Volume 11, Issue 5 - June 2010

AMD Headlines

Everything’s Blooming—Even the Industry
by George E. Kessel Jr.

We exited the hibernation of winter and watched the crocus sprout, trees bud, birds sing and flutter about building their nests, the grass turn that familiar shade of green, and I watched my wife formulate her spring “things for me to do” list. There was a feeling of happiness in the air, and colors became bright and vibrant: hope was renewed.

Our industry has been through some difficult times perhaps an even once-in-a-generation event. It’s time to get all that behind us and plan for the future. I’m not talking about tomorrow’s future or next week’s future, but months from now future. We need to plan for the future like we used to do.

I recently had a discussion with an acquaintance who is a consultant with an engineering background. He is not part of our industry, but he quickly understood the difficulties we are facing. After a brief discussion, he asked, “What steps have you taken to better cope with the changes that have occurred within your industry?” Several replies came to mind instantly, all flippant. This is a really smart guy who would see through my rambling instantly, so for once I said the right thing and replied, “I don’t know yet.”

Most of my frustrations with not being able to solve a problem are due to trying to process too much information at one time. Breaking everything down into basic components helps bring clarity. Too much data masks simple solutions. Having spent a considerable amount of time reflecting on what has worked in the past and what we will need to do differently in the future, two cultural organizational changes came to mind.

First, in the past, organizational size in terms of number of locations, geographical diversification and buying power was a huge advantage. In my opinion, dominance in a particular marketplace in the future will have more bearing on success. You are going to need to be the dominate player in that market or at least a strong number-two. Manufacturers have invested a lot of money and resources developing their own sales staff to market product. To grow market share, they will need to look past the large national distributor to the dominant regional distributor. It may be a slower growth model for them, but it also comes with the rewards of diversification and higher profit margins. A strong local distributor currently has a more even playing field than in the past. Our planned future growth is vertical.

Going forward, in my opinion, dominance in a particular marketplace will have more bearing on success.
You are going to need to be the dominate player in that market or at least a strong number-two.

Second, in distribution, three attributes can be sold: quality product, service and price. Profitable selling allows us to offer the customer two of the three attributes. We have a tendency to define the type of distributor we want to be and then market ourselves accordingly. We sometimes limit our customer search to the type of distributor in which we define ourselves. For instance, quality product and good service or low price product and good service. Service never can be sacrificed. We are looking for that niche market.

We need to have all three attributes available, then decide which to offer to each customer on an individual basis. Why? The size of pie consisting of housing starts has shrunk considerably. To maximize sales opportunities, product offering will have to be expanded.

All products are not equal, and all customers are different. We need to do a better job of matching customer needs with product and service offering to those customers. Most of us have capital restraints so we have to choose expanded product offerings wisely. We also may have to sacrifice some inventory depth to help free up capital for expansion. One thing we cannot sacrifice, however, is service. We also must be mindful that service is an attribute we have available to sell, not give away. If all customers get the same level of service, then either the services are being sold too cheap or they aren’t worth what is being charged.


George E. Kessel Jr. is president of Morgan-Wightman Supply Co., and also serves on the Association of Millwork Distributors Executive Committee as treasurer. His opinions are solely his own and do not necessarily reflect those of this magazine.




DWM

© Copyright 2010 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.