OUTLOOK 2009

The NAW just announced the availability of OUTLOOK 2009: An Executive’s Companion to Facing the Forces of Change, a new report that gives an interim update on the key issues identified in Facing the Forces of Change®: Lead the Way in the Supply Chain.

I did not write OUTLOOK 2009; I am only the Executive Editor. But rather than just giving you a marketing pitch about the new book, I want to use the informality of this blog to explain why I pulled this collection together.

Earlier this year, I asked consultants and experts from around the industry to provide their point of view on the industry trends in the most recent Facing the Forces of Change trend study. Only two people turned me down. The other ten people were brave enough to take part in this project and subject their ideas to peer scrutiny. (See the full list here.)

Unlike the primary research report, the OUTLOOK is a collection of independent articles written by a group of well-known industry experts. I worked with each of the contributors to create a coherent book, but there is no attempt to force consensus or consistency of opinion. Each chapter gives you with the author’s own assessments and predictions along with specific action steps.

Sometimes, the contributors agree with my interpretation of a trend, and sometimes they don’t. I think that this diversity helps to make the industry stronger. The contributors to OUTLOOK 2009 are a group of people who regularly help me to learn and grow. I hope it will also help to make your company better prepared to manage through these unsettling economic times.

One final note: OUTLOOK 2009 looks at business and strategy trends, not economic trends or forecasts. If you want to know more about my view on the economy in 2009 and what it means for wholesaler-distributors, stay tuned next week for an exciting announcement.

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And to those readers for whom it is relevant: L'Shanah Tovah!

How Suppliers View Channel Data

Hey, wholesale distribution executives! Do you want to understand how your suppliers feel about data sharing by their channel? Or perhaps figure out how you can profit from the demand-driven channels trend from Chapter Two of Facing the Forces of Change®: Lead the Way in the Supply Chain?

If so, then check out my new research study, which you can download for free after registering with InfoNow, the report’s sponsor and a leading channel data management (CDM) company. Here’s the link:

A Cross Industry Study of Channel Data Automation

In case you didn’t know, Channel Data Management (CDM) describes the processes by which manufacturers collect point-of-sale (POS) transaction and inventory information from their distribution network, cleanse and standardize the data, and then use the results to make better decisions.

I looked at the channel data management practices of 124 technology, manufacturing and pharmaceutical companies that sell through indirect channels such as wholesale distribution. The study provides a complimentary perspective to Facing the Forces of Change® regarding data sharing between wholesaler-distributors and their suppliers.

According to the manufacturing executives in the study, a major challenge associated with channel data comes from their company’s ability to gather and use the information effectively. However, the frequency of these problems varies significantly based on the level of automation used by a manufacturer for gathering and reporting data from wholesalers, retailers, and other resellers.

For example, more automated processes for handling distribution channel data are closely associated with fewer problems in the quality of channel data reporting, such as:

• Less frequent discrepancies between a manufacturer’s internal sales data and the data collected from their distributors.
• Less time spent by a manufacturer validating or auditing sales data submitted by their distributors.

So, just as customer relationship management changed the landscape for companies that sell direct, I expect CDM will one day revolutionize how a manufacturer manages sales through indirect channel partners such as wholesaler-distributors.

Here’s a strategic question for wholesale distribution executives: How can you use knowledge of CDM to build a new service for your suppliers or identify a new compensation model for your data?

2008 Industry Growth Update

Hello again!

As you may have noticed, I took a little blog-cation during the summer. But I’m back to catch up on the news in these uncertain economic times. In the coming months, I’ll also let you know about some new tools to help with your 2009 planning.

Let’s get started by checking on the wholesale distribution industry’s growth rates so far in 2008.

As you can see in the chart below (click to enlarge), year-over-year quarterly growth rates in revenues were a robust 14.7 percent in the second quarter of 2008. However, the growth rate was a much more modest 1.0 percent after adjusting for the effects of commodity price inflation. In case you are wondering, my calculations are based on sector-specific wholesale distribution deflators created by the Bureau of Economic Analysis.

Once again, we can see the distorting effect of the commodity price bubble. Nearly two-thirds of the industry’s nominal revenue growth came from just two inflation-driven commodity sectors (Agricultural Products Wholesale Distributors and Oil and Gas Products Wholesale Distributors). Other sectors with large inflationary growth gaps include Office Product Wholesalers and Paper Merchants, Chemicals and Plastics Wholesale Distributors, and Pharmaceutical Wholesalers.

Wholesale distribution executives should make sure to measure their company's growth using metrics that account for inflation. For example, you can compute a price index for your product lines and adjust revenues accordingly. Another approach would be to measure growth using non-revenue metrics such as units shipped or number of order lines.

Meanwhile, the current commodity price bubble, which dates back to 2002, may be bursting. (See Charting the Breakdown in Commodities Stocks.) Look out below!