If your company has no room for improvement in either benchmarking or contingency planning, then read no further. You have your priorities defined and are well-positioned to negotiate the next few years of volatility. I’m oversimplifying of course, but I believe the next 12-24 months will reshape many distribution sectors and markets. Here are a few reasons why.
As industry groups dive back into the fall meeting schedule, there is a sense of optimism not seen the past few years. But the pattern is tracking pretty closely to what we’ve heard from economist Dr. Adam Fein and others who track industrial markets closely. The rebound is sluggish and has the potential to stay so for a few years. A weak recovery doesn’t feel very good, as we all are finding out, but it beats what just happened.
In that light, depending on sector, some distributors are emerging from this recession either on fire or enjoying strong growth at or close to pre-recession levels.
Historically, the growth period out of the trough of a recession has been fairly aggressive and steady; we are not experiencing either of those characteristics at this point. Or if you are in the minority who is enjoying that, how much is attributable to customer restocking versus downstream demand? It’s difficult for most distributors to get an accurate answer to how much “pull” their customers are experiencing versus inventory replenishment.
Add to that the likelihood that we face a much more volatile global economy over the next five years. There will be increased bankruptcy and forced sales – more opportunities for growth – as your competitors get squeezed because their balance sheets can’t handle the rebound.
Distributors who are most effective at identifying and advance planning worst-case to the wildest best-case scenarios will be positioned to seize opportunities with customers, suppliers and service providers, including banks, before competitors can react. But it goes much deeper than crystal ball gazing or playing “what-if” on Friday afternoons.
At every level of competition in distribution markets, these next few years are being defined right now by those who mine the metrics in all parts of their businesses – inventory, pricing, service levels, profitability, market potential and productivity are at the top of the list. They are redefining the business model to match new conditions. Most importantly, they are positioned to adjust quickly because they have data for decisions, and a culture to plan and take advantage of new opportunities.