We’re excited to provide the readers of Industrial Distribution with the results of our 68th annual Survey of Distributor Operations. The objectives of this report, as always, have been to understand the most critical issues affecting distributors, and to provide data to help drive their educated business decisions. Through these findings, we’ll discuss new and ongoing industry trends, and what trends have fizzled.
In this segment, we focus specifically on:
- Demographics, which establishes a profile of survey respondents based on company size, years in business, sales volume, and product line.
- Challenges, Trends & Economy, which outlines the initiatives distributors are undertaking to address key business and market concerns. This also covers mergers and acquisitions, and how distributors view the impact of the economy.
- The Balance Sheet, which offers insights into revenues and profitability. This addresses areas of investment, concern, and other analysis of factors impacting revenue.
- Best Practices, which sheds light on distributor relationships with suppliers and customers, as well as their global business plans and what challenges are involved.
- Tech Usage & Investments, which covers areas like e-commerce and other big-impact technology solutions for now and the future.
- Value of the Distributor, which addresses the reasons our survey respondents believe customers do business with them, and which service offerings play a significant role in the industry.
- Employment, which identifies hiring and layoff trends, recruitment, and compensation.
The results of this study are based on an email survey sent to Industrial Distribution subscribers. Recipients of the survey were offered an incentive to complete the questionnaire. Industrial Distribution’s subscriber base is comprised of 30,000 readers, the majority of whom identify as executive, upper management, sales, or sales management. Results are based on a pool of respondents within this subscriber base.
Because Industrial Distribution transitioned to a new publisher in 2010, no survey was conducted that year. Therefore, results which track comparisons over the past decade will reflect a gap between 2009 and 2011.
Comments on this year’s results? Email ID’s executive editor, Anna Wells, at Anna.Wells@advantagemedia.com.
News about the decreasing rate of national unemployment is encouraging, though in the manufacturing sector, it’s been offset by a skilled labor shortage that many think will continue to grow over the next few years.
At least in industrial distribution, the labor numbers are promising (Figure 3). As they did the last three years, more than 50 percent of respondents – 52.9 percent to be exact this year – said they have added staff in the last 12 months. That’s even a bit higher than last survey’s 52.1 percent, and a stark contrast from our 2009 survey when 68 percent said they had to reduce staff and 18 percent foresaw a need to do so in the coming year. With the recession now six years in the past, distribution employment has increased ever since. The number who had to reduce staff in the last 12 months was the same as last year’s 14 percent, while the amount who anticipate reducing staff gained 1 point. That coincides with the number who anticipate the need to add staffing dipping 2 points.
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To no surprise, staff additions (Figure 2) were heavily in sales (65 percent), a figure that has steadily decreased from 73 percent in 2011. In fact, 51 percent of respondents said they now have more sales reps than they did last year. That’s a 10 point gain from last year’s survey. Only 10 percent this year said they have fewer sales reps, while 39 percent said they have the same — down 9 points from a year ago. This shows distributors have put a definite priority on beefing up their sales teams. Warehousing staff additions were second at 40 percent, down 4 points from a year ago. The next top additions were to Customer Support (32 percent) and Operations (29 percent). Operations saw a 6 point jump from last year. Administration additions (19 percent) saw a 5 point jump, while Clerical additions (9 percent) remained the same. The overall close similarities show year-to-year confidence in economic stability.
For the small portion of respondents who had to reduce staff in the past year, it was mostly either in Warehousing (32 percent) or Clerical (31 percent). The drop in Warehousing isn’t surprising given the continuing rise of automation. Nearly identical to last year, 97 percent of respondents said they value hiring technical trained employees for open positions, with 61 percent in the “High Value” portion (+2 points from last year).
Another positive employment sign is a 5 point gain from last year in the number of respondents who said they are able to fi nd suitable job applications for their company. This goes back to the skilled labor gap, which certainly is affecting industrial distribution, but at least the numbers are going in the right direction. Asked to rate their ability to qualify and recruit (Figure 1), respondents showed they’ve gained self-confidence. Sixty nine percent of respondents rated themselves “Good” or better, with 24 percent rating themselves “Very Good.” Last year, 61 percent rated themselves good or better, with only 15 percent at very good.
Once employees are in place, getting them to stay long-term is key. The manufacturing industry is known for this, especially industrial distribution. This is often done through a variety of incentives. Our survey shows better than 75 percent of respondents offer performance-based pay incentives as a way to retain staff, up 6 points from last year. In second place, Training also showed a healthy 8 point yearly rise up to 55 percent of respondents, while Improved Benefits was close behind at 54.5 percent and a 2 point gain. Tuition Reimbursement was the fourth-most popular incentive once again, but showed a 4 point increase up to 28 percent. Nearly half of write-in responses mentioned an employee stock ownership plan (ESOP), while there was one mention of holiday bonuses, and even one distributor said they offer breakfast burritos every two weeks. Overall, distributors showed a solid increase in their incentives participation.
As far as benefits specifically, 93.5 percent of respondents said they offer health insurance (+5 points from last year), while 79 percent said they offer 401K/Pension (+2 points) and 63 point offer Bonus/Compensation plans (+1 point) to round out the top three. Other benefits making the biggest gains from last year were Sales Performance Reviews (52 percent, +8.5), Training Programs (43 percent, +6), and Employee Recognition Programs (34 percent, +5). Only 13 percent of respondents indicated having to reduce employees’ overall benefits packages over the last year, just a .5 point yearly increase.