Olsztynski Editorial: Quick Takes On The Supply Chain Summit
Almost all of ASA's educational programming in Toronto was devoted to the single broad topic of supply chain management. SCM is a fancy term for wringing costs out of transactions, especially through application of information technology. The focal point of this year's convention was an all-day "Supply Chain Summit" on Oct. 30 that featured numerous speakers and panels tackling SCM from various angles. What follows are some highlights, and a few lowlights, from these sessions.
Pain = OpportunityThe first speaker at the SC Summit proved to be one of the most compelling. Laurie Breininger, vice president and general manager, Bath & Kitchen Americas, American Standard Cos., presented consumer research showing that the vast majority of bath and kitchen projects are not finished on time and riddled with process errors. "Dear God, let this be over!" was her way of describing consumer attitudes.
Their pain can be wholesalers' gain, however. Chaos creates opportunity to take charge by simplifying product choices and offering solutions to problems that bedevil builders and remodelers.
She also said that PHCP distributors are widely recognized for their expertise in commercial-industrial construction and high-end residential. This will enable them to survive amid two other trends that are not so good for distributors - growth of the big boxes and increasing consumer influence on plumbing purchases.
Errors GaloreFollowing Breininger to the podium was Hughes Supply's Robert Machaby, senior vice president of vendor relations, who emphasized the need to "embrace speed and quality" as a way to satisfy customers and reduce costs.
These eyebrows hit the hairline when Machaby revealed that before Hughes embarked on a process improvement program, some 40% of all purchase orders issued by the company contained errors, and the average cost to fix those errors was $70. These are stunning numbers, and it seems unlikely Hughes was the most inept wholesaler in the industry in that regard.
Over the years I've listened to so many contractors complain about supply house errors, I'd come to brush it off as chronic whining. Now it seems they were on to something. If wholesalers make that many mistakes on POs, what reason is there to believe they are any less sloppy with invoices? No wonder ASA has become obsessed with SCM.
Out Of GasIt was disappointing to see the crowd dwindle so much during the afternoon Summit program. About a third of those in attendance before lunch decided to do something else in the p.m. Too bad, because the afternoon sessions were terrific.
It's not a good sign for the industry when so many wholesalers turn their backs on the industry's most ambitious attempt to deal with the pressing issues of the day. Even though it was too cold to play golf! It's one thing to avoid seminars you may have heard before, but this programming was unique. Nobody knew what would come out of the Summit. Yet, a large portion of the audience was not even interested in finding out.
This came on the heels of one of the saddest moments of the convention for me. That was getting word that the Wholesale Distributors Association had folded after 74 years. It dissolved from a combination of financial difficulties and sheer apathy. I'm told WDA was able to pay its bills - barely - but did not want to incur future liabilities by entering into hotel contracts for new conventions amid declining participation. There was simply not enough interest among members to proceed with further association activities and try to reinvigorate the group.
Everyone blames it on consolidation, but there are plenty of vibrant trade associations around with small numbers. There was also the possibility of a WDA-SWA merger, something that had been discussed from time to time. But WDA's dwindling stalwarts couldn't muster enough interest.
Not only is this sad, there's something wrong with our industry if this news doesn't make everyone squirm a bit with embarrassment and foreboding. Just as we should feel embarrassed by the poor turnout during the afternoon of ASA's Supply Chain Summit.
Wholesalers seem to be totally absorbed in their own problems and losing interest in the big picture. A cosmopolitan view of the business is giving way to provincialism. Let's worry about this.
The Message & The MessengerAdam Fein, president of Pembroke Consulting and moderator of the Summit, kicked off the afternoon with a monologue titled "The Unbundled Supply Chain." It was a brilliantly reasoned report about the challenges ahead for PHCP distributors as various of their functions get usurped by other channels or other channel players. This doesn't mean wholesalers will disappear, Fein assured, but it does compel them to figure out new ways to operate.
Fein has been cited quite a bit in the pages of this magazine, because we consider him to be one of the brightest industry analysts around. He may be a bit too bright. One prominent wholesaler confided to me that he "couldn't understand what (Fein) was talking about." Fein is a good public speaker but does tend to package his message in language more intelligible to fellow Ph.D.s than to citizens of a hardscrabble industry who value the practical over the theoretical.
Nonetheless, wholesalers who make an effort to pay attention to Dr. Fein will find him as attuned to their business as any outsider could be. (Fein's "Forces of Change" article on page 50 addresses many of the themes presented in his Summit program.)
The Problem In A Nutshell
Fein's presentation was followed by a panel of wholesalers giving their take on how vendors and suppliers can move forward together. There was plenty of audience discussion in this session, and one gentleman said something that starkly summarizes the impasse facing the industry when it comes to adopting state-of-the-art technology throughout the supply chain.
"None of us (wholesalers) is convinced that EDI is a cost saving," said the wholesaler, whose name I did not get. The comment was not as foolish as it may come across in print. A discussion followed about the industry's array of special products, special pricing and other quirky business practices that can render EDI coding as complex as subatomic physics. "How do we clean up our business practices to make EDI work?" was the rhetorical question of the hour.
Nobody had an answer.