In Part 1 of the ninth annual American Supply Association/Supply House Times distributor roundtable interview, a blue-chip panel tackled such industry issues as technology, consolidation and succession planning.
This time, the panel continues its discussion on e-commerce and also talks about the economy as it relates to the PHCP-PVF supply chain, as well as the importance ASA continues to play in our industry.
This year’s panel for the exclusive interview, which took place during NETWORK 2018 at the Fairmont Scottsdale (Arizona) Princess, includes:
• Howard Rose, co-chairman, The Portland Group, Billerica, Massachusetts;
• Tracy Bates, vice president, Ideal Supply Co., Jersey City, New Jersey;
• Kyle Stratiner, executive vice president of engineered products, Puget Sound Pipe & Supply, Kent, Washington; and
• Rob Powers, director of marketing, PVF, Chicago Tube & Iron, Romeoville, Illinois.
In the first part of the interview, which is in the January issue of Supply House Times, the subject of e-commerce came up as it related to an initial question about current customer demands. The conversation continued on the e-commerce subject with panelists giving their thoughts on where their companies are at with it.
“I don’t see it as a big threat, probably because we have de-commoditized,” Powers says. “We aren’t just selling a 1-inch 90 malleable off the shelf. If we were more of a plumbing and commercial supply house, I would be scared and we would be investing. You can spend a lot of time and resources with e-commerce if it is not done right. We have seen a lot of companies do that and bring in consultants who do data compiling and it doesn’t work. You need to find out if your customer base uses it, and eventually they are when a total shift happens.”
Stratiner adds: “It’s going to happen. Customers are coming to us all the time saying so-and-so does this. When are you going to do it? We’re starting to get there. We don’t want to just roll something out. You have to make sure it is done right. The taxonomy has to be there. For us, it’s extending relationships and bettering what we have. It’s not necessarily going after the new guy. We’re probably a year or two away. We just rolled out RF scanning, and that rollout still is happening in our branches in Alaska because of MTRs and all they have to deal with for the oil companies up there. It’s a different animal.”
Rose, whose company also includes a strong kitchen and bath showroom presence, says e-commerce “is a necessity for us.”
“We’re not there yet,” he adds. “We’re constantly being checked by millennials online. e-commerce for The Portland Group should be as important as expansion. I have pontificated to my son (Ben Rose) and my partner’s son (Mike Fox) that it has to be embraced sooner than later. You are hearing statistics where 8% of people bought online and two years later it’s 9.5% and now it’s approaching 14 and 15%. It’s not going away. It’s on our agenda to accomplish in the foreseeable future.”
What are your thoughts on the short-term business outlook?
Bates says business in the New York-New Jersey metro area remains strong. “We’re continuing to stay busy with both public and private-entity projects, which will be solid for at least the next year,” she says. “However, we also have to closely monitor the political climate and any tariffs, and the impact on the decision-making process of our customers and vendors. So far, as a domestic house, although some prices have increased, it hasn’t hurt us too much.”
Powers sees strong activity through 2019. “If you look at the infrastructure through the country, energy independence and the amount of oil coming out of the ground in west Texas, that pretty much drives everything,” he says. “When those mills are busy, it trickles down to the mechanicals. Our customers are forecasting growth. Everybody has been touched by the tariffs. With all the uncertainty at the beginning of the year, people were worried about running out of material and not the cost of material. We also are pretty heavily domestic, but do get involved with import. There has been some concern about recent softening (at the end of 2018), but money still is relatively cheap and companies still are investing.”
Stratiner notes Puget Sound Pipe & Supply now sells more import than domestic because of its geographical area, but still is heavily involved in the domestic material side of things. “It’s hard to know what’s going on,” he says. “You don’t want to bring in too much inventory. In our industry, I still see two or three years of growth mechanical-wise. I see oil coming back, but you don’t know what will happen in the Middle East. It will fluctuate. I think the next two years are good and after that I don’t know.”
How about any ‘hidden’ threats to the industry out there?
Rose summed it up perfectly with his comment about where the next threat to the industry will come from. “You don’t know where it is coming from next,” he says.
Powers recalls one of the sessions at NETWORK he attended prior to this interview that dealt with 3D printing among other topics. “What about machine and fabrication shops where there could be a reduction in machining? There still is an incredible amount of waste that occurs,” he says. “There are things out there where you are taking 21 components and reducing it to one. That will wipe out certain players. This type of thing is on our radar for the future.”
Rose brings up the example of a manufacturer he knows that is in the process of developing a UPS direct-ship option to customers. “We can participate in that program, but at a lower margin,” he points out. “There are vendors coming up with their own programs to ship direct, slowly but surely.”
Stratiner cautions the distribution model isn’t going anywhere anytime soon. “If you look at other parts of the world, and it’s only the manufacturer and the end user,” he says. “You see the problems this creates without the middle guy. We are the fallback. We are the ones who get yelled at, but we are the ones that take care of the end user. If a lot of these end users had to go direct to a vendor, I don’t think they would want to do that. They rely on us.”
How important is the American Supply Association to our industry?
The panel wrapped up the interview with this question about ASA’s relevance in the industry as it celebrates its 50th anniversary this year. As always, the response was unanimous. ASA plays a vital role in the PHCP-PVF supply chain.
“I’ve been coming to NETWORK for five or six years now and it’s the networking that really does it for me,” Stratiner says. “I meet new people and learn new things from folks that have been doing this since the early 1990s. They know things and have been through it all. We utilize ASA University as much as possible.”
Bates notes Ideal recently utilized ASA-U for three of its new hires with great success. Powers adds education and networking are the two biggest pluses for CTI’s membership in ASA. “With all the succession planning and new hires, education is the biggest component. We find great value in the 101-level classes. ASA is second-to-none in terms of education,” he says.
Rose admits The Portland Group was at a point about a decade ago where it thought of pulling out of ASA. “We paid the dues but we were not feeling great about what we were getting back,” he says. “They have brought back relevant data under current leadership. We get great value from the networking and talking here in this interview. We see great value in ASA.”
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