Nine successful distributors from diverse product sectors shared some of their companies’ key business strategies in a series of “best practices” panel discussions at this year’s Executive Summit of the National Association of Wholesaler-Distributors (NAW), held in the nation’s capital Jan. 29-31. Three panels were organized around the topics of customer focus, operational efficiency and leadership culture, which were identified by NAW’s membership as the most important facets of top companies.
Among the panelists was Wolseley CEO Chip Hornsby, who also took the reins as NAW chairman for the 2008-2009 term. Speaking on “leadership culture,” Hornsby reviewed Wolseley’s recent divestment of unrelated businesses to consolidate into a construction distribution specialist. He also cited Wolseley as moving from decentralized management “toward centralization by country.” Hornsby, who formerly headed Ferguson before taking the reins of the parent company, labeled Wolseley’s strategy as “earn, turn and grow,” explaining that “we want to grow the bottom line faster than revenues” and focus on rapid inventory turnover culture, which “varies greatly by country.”
In a preamble to his panel presentation,” Wolseley’s CEO discussed the biggest challenge facing the corporation and its Ferguson unit in the short term was the U.S. economy. Hornsby issued a stunning prediction that U.S. housing starts would plummet to a meager 750,000 in 2008, down by almost two-thirds from an all-time high of 2.2 million in 2005. That figure would be more than 25% lower than any previous annual housing starts recorded in the U.S., according to data going back to 1959.
Referring to Ferguson reducing its employment by about 1,500 this year, Hornsby said, “regrettably, we will continue headcount reduction” as a means of coping with the housing slump. According to him, Ferguson is in reasonably good shape because home building accounts for only about 20% of its business. But the former Ferguson CEO shared that he didn’t think the housing market in this country will recover until 2010.
A somewhat less bleak picture was painted by popular economist Alan Beaulieu (Institute for Trend Research), who kicked off the Summit with a continuation of his presentation at last year’s event in which he predicted a recession starting in 2009. He stuck to those guns, saying that “the economy will continue growing at a tepid pace in 2008 – 2.3%, maybe closer to 2.0% -- but by January 2009, we’ll be in recession.
“The housing market is the tip of the iceberg,” he explained. “The rest of the credit markets will follow.” Beaulieu predicted the downturn to last into 2010, saying, “It could be an ugly one.”
The economist countered his recession forecast with an upbeat assessment of the U.S. economy for the longer term. He quoted Fed Chairman Bernanke as saying: “Recessions are a lot like forest fires. We don’t like them, but in the long run they do good in clearing the way for new growth.”
“Many things are going right,” said Beaulieu. “For one thing, we are having children. That means we have a bright future with consumers, labor, taxpayers and innovation. This is not happening in Europe, which has a demographic problem.”
As for China, Beaulieu pointed to severe demographic problems, including 125 million more men than women in their child bearing years. “That’s about the population of Mexico,” he noted. “(The Chinese) have potential for great unrest.”
He added that U.S. GDP and industrial production are still going up and we’re still the number one exporting nation. “The United States is the most competitive nation and the most productive nation,” he stressed. However, Beaulieu lamented the failure of our political leadership to deal with the long-term fiscal problems facing Social Security and Medicare. He stated that to fix those problems, “we need to appoint a czar who doesn’t need to be reelected.”