Excerpts from speakers' presentations provide insight into supply chain relationships.

The North Central Wholesalers Association focused its annual meeting on an all-star panel presentation on industry trends. Eight high-ranking executives from manufacturers, wholesalers, a rep firm and a buying group presented their views on “Emerging Trends in the PHCP Distribution Industry.” None of them addressed the same subject, which made for a fascinating glimpse into the values and priorities of the supply chain partners. Key excerpts from their presentations follow.

Rex Martin, CEO, NIBCO:

“Supply chain waste is one of the most critical issues facing the plumbing wholesale distribution industry today…

“Today, 75% of our incoming order lines are received by EDI… At times, people ask, 'Does EDI really save money?' My answer is absolutely, yes… In 1998, we had 125 customer service representatives. Today, after six years of good growth, we have less than 70! We did not lay anyone off. We transferred people to other jobs and used attrition to eliminate headcount.

“There are many other examples of the use of information technology to eliminate waste, but I don't want to imply that business is only information technology. People buy from people. Relationships are important, and I don't see a time in the future when all business is done computer to computer.”

John Wills, group president, North American Plumbing Products, Masco:

“Today, there are as many channels of distribution as there are situations, and I haven't mentioned logistics providers like Penske Transport and the like who also participate in distribution or online selling and the complications that adds …

“The key in our industry going forward will be determining in which segment or segments one wants to participate, and then developing the correct marketing approach for those segments by understanding the needs of the end user. In some segments, players may compete with customers or suppliers, but it will be necessary to collaborate with these same organizations in other segments …

“Our industry is more complex than ever before, and one will need to be flexible to compete, and not expect rigid rules to govern the total marketplace.”

Robert Hoff, president, Omni Corporate Services:

“The small independent distributor will have a place in our industry for years to come. He is a niche marketer, a guerilla fighter, and backed by assets such as group purchasing, he will be a survivor…

“I am also convinced that even though this is a tumultuous time for the traditional trade associations, both regional and national, they are direly needed and will emerge after the necessary restructuring to meet the future needs of our industry.”

Jeffrey New, president, Mid-City Supply:

“Relationships are the key to the future success of our industry… My experience has shown that people will pay a little more to do business with people they enjoy and trust…

“Building relationships is not something that can be done quickly. It must be a long-term commitment to a different way of thinking … I tell my associates to always look for opportunities to become a hero. Whether it's a customer, a vendor, or an employee, people may not always remember what you have done, but they will always remember how you made them feel.”

Richard Schwartz, president, Winholesale Inc.:

“Home builders have diligently analyzed acquisition and installation costs of every component of a house. A key concern is the large price variances of plumbing and HVAC products across the country. Many home builders see the need to minimize costs and optimize communication, product flow and cash flow within the supply chain. They are actively pursuing activity-based costing analysis and trying to minimize the complexities and costs of their multi-tiered supply chain models. I think we should do the same.

“Wholesalers will have to find ways of delivering added value to home builders at lower costs than builders can do on their own. At the same time, maintaining our alliance with our contractor customers is critical to our mutual success. We can't afford to forget who we came to the dance with.”

Pete Lewnes, president, Preferred Sales Inc.:

“The key to competitive advantage is an organization's ability to adapt and change quickly. And one of the largest impediments to the ability to adapt and change quickly is arrogance. Think about it. If the corporate culture does not change, nothing else does either. 'That's the way we've always done it' is a kiss of death…

“The next megatrend in the PHCP industries will be/is offshore products. Like it or hate it, China, India and others are here to stay. How will these products go to market in the U.S.? Who will market them? Who will be their manufacturing partners?”

Rick Mousa, national and key accounts manager, Home Depot Supply:

“Industrial customers are trying to find strategic partners who can effectively and in a measurable manner help them to reduce their costs of operations, to compete not only against their domestic competitors, but also against foreign competition. Obviously, the easiest way to this goal is to transfer some of their costs to their supplier. This comes in the form of consignment inventory, managing free issue areas, providing training, providing more attractive terms and conditions - 24/7 at no additional cost, etc. - and while doing all of this, shipping product at the lowest price.

“The challenge for industrial PVF distributors is to be the best at contributing to their customers' profitability and at the same time generate a reasonable profit for their own companies… The Catch-22 here is that if you do not win the MRO agreement, that MRO business could be gone for years… There is only so much industrial business to share, and the industrial market in this country is shrinking.”

Rob Braig, national manager - commercial & industrial, Ferguson Enterprises:

“As a result of the pressure to stabilize margins, the distributor has begun to look at adding 'own brand' products to his offering. I do not see own brand taking the place of the major brands that exist in our business today and are widely known in the wholesale distribution channel. However, the pressure to increase margins and the influx of available product from offshore will ensure that own brand and import product of high quality will become an integral part of the distribution business. If a product is indistinguishable in the marketplace, or if there is a gap in the offerings of major brands as perceived by the wholesaler, then promoting own brand offering will become an alternative.

“That said, the most powerful sales call occurs when a distributor and a manufacturer operate together. This is the partnership that needs the most attention if the distributor and manufacturer decide mutual growth is the best course.”

Moderating the panel discussion was NCWA past president Jim Johnson of Midway Supply. Approximately 200 people turned out for the NCWA event, held June 14 at the Maumee Bay Conference Center just outside of Toledo, Ohio.