Why Strategy Matters

I’ve been flying around the country during May talking to distribution and manufacturing executives about the results in the new Facing the Forces of Change®: Lead the Way in the Supply Chain report.

All too often, I hear the presidents and CEOs of wholesaler-distributors complain that they “don’t have time for strategy.” Running their businesses keeps them fully occupied, so they do not have the time or inclination to think about how their supply chain is evolving. This appears to be especially true when the changes are somewhat gradual.

Reinvent or Die

Did I describe your attitude? Then read Reinvent or Die, an excellent profile of D&D Tool & Supply from Progressive Distributor magazine.

The article describes how a small family business looked at its changing markets, built a plan of action, and successfully grew the company under the leadership of Georgia Dutro, a new President from the family. Key parts of the story:

“The entire manufacturing market in the U.S. was shrinking, but what would be left in Southern California? Likely survivors included aerospace, ship manufacturing and other metal fabrication companies, along with the military, which required a variety of MRO supplies. Wood manufacturing continued moving into northern Baja California, Mexico. Dutro advised her brothers to expand in two ways: geographically into all of Southern California and Mexico, and then to diversify into other types of manufacturing markets. This required D&D to open operations in the border areas of Mexico to serve the wood industries, and to diversify into the machine shop and metal fabrication markets, which meant learning new markets, vendors and applications.”

In other words, the company stepped back from day-to-day operations and saw a market that was going through a fundamental change.

Know your future

Part Two of Lead the Way in the Supply Chain examines the major markets in which wholesaler-distributors operate. Here is a sampling of factoids from the report about evolving trends that signal fundamental change:

• The national market share of the top 10 home builders has doubled to 21% of closings in the past decade, with a few builders having even greater share in regional markets.
• The U.S. Bureau of Labor Statistics forecasts that total employment in many contractor occupations will grow faster in the next decade than the overall U.S. employment growth of 13% over the same period. (See Exhibit 6-1.)
• The period from 1998 to 2004 saw a net loss of 27,000 manufacturing plants and more than 3 million domestic manufacturing jobs. (See Exhibit 7-1.)
• About 90% of manufacturing executives indicate a moderate to severe shortage of qualified, skilled production employees.
• Real (inflation-adjusted) revenues of grocery wholesalers have been essentially flat since 2001. In contrast, sales at restaurants and bars continue to grow faster than grocery sales, reflecting a long-term shift away from home cooking.

These points illustrate long-term trends that will change wholesale distribution in the respective industries, even if these trends are not directly changing your business today.

Don't close your eyes to the market and forget to build a long-term vision for your company. The future is more predictable than you think, even if hardly anyone bothers to predict it.