-based Wipfli has provided private and publicly held companies with industry-focused assurance, accounting, tax and consulting services for 88 years.
In particular, our discussion focused on areas of technology, supply chain and labor, and how curiosity might be distributors’ best weapon to attack them.
Mike Hockett, MDM: With so many different technologies out there at distributors’ disposal, it can be overwhelming and difficult to pick something to start with. How can distributors go about putting technology to use in 2023?
Chris Blaylock, Wipfli: Certainly, everywhere — no matter the industry — the rise of analytics is certainly a game-changer because it can do different things for you. If set up right and used correctly, it can really help leaders put in a position to make better business decisions and gain more control over outcomes. You really reveal where performance gaps are. And to do that, you’re going to have to understand what the data is and what data you have, because you can get lost in data really quickly. You have to understand that data in order to produce the KPIs that are relevant to you and your business so that you can make decisions and look forward vs. a historical recap. That’s where I think the greatest use of analytics going forward is, and quite honestly, it’s going to eliminate some of the bias that you may have in an organization.
From another outlook, we need to put automation into processes as quickly as we can. It’s not going to replace an employee, either from a manufacturing fabrication perspective or from a distribution and moving product perspective — it’s going to supplement. We aren’t going to find more bodies to hire, because at this point, we’re stealing employees from one another, right? Automation is going to enhance your workforce, and if done correctly, it really can help move an organization forward. It puts the employees that you do have in a position to accumulate skills they might not otherwise have had. And upskilling an employee certainly leads to a different value proposition for them and gives them a skill set that they can build upon and provide more value to the organization and themselves going forward.
Hockett: There’s still a lot of supply chain stress out there, but the situation does seem considerably better than it was at this time a year ago. What steps can distributors take to make their supply chains more resilient?
Blaylock: I think the biggest thing that has changed over the last two years is our supply chains are more transparent now than they’ve ever been. Pre-pandemic, we didn’t have the issue of not getting product when we needed it. Pre-pandemic, we understood what our lead times were, and that worked perfectly for just-in-time. The pandemic hit, and we did not have a clear picture of who we were working with and what struggles or challenges they had on their end to provide the product that we needed further down the chain. That created what we saw in the overseas lockdowns that created issues and shipping delays at ports.
We looked at our partnerships with those providing product to us and said ‘Okay, how do we create a more transparent relationship, both with international partners and domestic? Domestically, who could we also create partnerships with?’ The latter were a little more attractive there because they’re becoming a bit more economically viable than our overseas partners or suppliers were. So it really comes down to deepening the bench of potential vendors so that we have backups in place to manage going forward. It’s going to create more resilience. So that if one provider is struggling or cannot meet the deadlines that we have, we can be reliant on those other vendors or partners. It creates continuity in the supply chain so that we have greater visibility and awareness to answering the questions that our customers have in terms of turning that sale around in a more timely manner.
Hockett: I’m sure distributors are tired of talking about labor issues, but it figures to remain maybe their biggest challenge in 2023. How can distributors go about making themselves an attractive place to join and stay at?
Blaylock: It’s not just about bringing employees in anymore. It’s retaining those that we currently have. It’s about supporting them, providing the tools to help them grow into influential leadership roles. And we do that by listening to the needs that they have, providing them environments and solutions to help them succeed. We’re all in a fight to retain and attract talent to organize our organizations. And as leaders, we’re at a crossroads where we need to be visionaries of our workforce. And what I really mean by that is, we have to define our why that fits within our culture that our employees feel inspired about coming to work every day. And if we can create that culture, build stronger foundations for our employees, we’re going to certainly achieve the organization’s strategic vision moving forward.
Hockett: Flexibility seems to be the key attribute distributors have had to navigate for their workforce. What does flexibility look like to you?
Blaylock: That employee value proposition is important for everybody because it really is meeting the employee where they’re at — both in their professional career and their personal side. Because everybody, you know, we talk a lot about work-life balance. I personally don’t like the term work-life balance. I look at it more from a work-life integration in terms of where the employee is at, what is it that they need and meeting them there. And maybe that means they can only work three days a week to give us everything that they have. So be it. Let’s meet them there and allow them that flexibility, vs. that requirement of ‘you have to be here five days a week, no questions asked.’ We’re no longer able to tell the employee how to do things and what to do. We’ve got to give them choice. We’ve got to be curious about what they’re looking for.
Hockett: That point of curiosity is one that isn’t touched on much in labor discussions. It seems that having an open mind and curiosity about what staff, suppliers and customers’ needs are is going a long way right now. How can staying curious benefit distribution leaders?
Blaylock: At Wipfli, we look at interactions with our clients with an approach of “perspective changes everything,” and that’s where curiosity comes into play. Looking at, talking to, or more importantly, listening to your employees to find out what motivates them. Getting curious with customers means gaining a deeper understanding of what day-to-day challenges exist that they’re trying to navigate. It’s not always about having a solution at the end of the day, but talking through those challenges and understanding them. Hopefully, you are adding value to the conversation and the relationship.
Distributors are in a position where they can grow and have a deeper relationship with their customers. It’s no different than from a service perspective. The more I can understand about my client, the better consultant I can be to them. Distributors are in the same position. What are the needs and challenges of my customers? Get curious and ask them. Businesses love to talk about themselves, and that’s a good thing. Understand what those environments are, that uncertainty that they have every day. Ask a lot of questions, listen and ultimately come back and ask your team, ‘As a distributor, how can we meet those needs that they have, and become a greater partner to them?’
