Often inappropriately designated as the "middle man", successful industrial distributors are in fact the front line. We add significant value to the products we provide our customers. Perhaps more important than sourcing product, our job is to be a presence in our customers' facilities, making product recommendations, solving unique application problems and partnering with our customers in their efforts to increase productivity and profitability.

Industrial distributors are a tremendous resource for our customers. We now perform many of the functions previously accomplished in-house and supply a level of expertise that was once the domain of the "factory engineer".

As we are well aware, the complexion of the distribution industry has changed significantly over the last decade — and we will likely face even more significant changes in the years ahead. Coupled with changes in industry practices and the economic slowdown, the industrial market has endured much and has challenged distributors to think in new ways.

Through August, the leading economic indicators had begun to show some improvement. However, the magnitude of the unknowns brought about by the horrific September 11th terrorist attack have a likelihood of impeding the fragile recovery. If consumption does not rebound, the balance of supply and demand will continue to be tipped towards the supply side of the scale, resulting in ongoing pricing pressures.

Those distributors that have grown their businesses in this climate have responded with strategic agility to these dramatic changes and are committed to seeking new ways to move with the changing variables of industry.

In a recent Final Word article, it was pointed out that value is what the customer perceives it to be, and the critical value point that the industrial distributor brings to the relationship is the services and the expertise we provide, rather than the hardware we deliver.

Indeed, the opportunity for profit — and ultimately survival — depends just as critically on the distributor's ability to provide and market the services that customers perceive as valuable, as it does on inventory and logistics.

The challenge is to fully understand what each customer identifies as valuable, to develop services in response to this demand and to make the necessary investments that allow the distributor to deliver these services effectively and efficiently. And, significantly, to charge appropriately for the services provided.

As we analyze our monthly operating statements, we can get a very quick read on how well we are doing in meeting our customers' needs. Are we improving our business (growing sales and gross margin) or is our business being eaten away because we did not place enough strategic importance on understanding exactly what our customers perceived as value, catering to it and charging for the valuable service delivered?

Companies that succeed for the long term in this competitive marketplace do so by working to become a valuable partner to our customers and providing real solutions rather than simply a low price. The reward is not only an additional source of revenue from providing the additional services, but more importantly building a stronger customer relationship and the promise of future business.