At the recent Specialty Tool and Fasteners Distributors Association (STAFDA) 2015 Convention and Trade Show in Phoenix, things got formerly underway on Nov. 9 with the event's general session, where STAFDA president Rod Gowett gave a distributor "state-of-the-industry" report.
Gowett, Vice President of sales and marketing at Acme Construction and Supply, gave a speech that featured several topics, the first being his concern for mid-sized distributors going forward.
"After 35 years of being in the construction supply business, I have some serious concerns about the direction it’s headed," Gowett told the crowd in the north ballroom of the Phoenix Convention Center. "I’m mainly concerned that many mid-sized construction supply companies might have a very difficult time in the future."
Gowett specifically mentions construction distributors there, but his sentiment can be applied to industrial distributors as a whole. He went on to say there will always be a need for small and large distributors as each have their advantages, while mid-sized companies having to constantly answer the demands from both sides.
"I think there will always be room for the small distributor who has built the proper relationships and is nimble on their feet," Gowett said. "The faster and more flexible service these smaller distributors provide will always be a value to the end-user. And larger distributors, such as the national chains, will continue to have an advantage because of their ability to be able to buy right. The larger volume they provide will always be very appealing to manufacturers and keep them highly competitive in the market place.
"But this makes me worry the mid-sized, regional distributor will be increasingly squeezed on both ends – they may not be large enough to hold the manufacturer’s attention when it comes to volume, and at the same time, they are not small enough to be able to service the customers the way they will demand."
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Gowett used this concern to transition to his other major theme – people. He went on to stress the importance of employee training, recruiting & retaining talent, and the importance of succession planning.
"I believe in order for the mid-sized distributor to thrive in the coming years, they must take advantage of every opportunity to build the best, most qualified team they can," Gowett said. "As leaders of our industry, we all have the tendency to micro-manage. Going forward, it will be important for owners in mid-sized distributors to further empower and trust their team. And, there are resources available to help you do just that."
Gowett stressed the value of being a member of an industrial marketing/buying group or other industry associations, as both can provide distributors with the tools to successfully compete in the future.
In suche a niche industry as industrial distribution, many distributors are selling the same products. That's even more true at a trade show such as STAFDA, where so many of the hundreds of manufacturers on hand sell similar fasteners, blades, abrasives, hand tools, power tools, and safety equipment.
With that, the way distributors differentiate themselves is in their service, and more so, their people. It was that point that Gowett emphasized in the rest of his speech.
The growing talent gap in manufacturing has been well-documented, and it's made it tougher for industrial distributors to keep their employees, and find new talent.
"When I talk with others in the industry, an ongoing concern is how difficult it is to find good people & retain them," Gowett said. "I believe having an established and on-going program of training and development will aid in your efforts to recruit new people to your business.
Gowett stressed the importance of training current employees, and giving them a reason to stay long-term.
"Remember, employees quit leaders, not companies," he said. "Leadership drives workforce development. It’ll be the younger generation in your company who will help guide many of upper management’s business decisions. We need to attract young people into this industry and into our companies. One way to do this is to demonstrate that you have career to offer them, not just a job. And, you have to be able to show them that you have a process in place to develop their skills."
This process, Gowett said, should involve a full palette of programs, ranging from online and product training, to leadership development and selling skills.
"Each of us must have a process in place, with a plan for each employee, if we are going to be competitive in the coming decades," Gowett said.
To drive this point home, Gowett delivered this anecdote:
"I know what some of you may be thinking. Over the years, I have had other business owners say to me, “What if I train my people and they leave?” I like to counter that with 'What if you don’t train your people and they stay?'"
Gowett then moved on to the topic of succession planning, giving his concern for a lack thereof for industrial distributors. He stressed how the U.S. is about to experience one of the largest wealth transfers in history, as an estimated 9 million of America's 15 million business owners were born in or before 1964. "As a result, an estimated $11 trillion will soon be transferred from one generation to the next," he said.
Gowett referenced CliftonLarsonAllen Wealth Advisors' “Manufacturing and Distribution Outlook” report, which indicated that only 54 percent of business owners are 'somewhat prepared for a pending leadership or ownership transition, noting that most of the STAFDA audience fell into that 54 percent.
"If you plan to step-down in 5-10 years, start putting together a game plan now," Gowett said. "How many times have we heard or read about owners who didn’t have a succession plan in place, then experienced a major health incident, panicked, and ended up selling the business well below its value, not to mention leaving its employees in a state of confusion and limbo.
"Your employees are smart…they watch as the owner gets older and if they don’t sense a succession plan in the works, they might go elsewhere."