12/1/2014
HEADLINES
Grabowski at STAFDA: Vending “Minimally Profitable”
This past year has been exciting as the economy continues to expand, Edge Construction Supply CEO Eric Grabowski told attendees of the Specialty Tools and Fasteners Distributors Association convention in Charlotte, NC.
“Over the last year, we’ve seen a stronger overall economy, increased construction spending, a decent return of the residential market, and lower unemployment,” Grabowski said in his Distribution State of the Industry address. “While government construction spending has slowed, it continues to hold its own, fueld partially by increases in state and municipal projects.”
Grabowski noted that in August President Barack Obama signed a stop-gap highway bill to extend bridge and road funding until next summer.
“While home building remains lower than expected, there is growth in residential construction, especially in multi-family homes and condos.”
In addition, construction starts in the commercial, industrial, institutional, and engineering sectors are expected to exceed pre-recession levels in 2015.
“If this proves true, my successor — Rod Gowett — will be able to tell you about how 2015 was the biggest year for construction speding ever in the U.S.,” Grabowski stated.
Now that the economy is growing, distributors must consider how to add inventory, deal with price increases, decide how much money to borrow, determine how to “strategically” add staff, and figure out what technologies to invest in.
“These are all good problems to have,” he emphasized.
Grabowski noted the impact price increases have on the supply chain.
“Manufacturers justify their higher prices by citing the skyrocketing costs of raw materials and other expenses,” Grabowski explained. “End customers are deciding if they want to accept increases or if they’d rather find different sources and brands.”
Distributors are caught in the middle, bargaining with manufacturers and negotiating with customers.
Evenutally, product availability becomes a factor in making purchasing decision.
“This whole dynamic puts a strain on the relationships between the distributors and the manufacturers,” Grabowski noted. “This strain is passed on to the end customer who ultimately decides what price and lead time they will accept.”
Technology is putting new pressure on pricing, Grabowski explained.
“I hear from my peers across the country about customers coming into their showrooms, scanning a bar code with their smartphone, and searching the web for the ‘best price’ on that exact product.”
But Grabowski insisted that success in a tech-driven marketplace has less to do with how well you understand technology than how you apply it to your business.
“While I challenge everyone here to implement more technology, I also caution that it should only be done if your company or customers can realize a direct benefit.”
E-commerce is another pressing issue for distributors. Reasons for entering e-commerce vary. Some companies are trying to stave off competition, while others ony want to provide access for their best customers.
The rise of technology and e-commerce has made same-day delivery increasing important. Services to meet this demand include vendor managed inventory (VMI), “keep-fills,” and vending machines. While VMI and “keep-fills” have been around for a while, vending machines are a new “source of frustration” for distributors.
“It appears many of these machines produce minimal profits, especially considering the high cost of the asset and physical limitations. “No (STAFDA distributor) likes them much, but some are forced into them.”
Whether its VMI, a fleet of vehicles with local inventory, or vending machines, distributors must figure out what works best for their customers in the “new paradigm of ‘same day service.'”
The other “big” issue facing distributors in recruiting and retaining the next generation of industry leadership.
It’s important to develop a plan, a company culture, or “some new, hip, rad ideas to attract younger talent into private distribution,” Grabowski said.
“I hate to say it, but the Apples, Amazons, Microsofts, Googles, and even malls of our world market themselves better to younger people than most of us do.”
Lauded ideas for attacting the next generation of workers include: having a good website; building a career page on your site; developing a company culture that embraces change and rapid growth; establishing your brand and what makes you different; marketing why you offer a compelling place to work; fostering a culture of high standards; and providing a family-friendly work environment.
“For all of us to continue to thrive and be relevant to the ‘next generation,’ it’s inevitable we must adapt and find a way to bring more young talent into our companies.” Web: STAFDA.org
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