Recruiting Generation Me

Last Friday’s Wall Street Journal has a great article called The Most-Praised Generation Goes to Work. (This link should work for non-subscribers.)

It describes, sometimes hilariously, the inter-generational conflict between younger employees and their managers. According to the article: “Bosses, professors and mates are feeling the need to lavish praise on young adults, particularly twentysomethings, or else see them wither under an unfamiliar compliment deficit.”

Well, at least we can’t blame the “compliment deficit” on foreign trade!

Are You Special?

There is a serious side to this issue if you are concerned about your company’s future.

Bob Reynolds from Graybar gave a fascinating Chairman’s Address at January’s NAW Executive Summit. He focused on “…our collective need as an industry to do a much, much better job of recruiting, engaging, and retaining the best and brightest.”

Here a few choice quotes: You can read the full-text of his speech here.

• “Most young people today expect to have several employers in their working years. They are loyal — first and foremost — to their own development and personal growth aspirations and they measure their employers against this standard.”
• “Our industry has not capitalized on the power of training and development to the degree of other business sectors…we need to take a hard look at the level of commitment we make to creating robust employee educational opportunities.”
• “Clint Eastwood doesn’t work in distribution.”
• “In this world there's two kinds of people, my friend. Those with loaded guns, and those who dig. You dig.”

OK, just kidding about the last one – I’m quoting Clint Eastwood from Il buono, Il brutto, Il cattivo. But Bob’s message highlights the flaws in using The Man with No Name as a guide to management practice.

The Demographic Tide

In Chapter Five of Facing the Forces of Change®: Lead the Way in the Supply Chain, I highlight how the U.S. workforce will change. Check out these statistics:

• Although the U.S. workforce will grow by more than 12 million people by 2014, 77% of that growth will come from people over the age of 55. The number of people under 24 years of age will actually decline! As a result, more than one out of five U.S. workers will be older than age 55 by 2014.
• The number of 35 to 44 year-old workers in the workforce will be declining, so wholesaler-distributors will need to compete more aggressively to attract the next generation of managers into their companies.
• A major factor in U.S. labor force’s growth has been the growth in working women. However, the percentage of women in the wholesale distribution workforce is only 29%, compared to the overall U.S. average of 47%.

Will wholesale distribution attract the right people? Will your company be able to compete effectively for the next generation of employees? Will you be an employer of choice?

Before you chuckle at the “Praise Me Generation,” pause to consider that your future CEO is among them.

Automating the Mundane

Innovation in wholesale distribution doesn’t always require industry-leading strategy shifts. Sometimes, success just requires ongoing, incremental improvement to get better every day in every way.

I recently came across a neat case study about one distributor's productivity improvement in the most mundane of activities – document printing.

Why you should care about productivity

Productivity is fundamental to profit growth in wholesale distribution because employee compensation costs—salaries, commissions, and benefits—represent 60% to 70% of total operating expenses.

Over the years, I’ve seen the most reliable profit improvements come from using technology to improve the productivity of your people. As I note on page 5 of Facing the Forces of Change®: Lead the Way in the Supply Chain, the wholesale distribution industry has benefited from productivity-enhancing technology investments that substitute IT for repetitive activities such as order processing, billing, delivery route scheduling, or warehouse management.

Productivity-enhancing technology is an important hedging strategy against the negative demographic trends that I describe in Chapter 5 of Lead the Way. Wholesaler-distributors will soon face the retirement of their most knowledgeable and seasoned employees, while simultaneously being forced to compete more aggressively for the next generation of managers.

You can read more about the productivity of different industry segments within wholesale distribution in this article: Where Productivity is Growing in Wholesale Distribution.

The Benco Story

Benco Dental is a third-generation dental distributor with about 20,000 active accounts. Chuck Cohen, Benco’s President, also serves on the Board of the NAW Institute for Distribution Excellence, the non-profit foundation that sponsored the Facing the Forces of Change research.

Apparently, simply generating invoices, account statements, pick tickets, and the like was making Benco's computer system crawl. They put in a new “document management” system that sped up printing so much that the company virtually eliminated overtime costs!

Check out the full case study:
Growth Prompts Benco Dental to Scrap Old Document System

Curious, I called Rick Cohen, EVP at Benco Dental (and Chuck’s brother), to find out what customers thought about the new system. He told me that “customers didn't notice the transition because it basically duplicated the documents they've always received, only with less time and frustration.” Rick also told me that Benco extended the life of their mainframe system by 2 to 3 years. Cool!

Your story?

Successful companies realize that there is never a final, specific end point to strategy because the world is always changing. Make a commitment to improve your company in 2007 by automating an internal activity that adds costs to your business but does not deliver value to customers.

P.S. I have no relationship with any technology company mentioned in the article – I just thought it was a great story!

Brand Killers

Four years ago, Fortune magazine ran a cover story called Brand Killers that told how private label retail brands "scared the pants off" consumer goods makers. Over the past few months, I've been talking with manufacturers in business markets who are getting worried about the growth of B2B private label brands.

Here's a good example: Stanley Works (NYSE:SWK) announced a few weeks ago that Home Depot would be replacing its branded padlocks and latches with products from Crown Bolt, a manufacturer that Home Depot acquired last year and is now part of HD Supply. (Full article: Home Depot, Stanley hardware part ways)

Wholesaler-branded products are now expanding rapidly in B2B supply chains. For example, my research for the new Facing the Forces of Change® report found that almost one-half of maintenance, repair, and operations (MRO) supplies distributors and nearly two-thirds of original equipment manufacturer (OEM) distributors currently offer private label products. (See page 133 for the specific data.)

These data point to an uncomfortable new reality -- private labels will continue to grow in categories where the manufacturer's brand does not add enough value to the customer. As in consumer markets, products are becoming increasingly commoditized as supply chain customers shop for the low-cost sourcing alternatives. Distributors have recognized the opportunity to provide these products and help customers with sourcing, instead of only acting as a sales channel for branded manufacturers.

I'll follow-up on manufacturer strategies in a future post, but don't be surprised if you see more conflict due to private label brands in the future. In the meantime, check out Private Label Strategy, a new book that analyzes strategy in consumer markets from both the manufacturer and retailer perspectives. (I'll post a review in a week or two.)

FOLLOW-UP ITEMS

• You can now order the new 2007 NAW Economic Reports, which I referenced in Measuring the Growth Gap

• Friday's NAW SmartBrief had a good article on Avnet's fee-for-service logistics business, which I discussed in Capturing New Profits from Services.

• Check out Forbes publisher Rich Karlgaard's editorial about how one airplane manufacturer benefits from the positive -- and sometimes negative -- customer discussion on its online community. (I highlighted Online Customer Communities last week.)

Online Customer Communities

The Internet is now a key decision-making tool in our society because it allows us to draw on a broad social network of people for advice or to share experiences. My kids (ages 7 and 10) would hardly think about buying anything without looking it up online. (Yes, "to google" is a verb in my house!)

People don’t forget that the Internet exists when they go to work, which is why Connected Customers (Trend 4 in Facing the Forces of Change®: Lead the Way in the Supply Chain) describes how business customers will increasingly use the Internet to gather information from other customers rather than manufacturers or wholesaler-distributors.

Is your company taking this new development seriously?

ONLINE COMMUNITIES

I found internet forums (a.k.a. communities) to be one of the most fascinating aspects of my research for the latest Facing the Forces of Change® report. Customers can communicate with each other by reading and responding to messages posted for everyone to see. Exhibit 4-6 (page 82) lists 21 active forums with participants who would be customers of wholesaler-distributors.

You will probably be amazed at the quantity and detail in these online conversations. Spend a few minutes browsing the many forums at ContractorTalk.com. You’ll see customers giving product reviews, sharing business tips, and discussing buying strategies. One recent conversation gave a fascinating peek into how contractors view the tradeoff between the services of a lumber wholesaler versus Home Depot. (See
Nothing beats outstanding service, but saving thousands is tempting.)

The discussion forums on TractorbyNet.com provide another active forum with plenty of advice to and from customers. Are you skeptical that customer will get independent pricing information online (as I suggest on pages 79-80 of Lead the Way)? You will reconsider after reading the posts in the Buying/Pricing/Comparison forum.

DEALING WITH 'NET REALITY

I’m just scratching the surface, so I suggest that you take some time to find out what your customers are doing online.

The fifth Question for Management Discussion from chapter four (page 90) suggests that you research customers who have used online forums.

• How many of your customers are visiting an online forum in your industry? (Don’t say “none” unless you’ve bothered to find out.)
• What information were they searching for? Did they find what they wanted?

The big question: Does participation in an online forum lower the perceived value of a wholesaler-distributor?

You can try searching for online communities at the Open Directory of Internet Social Communities – or just ask a few of your net-savvy customers.