Network2017 ASA Roundtable: Part 1
Distributors express market optimism.
The consensus from the panel of five blue-chip PHCP-PVF distributors that took part in the eighth annual American Supply Association/Supply House Times roundtable discussion during NETWORK2017 in Nashville is the industry is humming along at a good pace right now.
However, certain factors loom ahead that could bring the industry to a crossroads, the panel said. And at the top of the list is the hot topic of the continued labor shortage throughout the supply chain.
That issue, along with many others was addressed by the panel during an hour-plus-long exclusive interview during ASA’s annual convention at the Omni Nashville Hotel. Other topics discussed in Part 1 here include the current business climate, plus ways distributors can ensure their long-term prosperity. This year’s panel included:
- Jay Bazemore, Vice President, JABO Supply, Huntington, West Virginia;
- Bob Christiansen, President, Chris-More Inc., Memphis, Tennessee;
- Brendan Donohue, Vice President, Sales and Marketing, Cregger Co., Columbia, South Carolina;
- Mike Taylor, President, Columbia Specialty Co., Long Beach, California; and
- Reed White, Director of Operations and Marketing, George T. Sanders Co., Denver, Colorado.
The second installment of the interview appears in the February issue of Supply House Times.
Question: How do current market conditions look in your neck of the woods?
This question led off the hour-plus interview and panelists echoed the main theme ongoing throughout the industry of improved business conditions as a whole. And with this panel and their business locations, improved may not be strong enough of a word.
“The Southeast continues to grow,” Cregger Co.’s Donohue said. “We’re on pace for double-digit growth (this interview took place in October 2017) and last year (2016) we had double-digit growth. This region is very active with multifamily, and residential and commercial are coming on strong. Manufacturing has come into South Carolina. This is a very favorable state for that, which has led to more jobs, more housing and the infrastructure needed to support a larger population. It’s a very attractive place for retirees. We are seeing a large influx of people coming into our geographic area, which has helped with commercial, residential and multifamily.
Christiansen’s Chris-More Inc., is based out of Memphis and is seeing the same type of growth. “The Southeast is rolling and finally coming back,” he said. “We’re seeing commercial and everything that follows. It’s a little bit of everything. The biggest thing I’m seeing is optimism from my customers and the generals. They are more in-tune with money flowing for them, which trickles up. They have access to money. Apartments are going nuts, condos are going nuts and the residential side is wide open. It’s been an interesting year and a half here.”
Chris-More’s Bob Christiansen says the business climate in the Memphis area is robust. “It’s a little bit of everything. The biggest thing I’m seeing is optimism from my customers and generals. They are more in-tune with money flowing for them, which trickles up. They have access to money.” Photos by Bob Levy and Bob Miodonski/Supply House Times
Taylor noted Columbia Specialty expanded to other parts of California several years ago with branches in San Jose, San Diego and Sacramento. He uses those locations as a good business barometer. “All those branches are coming into their own and expanding, which leads me to believe our markets are pretty good,” he said. “We’re seeing a lot of activity and all the branches are having record years.”
Bazemore said JABO’s West Virginia base, which has been hurt by the coal industry in recent years also is showing signs of strong recovery. “With the new administration coming in we’re starting to go from a more optimistic sentiment to business actually turning around,” he said. “The price of metallurgical coal, which is used to make steel, has skyrocketed for the first time in many years. A couple years ago that was business that wasn’t worth going after. It’s not only turned around but is beginning to thrive. We’re also seeing capital investment from manufacturing that we haven’t seen in a long time and they just passed a roads bond. One of our biggest problems is our state’s geography. It is difficult logistically to move product around but this road bond could alleviate some of that burden and attract more business.”
And finally, White had to apologize for his answer to the question. “I hate to sound repetitive, but things are good in Colorado as well,” he said. “Colorado is going through its biggest population boom ever. From 2012 to 2015 we had double-digit growth every year. Right now, the skyline of Denver has three- or four-dozen cranes and they will be there for the next 12-18 months. We opened a 76,000-square-foot distribution center in the spring because of the growth and we’ve acquired three companies over the last four years and opened two more branches. We have more work than we can keep up with at the moment. Colorado is booming.”
Question: How do you rate the current business climate?
As opposed to conditions in their particular regions, this question was met with more measured responses.
On the subject of labor, White notes George T. Sanders Co., is active on the internal development front. “We’re promoting a lot of people into branch management and sales roles and even territory managers.” Photos by Bob Levy and Bob Miodonski/Supply House Times
“We’re cautiously optimistic,” Bazemore said. “As challenging as it has been, it’s all starting to come back at the same time. But markets are fickle and policy decisions in Washington can help you or the next administration could come in and sweep all the gains away just like that.”
Donohue agreed with Bazemore’s take. “The outlook is pretty robust, but it’s like a running back going for the end zone and it is wide open. You can get pushed out of bounds pretty easily. However, there is no reason to think it shouldn’t continue barring some economic catastrophe or geopolitical event.”
Taylor said a number of factors are contributing to overall optimism. “There is a lot of activity out there in different businesses and different industries. We’re seeing a lot of expansion with airports and stadiums and those types of projects,” he said. “Money still is relatively cheap. If you want to expand or you want to invest in new branches and new inventories, now is the time to do it because you have access to cheap money.”
Question: What is your take on the industry-wide labor shortage that has been top of mind of late?
This is where the optimism in the earlier part of the interview took a turn south, backing up what all have been told throughout the supply chain —we are on the cusp of a real labor crisis.
“It’s worse now than it has ever been,” Christiansen said. “We let our customers put want-ads for plumbers up on our bulletin boards and we have more of those up there now than ever. It’s getting harder and harder to find and cultivate somebody into our business. It’s an interesting trend. There always have been two or three managers floating out there if you needed a manager or an outside sales guy. Those guys aren’t floating around anymore. That type of help is not available. The ones floating around are the ones you don’t want to hire. This is a very big concern.”
Cregger Co.’s Brendan Donohue wonders if entities such as Amazon will change the industry’s relationship dynamic. “I’m worried the more technology gets involved the less relationships will matter.” Photos by Bob Levy and Bob Miodonski/Supply House Times
At the same time, the conversation quickly turned to the offensive and what these panelists’ companies are doing to combat the problem.
“We started a career program and we’re also incorporating millennials into our organization,” Donohue said. “Everybody is challenged by how millennials think and operate, but to be honest companies that embrace millennials and get that right are going to be the ones that thrive. We are doing everything we can to incorporate millennials into our succession plans and strategic thinking going forward. The way that generation thinks, operates and wants to do business ultimately is going to be how it will happen in a short period of time. In the next 10 years, millennials will make up the bulk of the workforce. We’ve taken an active role with this. It’s almost impossible to find the people you need so we decided we are going to grow them ourselves.”
White said George T. Sanders Co., also is active on the internal development front. “We’re promoting a lot of people into branch management and sales roles and even territory managers,” he said. “We’re creating new roles we’ve never had before because we know they are good and we don’t want to
Christiansen asked if the group actively recruits in high schools, trade schools and colleges. “We do all that,” Taylor said. “We also have craftsmen in place with machinists and welders at some of our locations. We go to trade schools and draw some talent from there. We also go to colleges and universities and have had help from ASA with its marketing materials that we use when we go to these places. We’re also building our people from within rather than only relying on people from the outside. You have to bring in people from those entry-level positions and train them up in the business. We’ve had pretty good luck with entry-level people who want to learn the business and move up.”
Christiansen added: “Entry level is not the hard part. If you need a quotations guy or a purchasing guy you have to hope you have somebody in the chain that can slide into it. We can find truck drivers and order pickers, it’s the guys up the chain a little further that we have a hard time with.”
Columbia Specialty’s Mike Taylor says technology is great, but remaining relevant to your customers is paramount. “You have to always be looking for value-added things that you do that will make a difference to them.” Photos by Bob Levy and Bob Miodonski/Supply House Times
Bazemore said mentoring has become a critical element in today’s workplace. “You need a mentor or some sort of program where one guy is doing his job and at the same time is shadowing a new employee and working with that person until they are comfortable on their own,” he said.
“Everybody talks about planning for an aging workforce and retirement. We’re going through it right now. We are 100% all-in. We had a purchasing guy that’s been with us 49 years retire at the beginning of the year (2017) and a sales manager who has 45 years with us will be gone at the end of (2017). It’s challenging and difficult but at the same time if you are talking about millennials, it breeds opportunity. They see these long-tenured guys and how long they’ve been here and start wondering when the next time something like that is going to open up? You see people step up. It’s very rewarding to witness younger guys stepping up and taking on bigger roles.”
White has a unique role at Sanders. “It takes some thinking outside the box,” he said. “One of my main responsibilities is to pay close attention to our young people to see if they are capable or not. A lot of times they end up being your next best branch manager. You have to have a keen ear.”
Christiansen cautions this dilemma is not limited to distributors. “One of our greatest challenges is our customer base,” he said. “On the contractor side, how many new plumbers or mechanical contractors are starting up? Are there transition and succession plans at these other companies? Will these companies continue on? You are seeing less and less people in the trades. The customer base is going to shrink and that could cause real problems as well.”
Question: How can the current-day distributor thrive in the long-term?
This part of the discussion ranked up there in length with the labor shortage topic and produced some insightful comments. “You have to embrace e-commerce,” White said. “We just hired our first e-commerce manager and she’s great. She comes from Coleman camping and ran its B-to-C site. She has been charged with creating a new platform driven through our buying group (AD) and creating sales that way.”
JABO Supply’s Jay Bazemore is cautiously optimistic about the current business climate. “It’s all starting to come back at the same time. But markets are fickle and policy decisions in Washington can help you or the next administration could come in and sweep all the gains away just like that.” Photos by Bob Levy and Bob Miodonski/Supply House Times
Bazemore said the embracement of analytics is a must. “It’s all about analysis,” he said. “With a baseball card, you used to go to the back of it and look at all the numbers. That’s kind of how it used to be in the industry. But just like baseball going through this analytic breakthrough and phenomenon, we are starting to incorporate that into our own business. It’s amazing what you can find in your own numbers. It’s always been there, but we’ve never really paid attention to it.”
Taylor added: “It’s the technology we are bringing into our businesses that highlights all that information and data. There is technology now where you are able to get a good idea of the effectiveness on salesforce productivity and things such as pricing strategy. That used to be a gut feel. The technology is there now to where it doesn’t have to be a gut feel anymore.”
“It can be an educated, gut feel,” White said. “We have access to better, actionable data these days.”
But talk quickly turned back to some old-school and yet extremely pertinent ways of thinking. “You have to make sure you remain relevant to your customers,” Taylor said. “You have to always be looking for value-added things that you do that will make a difference to them. How do you keep thriving? Part of that has to do with who you really are and knowing who you are in the marketplace and working your very hardest to be the best in the marketplace. You can’t be somebody else. You can’t have multiple strategies going at the same time. Concentrate at being the best at what you do. If you get involved in all the other stuff you will lose focus.”
Supply House Times Chief Editor Mike Miazga asks a question during the eighth annual distributor roundtable session. Part 2 of the interview appears in the February issue and will include discussion about freight costs, buying groups and the critical role ASA plays in the industry. Photos by Bob Levy and Bob Miodonski/Supply House Times
Bazemore feels the industry will continue to thrive on relationships. “They are as important as they always have been,” he said. “That is the one thing that is not going to change. You have relationships, but if you don’t provide value someone else will and that will be the day you close the doors.”
Donohue wondered if entities such as Amazon will change the relationship dynamic. “I hope it stays a relationship-driven industry,” he said. “I’m a little concerned, though. Anybody bought anything on Amazon? It’s a relationship-less business. Who do you call when you need something from them? Our core customer base is relationship-driven. The millennials who succeed our customer base, will they be relationship-driven? I hope so. I’m worried the more technology gets involved the less relationships will matter.”
Bazemore added: “If you have a general contractor waiting there with 100 union guys are you going to tell them you got a thank-you from Amazon that the order is complete and it will be there the next day? When that contractor goes to bed is he thinking, ‘Jay promised me my materials will be there’ or ‘Amazon sent me a letter saying it will be there.’ Which one will he believe?”
Next time, the panelists discuss the topics of freight costs, buying groups, how to keep millennials at their companies and the importance of the American Supply Association.
This article was originally titled “Distributors express market optimism” in the January 2018 print edition of Supply House Times.