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Life in a Post-Pandemic World

Long ago a mentor once said, “Frank, if you want to anticipate customer actions, read what they are reading.  If you want to increase your sales, talk the way they talk and surround your products with problems they face.”  This was some heady stuff for a smart-aleck computer school cowboy with a shiny Ford automobile and two business suits. Dating myself here but let us just say it was a long time before the first Global Pandemic.  I followed his advice.

Back in those day, the process involved tearing out the subscription form near the back of the magazines in the customer’s lobby, maintenance shop, or engineering library.  Heeding his sage advice, I soon found myself browsing through magazines ranging from Rubber News to Food Manufacturing Magazine.  Always being an over achiever, I also signed up for free subscriptions to Plant Engineering Magazine, Maintenance and Engineering Magazine, and a lot more. 

The mailman hated me.   I may have damaged the environment through the mass quantity of paper consumed.  But I learned a quick scan of these publications showed me exactly what my customers were thinking about.  It provided valuable insight into my customer’s world, helped me understand their lingo, and helped me understand many of the hot button problems they faced.  Enough with the old timer stories, let us move into the 21st Century.

Happily, today the whole process is easier - and far less taxing on the trees.  A few moments alone at the computer allows us to research far and wide.  Lots of industry specific stuff – I like that.  But for a look at mega-trends, trends which I believe will sweep across the country almost as fast as those early COVID germs, we need to look at Pandemic driven issues and Post-Pandemic trends for business in general.

Wall Street financial folks have an unquenchable thirst for an understanding these types of macro business trends.  Organizations like McKinsey, Deloitte, and others cater to this information gap by doing extensive surveys of business leaders and blasting it out to the world.

Since late last year, most of these organizations have been asking financial questions, not about products or the things we sell, but instead polling on the customer direction.  Businesses, large and small are spilling their guts to these guys.  The message delivered is financial, but when translated become customer problems we can wrap our products in. 

We can position ourselves to play a part in the future of our customers, by creating a presence long before most of our “normal” customer contacts realize that is the direction they will be following.

Looking at the thoughts which repeated surface in these reports.  Some require little imagination in how we might approach customers.  A few require just a bit more of a deep dive.   Today's post we will cover the first one, Drive for Profitability.

  1. Drive for Profitability
  2. Supply Chain Revamps/Reshoring
  3. Robotics
  4. Green and Social Responsibility
  5. Renewed focus on Safety
  6. Expanded use of online training
  7. Digital Investment – Digitalization
  8. Remote Team Deployment
  9. Shortage of Skilled Workers

The Drive for Profitability

The background story for many of our customers is simple – 2020 performance tanked.  These organizations are doing whatever possible to improve their profitability.  If we look back at other economic recoveries, we see several customer behaviors which impact distributors and the business climate in general.  Here is a quick run down of these behaviors and some thoughts about distributor positioning:

Reorganizations and restructuring of the company

This phenomenon has happened with such regularity it has almost become routine with many companies.  The organization reshuffles departments, eliminates positions, and plays a game of org-chart musical chairs.  For distributors this means potential for the loss (do to transfer or termination) of key contacts and allies within the customer’s organization. 

Distributor activities to position and prepare include:

  • Expand and broaden the contacts throughout the organization. This can often be accomplished by asking friends within the account who else might value from your kind of products and services
  • Bolster/Establish relationships with customer upper management types as high in the organization as possible. The higher up the customer org-chart the better your chances of getting an early warning to the effort.
  • Acquire or create a customer organization chart to better understand how the organization works. If the restructuring has already happened, this should be a top priority.
  • When the restructure takes place, gather information on the goals of each of the newly created silos within the company.

Overall push for maximum productivity

On the manufacturing side, this equates to improving throughput and producing more products within the same facility.  For knowledge-based distributors this plays directly into our strengths.

Distributor activities to position and prepare include:

  • Talking to upper management about Overall Operations Effectiveness (OOE) goals and roadblocks to obtaining them.
  • Discussing your plans for assisting the customer in reducing unplanned downtime.
  • Couching services and spare parts in terms of improved uptime.
  • Asking customers about bottlenecks in their production.

On the people side, many of these companies have gone through at least some kind of reduction of staff during the Pandemic.  Some of the restructures described above will be attempts to do more with fewer people.  Often, they see hiring of outside resources more favorably than the addition of new headcounts.  This creates opportunities for distributors who provide value-add services of both the technical and non-technical variety. 

Distributor activities to position and prepare:

  • Gather information about areas where the customer has issues achieving goals with the current number of employees. Is this a service you could provide?
  • Present solutions for products which might minimize the amount of direct labor required on the customer part.
  • Talk about your kitting, subassembly production, and other services might make existing employees more productive.

Examination and evaluation of non-core competencies

In times like these many companies take a renewed look at all the process within there organization.  Experience dictates this is the time organizations have decided to outsource things like:  panel building, repair of equipment once done in maintenance, warehousing spare parts, and in at least one instance engineering. 

Even if your organization is not prepared to take on the task being outsourced, it pays to play a role in the decision.  To illustrate this let us think of an example.  What happens if the customer decides to outsource panel building and the panel builder they select is not an ally or is outside of your territory?   Your business disappears forever.

Distributor activities to position and prepare:

  • Management-to-Management meetings pay dividends. This type of outsourcing information is typically not shared with lower-level employees.  Instead, it is directed from high in the organization and is often closely guarded.  Now is the time to get the boss out for a visit with the owner, plant manager, or anyone else near the top of the organization.
  • Services provided by your organization should be revisited with higher level people within the customer organization.

Leveraging and reduction of suppliers

There are many consultants in the business world pushing the idea of leveraging suppliers to get better pricing.  You may have seen it before, and shook your head, but in the past several weeks I have received calls from procurement types asking for help in devising the strategy.  Mostly, the procurement plan involves requests for price reduction in exchange for being locked into the account’s business.  Be prepared.

Distributor activities to position and prepare:

  • Determine if you sell product brands which cannot be easily replaced. If so, prepare your supplier by talking about your Special Pricing Agreements.  Are they rock solid?  Do you need to strengthen them in case a second distributor is asked to quote?
  • Spend time understanding which products you are not selling to the supplier. If the negotiation gets tough, ask for a commitment for purchasing these products.
  • Understand the value you provide. Be prepared to explain all the extra things you do for the customer and the savings created through your activities.

Effort to delay capitol projects to conserve cash

This one will drive you crazy.  You will be asked to provide money for budgetary purposes.  The solution is perfect, the payback reasonable, and yet the customer hesitates on pulling the trigger.  If you track opportunities, and I hope you do, your opportunity dollars will go up.  All this and nothing happens… at least for a very long time.  Many salespeople make the mistake of not following the money.  Only a few have the natural audacity to outright ask why the purchase is not being made.

Distributor activities to position and prepare:

  • Explore the option of developing leasing arrangements. A lease smooths out the cash flow for the customer.
  • Find ways to suggest the project take place in small steps through a maintenance budget. This avoids capital spending.

A few companies have been quite profitable

Those who, for one reason or another, had good years have money and are looking to capitalize on their position.  Companies with strong positions in the health/pharma business did spectacularly well, companies participating in or serving the semi-conductor industry showed good growth and profitability.  These organizations are on the hunt for new acquisitions targets. 

If you happen to be lucky enough to have a customer in this position, the best win for you would be for them to migrate your company into the ranks of top supplier at their newly acquired company.

Distributor activities to position and prepare:

  • Identify the financial conditions of your customer. Did they perform well throughout the pandemic?  If so, there is good reason to believe they may be in the acquisition mode.
  • Conduct management-to-management meeting to determine if they have any specific targets identified.
  • Present your value to the customer and why you could bring this same value to any newly acquired organizations.
  • Assist your customer allies in developing corporate specs favorable to you.

A couple of final thoughts.

Our customer’s drive for profitability is not a product match.  With the potential exception of Robotics and Safety, none of them have direct product correlation.  This point is bad for the guys who sell brown boxes delivered tomorrow.  Yet it plays well to the knowledge-based distributor who provides a solution.  Your understanding of the customer and their applications enables you to provide better solutions.  This is the central point of being Amazon proof into the future.

It pays to put the force of change to your advantage.  One private equity guy we spoke to called this “Creating a Macro Tail Wind.”  I agree.  We can move forward with the winds of change at our back helping us create a better future.

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Tribute, Inc. is a provider of ERP business management software for distributors and system integrators in the fluid power, hose, motion control, automation, fluid handling & pump industry who provide value-added services.