Invite a couple of dozen brainy people to a plush resort. Mix distribution executives with experts from the academic and consulting worlds. Emphasize audience interaction during their programs and afterward. Provide some social diversions.
Such is the formula for the third Mincron Executive Conference, held at the Lake Las Vegas resort a half-hour's drive outside of the gambling Mecca on Nov. 2-3. Attended by 22 distribution executives, Mincron personnel and a few guests that included this reporter, the intimate gathering gave attendees a chance to immerse themselves in highly targeted presentations that gave rise to plenty of group brainstorming.
Although Mincron is one of the distribution industry's leading software providers, computer technology took a back seat to supply chain topics. Invitations to the conference were extended to top executives from client companies. Those who chose to attend mingled with Mincron's top brass, including President and CEO Walter Ulrich, who emceed the event. “The conference is limited to a day and a half because company presidents don't have much time. Our discussions are industry-based and thought-provoking rather than focused on our computer system,” explained Wendy Berger, Mincron's vice president of customer relations.
Almost every session left attendees buzzing in the aftermath and continuing discussion among themselves. Highlights:
He predicted U.S. GDP growth next year on the order of 3.2%. That would be down from a projected 4.3% increase this year but slightly higher than the 3.0% rate recorded in 2003. Interest rates are expected to go up in small, steady increments, with the federal funds rate reaching 3% to 3.5% by 2006, up from a measly 1.0% when the Fed hit bottom about a year ago. Even with these incremental increases, interest rates would remain low by historic standards and should present no big problem for the U.S. economy. “The wild card is the price of oil,” said Warrian.
Oil prices shot past the $50 a barrel mark for the first time shortly before the start of the conference. Warrian did not speculate how high it might go, though he cited some analysts who thought $80 was not beyond question. A bigger problem, according to Warrian, was where the price of oil would settle once supplies catch up with burgeoning worldwide demand. Warrian figured that will be in the $38-42 range, which would be about 50% higher than the average over the past several years.
“Along with other sustained spikes in commodity prices, a floor price of around $40 would cause a tremendous amount of capital equipment to become obsolete,” said Warrian. He cited the experience of Japan and Europe during the 1970s, when those economies were forced to modernize inefficient facilities in response to skyrocketing energy prices. Subsequent audience discussion made it clear that this might not be an entirely bad thing for commercial-industrial distributors.
Another wild card, according to Warrian, is China's role in helping to keep a lid on U.S. interest rates. “The Chinese are currently buying around $40 billion a month of U.S. Treasury bills,” he noted. He maintained that the U.S. government had struck an implicit deal with the Chinese to look the other way at their big trade surplus as long as they invest in the U.S. However, if the Chinese for whatever reason stopped soaking up T-bills, “interest rates could increase very fast.”
At one point Lawrence made the surprising prediction that U.S. manufacturing is poised for a comeback. “Logistics cost can overwhelm labor savings,” he said. He predicted that in order to take advantage of favorable logistics, U.S. manufacturers will tend to become regional in scope, but “they will come back to the United States.”
As for the distributor's role, Lawrence said: “The distributor must slow commoditization by wrapping themselves in value-added services.”
Audience discussion arose during this session about the practice of certain distributors to pick up orders from manufacturers on the back end of deliveries rather than have trucks return empty. Some distributors who have done this found out that some manufacturers make money off of shipping, and it has led to arguments about how much this service is worth to distributors.
According to Church, transactional sales aim mainly to separate customers from their money and get on to the next call. The consultative approach aims at building trust and doing what is needed to help a customer become more successful.
According to Maudlin, the goal is not always to win the bid, but to have the outcome be in the best interest of one's company whether or not the company is the low bidder.
For example, if a company enjoys a solid reputation with a customer holding a reverse auction, that firm may get a second look if the winning bidder isn't capable of performing to satisfaction. Then, it wouldn't be in the reputable firm's interest to bid the contract down to rock bottom. So when bidding against weak competitors, sometimes it may be better to position your company to finish second in the bidding rather than going all-out to win it.
An article by Stuart Maudlin about these and other reverse auction tactics will be appearing in a future edition of SUPPLY HOUSE TIMES.
“Technology is the key to improving business processes,” he said. Mincron technology specialists Mark Chellis, Ken Pietsch and Doug Vu followed up with elaboration about high-tech tools available to help the distributors meet on-demand challenges in a world that is becoming increasingly wireless and offering real-time solutions to customer problems.
According to Vu, the role of distributors in this new world will be that of “de-bottleneckers.”
Mincron's Executive Conference was an eye-opener and thought-provoker for this observer, and probably even more so for their clients in the distribution industry's front lines.
- by Jim Olsztynski