Distributors have played a critical role during the COVID-19-driven disruptions of the past year. Whether that meant supplying PPE or distributing vaccines, wholesale companies have been counted among the country’s “essential” businesses in terms of keeping Americans safe amid the pandemic.
At the recent National Association of Wholesaler-Distributors Digital Summit — renamed from the Executive Summit that’s typically held each year in Washington, D.C. — the importance of distribution during these uncertain times took center stage.
One presentation in particular, “The Distribution CEO Panel: Leading in a Time of Transition,” showed how some of the top companies in this space adapted to the challenges of the coronavirus and have been shepherding their teams through lockdowns, quarantines and evolving customer demands.
The panel included Kathy Mazzarella, chairman, president and CEO, Graybar Electric Co. Inc.; Debbie Weitzman, president, U.S. Pharmaceutical Distribution, Cardinal Health Inc.; and D.G. Macpherson, chairman and CEO, W.W. Grainger Inc. Eric Hoplin, president and CEO of NAW, served as moderator.
The questions asked during the session were built around a simple theme: Distributors are critical to ensuring that in-demand products — from the PPE needed to protect employees to the electrical products needed to keep businesses open to the medical supplies needed to keep everyone healthy — reach their final destinations, so how have they responded?
What’s more, the businesses represented on the panel are among the leaders in their respective verticals. Graybar posted annual revenue of $7.5 billion in 2019 and ranks No. 4 on MDM’s list of the Top Electrical Distributors (2020 revenue was not available at press time). Cardinal Health reported sales of $152.9 billion in 2020 with Weitzman’s division, Pharmaceuticals, posting the bulk of that total at $137.5 billion. And Grainger, whose 2020 revenue was $11.8 billion, ranked No. 2 on MDM’s Top 40 Industrial Distributors list from a year ago.
With the executives of such prominent distributors opening the playbook for how their companies navigated COVID-19, we are sharing some of those best practices so that others could learn from these market leaders.
Below are some of the lessons that each executive shared during the hour-long virtual panel about how they managed their teams and how their teams persisted in the face of such daunting obstacles. Here are these top execs in their own words:
On the leadership trait they leaned on to help their executive teams — and their companies — not only survive but thrive during the pandemic.
- Kathy Mazzarella: “What I leaned on was the belief in the power of our organization and our people to get through this OK. And the fact that we had to convince them that everything was going to be OK — that seemed to be the key to our success and allowed us to continue to move forward and to keep our people motivated to get through this.”
- D.G. Macpherson: “The most important thing that we’ve learned is to deal directly with some of the human emotions and implications. This has been a humanitarian crisis and taking the time to actually talk about those, but then bringing it back to what our principles are: how we deal with each other and treat others, and moving to what matters for the business for the future. Balancing that human connection, which is more important than ever, while building for the future, that’s probably the most important leadership lesson we learned this year.”
- Debbie Weitzman: “I would point to adaptability. Without adaptability, we would not have survived the changing circumstances that we faced every single day. As a quick example, when we all moved to work from home, our leaders had to model good behavior, and be on camera all the time, and make ourselves available 24/7. Now the pendulum has swung the other way and modeling good behavior is giving people permission to not be on camera. We’ve implemented something at Cardinal Health called Whitespace Wednesdays to make sure nobody’s scheduled meeting for a certain block of time and people have a little time to think. The needs have been shifting and changing, so adaptability has been key.”
Changes and Innovations
On the changes and innovations they implemented to “meet the moment” of the COVID-19 pandemic.
- Mazzarella: “When you head into something that was as dramatic as what we were dealing with and there’s so much unknown, you need to get people focused on the key goals and the priorities so that as the world was churning, and people were going to get very concerned, we could show them where we needed to go. We also had to accept the fact that what we thought was going to go wrong, probably would. Basic systems that we took for granted outside of the organization, we planned for them to fail because this was a global economic meltdown driven by a pandemic. We created three main goals that every employee was focused on. First was to take care of each other. Second was to provide uninterrupted, high-quality service to our customers. And third was to keep the company strong through business continuity and to make sure that we continued on with our long-term projects. The one thing I would recommend, if people haven’t done this so far, is to document everything that you’ve done as an organization — all the decisions you had to make, good and bad, anything you may have done differently. I tell our young leaders all the time that the time to get ready for a difficult situation is when things are good.”
On how the challenges of pivoting to PPE and supplying the crush of new product demands.
- Weitzman: “It was an all-hands-on-deck situation. The way you get through that is massive over-communication, literally every form of communication, whether it was texting or phone calls. And people stepped up to address the needs and make things happen that had never happened before. We were documenting things, debriefing things and creating that future playbook so that when we did hit a calm period, and we could take a breath and figure out what was here to stay and what is now the new normal, what could now be prioritized and what we could stop doing. It was an interesting learning period for the hourly workers in our warehouse all the way up to top leadership. Everybody played a role in figuring out how to get through this.”
- Macpherson: “Because we had product that customers needed during the pandemic, our customer acquisition numbers are way up over what they were before the pandemic. How that typically looks is customers find product on Grainger, buy it and we don’t know who they are. What we did have to do is change our customer acquisition and follow-up processes to make sure we were qualifying customers. Some of them may not be long-term attractive for Grainger, but a lot of them are. We have ramped up our ability to acquire, qualify and reach out to customers to try to get new customers to become regular buying customers. That’s been a change that has been consistent throughout, and we’ve had to change our process entirely to become much better at qualifying and getting repeat buys out of customers. It’s been an interesting learning for us — getting customers to repeat orders and make them consistent buyers, which is important for the business.”
On Cardinal Health’s view of when the vaccine will become more readily available but the challenges that will still exist in terms of getting enough people vaccinated to achieve herd immunity:
- Weitzman: “We think that we’ll hit that mark by late summer. I think the thing to worry about more is encouraging people to get the vaccine, because right now the problem is availability and actual inventory. But three or four months from now, that will not be the problem. There’ll be plenty of product flowing, and instead of people desperate to get the vaccine, we’re going to be out there looking for people who haven’t gotten vaccinated yet and encouraging them to do it, especially younger people who feel invincible. Within the health care population, there are health care workers who qualified for the vaccine and are saying that they don’t want to get it. We need to overcome that; I think that’s the bigger obstacle.”
On the growing importance of diversity in businesses and across the industry that emerged during the pandemic (according to the Bureau of Labor Statistics and NAW data, women compose 46.8% of the general workforce and 30.2% of distribution; African Americans compose 12.1% of the general workforce and 8.8% of distribution; Asian-Americans compose 6.4% of the general workforce and 5.4% of distribution; and Hispanics compose 17.6% of the general workforce and 18.8% of distribution):
- Mazzarella [who is one of only 37 women leading Fortune 500 companies]: “People often think about diversity through the lens of the traditional demographics, whether it’s gender, ethnicity. I tend to look at it a little broader than that. It’s about creating an inclusive workplace that represents the communities and the customers in which we serve. That’s going to vary across the United States. Why does diversity matter? Because it’s just the right thing to do. It’s not about hitting a number. It’s not about hitting a quota. It’s just the right thing to do. People with different perspectives and different life experiences bring a fresh and innovative view toward the opportunities and the challenges that we face today and into the future.
When our workforces represent the communities and the customers in which we do business, then it tends to create a better long-term relationship with those areas. Demographics are shifting. From a sheer practicality perspective, if we don’t reach into a variety of different areas to look for our workforce, we’re going to have a very limited pool.
“Diversity and inclusion are vital to the future success not only of our organizations, but of our industry. To me, it’s about a cultural shift in the way that we think about how do we hire people and how do we bring them into our workforce and make sure they feel valued? It’s about broadening the idea about diversity beyond race and gender, ethnicity, sexual orientation. It’s about asking how can we provide opportunities for people in underserved communities or people who don’t get the chance.”
Competing with Amazon
On how distributors should be responding to the Amazon threat, which seems to have grown fiercer during the stay-at-home dynamic of COVID-19:
- Macpherson: “I don’t think about out-competing Amazon because I don’t think we can compete as Amazon competes. You have to compete differently. For us, that means recognizing that we have things that Amazon typically doesn’t do or isn’t interested in doing. We have great product expertise, technical expertise, services that we provide at the customer’s place of business to help and manage their inventory. The thing I would urge every NAW member to do is to ask themselves, ‘What do you do that’s unique, that isn’t going to be in the crosshairs of where Amazon’s going?’
“Jeff Bezos has said that he’s not going after anybody in particular. Amazon focuses on doing what they do very, very well. We ask ourselves, ‘What do we do well?’ We’ve invested millions and millions of dollars in improved product information so that we can support technical expertise at every customer touch. We’ve done the same thing with customer information because the great news about our space is customer information is messy. Understanding what customers actually do and how they operate is great. If we can get an advantage there, we think that’s important. We’ve invested in a supply chain that has 700,000 items in a single building such that we can get orders to customers the next day much better than Amazon can do. It’s a different way of thinking about the world. For us, for all of us, it needs to be about what do you do well, what’s your point of advantage and how can you press that advantage? Find out what’s unique to whatever you do and just get better and better at that. If you do, it’s likely that you will create some competitive advantage with wherever Amazon goes.”