More good financial news keeps strengthening the outlook for distributors. A big surprise to many in August was the flipping of the purchasing manager index to the positive side of 50 (52.9 from 48.9 in July). That reinforces much of what we at MDM have been hearing about production and corresponding orders in August being more positive than expected. That said, this is not shaping up to be your grandfather’s recovery from previous sharp economic cycles.
Distributors and manufacturers planning for 2010 – and thankful to be forward-looking for a change – have to deal with a lot of mixed signals. But as our Webcast last week with Mike Marks pointed out, it’s time to deal with it and get a plan in place.
Most economists expect the next 12 months to be a grind, with flat to weak growth. That will feel good by comparison. Where the new up six months ago was slightly down, today the new normal is flat.
Some distributors have managed to keep their balance sheets and banking relationships strong. Others are furiously working to get new lines of credit as some traditional large lenders are dealing with a stew of problems.
To address this, MDM is preparing an article on how some of the “smaller” regional banks who didn’t get slammed are actually buying market share and in a better place to offer competitive rates for inventory-backed credit.
A few critical areas for positioning have emerged as distributors rebuild with smaller staff and resources:
Revisit how you segment customers. Markets and customer buying behavior have changed. If you are applying fewer resources to the way you used to segment, you may be missing new growth opportunities.
Mike Marks addresses this in the 60-minute (free) Webcast last week as he outlined focus areas for finding growth in this low-growth economy.
Access the Webcast at this link: www.mdm.com/webcast-downloads.
Reexamine pricing. The lead article in this issue by Brent Grover on strategic pricing execution addresses margin improvement and extracting more yield from the piece of the pie you have. Pricing is an internal process many distributors left in the hands of salespeople when sales were strong.
And finally, review how you manage talent. With smaller staff, roles and leadership responsibilities have changed. Do you have middle and top managers with the right skill sets for growing the company in an environment where sales aren’t necessarily the primary driver?
