The recently published Facing the Forces of Change study dominated the program at the 2011 National Association of Wholesaler-Distributors (NAW) Executive Summit, held Jan. 25-27 at the Fairmont Hotel in Washington, D.C.
Published every three years since 1982 by one of NAW’s research partners, this year’s study, “Decisive Actions for an Uncertain Economy,” focused on business strategies that distributors need to master to grow their businesses in the post-recession era. Guy Blissett of IBM’s Institute for Business Value managed this year’s Facing the Forces of Change study and conducted four panel discussions with eight distributors at this year’s conference. The panels focused on four of the study’s key findings: the expanding role of services; differentiating with analytics; leveraging human capital; and the transformative role of information technology.
While some of the study’s findings reinforced the evergreen need to concentrate on core basics of customer service, Blissett said it will teach distributors that they must really strengthen their relationships with customers by looking at them in new ways outlined in the research. “It’s not just seeing a customer 1-5 times a week,” he said. “It’s about the types of conversations you have with them and really trying to understand their businesses and processes.”
Kathy Mazzarella, executive vice president and COO, Graybar Electric Co., St. Louis, Mo., and Joseph Nettemeyer, president and CEO, Valin Corp., Sunnyvale, Calif., discussed some of the value-added services they now offer customers. Mazzarella said Graybar focuses on the services its customers don’t want to do, cannot perform effectively, or are planning to outsource. She said one of the biggest challenges was training branch managers to identify and sell the services customers want, because these managers are often very product focused and may not know how to customize a package of services for a customer.
In addition to managing an industrial distributor with operations in nine Western states and integrating the 26 acquisitions the company made since he came to Valin from Emerson Electric in 1990, Nettemeyer has developed centers of expertise in automation, calibration of instruments, process heating, filtration and oilfield services. The company also builds websites and conducts email marketing and fulfillment campaigns for customers if they don’t have that expertise in-house.
Each of these centers offers customized packages of fee-based services for customers such as programming PLCs and calibrating industrial instruments that measure the flow of oil. These services produce a steady flow of revenue for Valin. “If we can’t make money from it, we don’t want to do it,” he said.
The panel discussion on “Differentiating with Analytics” offered an interesting contrast in distributors. Jon Giacomin, president of U.S.-Pharmaceutical Distribution, Cardinal Health, Dublin, Ohio, represented the big-company viewpoint, as Cardinal does $90 billion in annual revenues, is ranked #17 in the Fortune 500, and has approximately 30,000 employees in 10 countries. In providing pharmaceutical drugs, health and beauty products to retail drug stores and pharmacies in hospitals, physicians’ surgery centers, as well as selling these products online, over the past few years Cardinal analyzed its pricing, forecasting, inventory, act-based costing and other business processes to streamline its operations and improve its customer service.
Julia Klein, owner, chairwoman and CEO, C.H. Briggs Co., Reading, Pa., manages a 170-employee distributor of building supplies that restructured its pricing matrix and segmented its customer base with the help of several distribution industry consultants to increase its gross margins in the face of horrific business conditions in the construction market.
The conference also offered a different take on the recession by Brian Wesbury, chief economist, FirstTrust Advisors, Wheaton, Ill. In his presentation, “It’s Not as Bad as You Think,” Wesbury said the economic crisis was a panic caused by bad government policy, including the TARP bailout, mark-to-market accounting used to value mortgages in the subprime loan crisis, and what he said were artificially low interest rates enforced by former Federal Reserve Chairman Alan Greenspan. “It all turned a fire into an inferno,” said Wesbury. “People think capitalism failed. It didn’t. It was bad government policy.”
Next year’s NAW Executive Summit will be held Jan. 31-Feb. 2, 2012.
—Jim Lucy, Washington, D.C.