Focus Your ‘New Normal Angst’
“Gentleman, you have come sixty days too late. The depression is over.”
Sound familiar? This was actually Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery in June of 1930.
Like many distributors back then, distributors today have almost taken growth for granted. When recessions slow and financial crises erupt, they generally have been regarded as the exception, temporary departures from an otherwise steady upward heavy-duty market progression — bigger truck fleet, increasing average age, blah, blah.
However, it should be increasingly clear that the current downturn is fundamentally different from recessions of 2007, 2001, 1991, 1980 or 1973. Between January 2008 and December 2009, distribution lost 467,000 jobs. Who knows how many from the heavy-duty sector? This is not merely another bump in the business cycle, but a restructuring of the economic order.
For some organizations, near-term survival has become the only agenda item. Others wonder how to position themselves once the “flat spots” have passed and things return to normal.
The question is, “What will normal look like?” What we will find on the other side will be foreign. The new normal will be shaped by a confluence of powerful forces — some arising directly from the recent economic dip and some that were at work long before it began.
The recently published National Association of Wholesalers study, Facing the Forces of Change: Decisive Actions for an Uncertain Economy, is the only research series to analyze the future of distributors in multiple lines of trade. It has provided very accurate insights since the first study in 1983, so you will want to pay attention.
It counsels that to confront the new economic environment, distributors must firmly grasp unconventional opportunities.
The Expanding Role of Services: Service must be seen not just as a source of incremental revenues, but as a source of competitive differentiation vs. peers, OE dealers and non-traditional (automotive, industrial, internet) competitors.
Services are the single best instant tool to reinforce customer retention, create incremental product sales and contribute to distributor net profits.
WDs need to continue to expand their service offerings into new areas of value creation, outsourcing and integration, customer-managed inventory, recycling logistics, light retrofit planning, design, installation and kitting and assembly.
Differentiating with Analytics: Customers’ and suppliers’ execution of new operating models increasingly utilize software as a service technology as a critical enabler. Quick payback is generated by customer segmentation, price/yield management, workforce and network optimization.
No return on investment can compete with information exposing which customers, products, services and suppliers are the most profitable at a granular level, most volatile over time, most strategic to our business and most costly to serve.
Leveraging Human Capital: The growing importance of this skill set is being driven by distributors selling a more complex value proposition to customers with ever-higher service expectations.
A more intense than ever competitive environment is compelling companies to extend their geographic, industry, product and service coverage.
Core skills required continue to evolve, while industry demographics reflect an aging workforce. Qualified service techs will see wages rising at three times the industry average.
The Growing Role of Information Technology: Distributors must leverage information technology as they look to transform their organizations, especially by capitalizing on web-enabled capabilities, simplifying supply chain and operational complexity and exploring alternative delivery and pricing models.
This much is certain: when we finally enter into the “post-flat” period, the business and economic context will not have returned to any pre-crisis state. The result will be an environment that, while different from the past, is no less rich in possibilities for distributors who are prepared.
Bill Wade recently has published a new book titled Aftermarket Innovation. He can be reached at www.wade-partners.com. The views expressed in the Guest Editorial are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of Truck Parts & Service magazine.