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Time is your most precious commodity

By Frank Hurtte

Have you ever found yourself running behind; getting to emails late, putting off important stuff in favor of the pressingly urgent, and unpleasantly discovering you’ve missed a deadline? It happens to most of us. Case in point, I just finished reading the second quarter economic report put out by the Association for High Technology Distribution. I have had it in my inbox for nearly a month.

The report is a joint effort of AHTD and ITR Economics of New Hampshire. Many of you have probably seen keynote addresses by either Alan or Brian Beaulieu, who lead the firm. If you haven’t seen their work, allow me to say this: nobody understands the economics behind the industrial distribution market like their organization. I read it regularly. And, the last report gave me reason to pause.

Without going blow-by-blow on the report, let me just give you a nutshell. AHTD distributors (and they are squarely in the industrial segment) should prepare their businesses for expansion into the future. The rest of 2014 will feature slow but steady growth, followed by some robust times in 2015 and 2016.

If I were to ask you to jot down some of the things required to prepare for future expansion, most of us could fill a couple of pages of tasks. The problem typically comes with time. Preparing for the future sometimes plays second fiddle to getting things off our desk.

I suggest we look at time as an investment. But, before we launch our journey, a word on investments. There are good investments and bad. The good investments pay big dividends. The bad investments blow up in our face. As the leaders of an industry, we need to stack the deck in our favor. We need to invest our time in high-return ventures.
Here are a few high-return investments to ponder.

Invest time in learning howto get analytical data from your business/ERP system
Most distributors already own pretty good business systems. These systems do a great job with inventory, accounting and other back-of-the-house functions. And, armed with the right report, a business manager can make radically better decisions. But there is a problem; most distributors lack the IT manpower to build the right report. Further complicating things, the analytic needs of distributor managers tend to shift and change over time. When outsourced, we tend to view the generation of custom reports as costly.

Many sales managers spend entire days playing with spreadsheets to get rudimentary reports such as “sales gap analysis,” sales by product group and other information. Most have not weighed the cost of their time against the price of a special report. They continue to slug through the work, devoting weekends and evening hours to the task. Ultimately, even the most dedicated manager burns out. They begin to check information annually instead of quarterly (or monthly). The distributor’s analytics suffer.

This is an area where both time and a little money invested could make a big difference. A number of companies have developed systems that harvest data from the ERP system and serve it up in a user-friendly manner. The best-of-class systems have a number of distributor-developed reports that improve selling and provide measures for improving the overall operation of sales and customer service departments. Armed with this type of system, a distributor can make far better decisions, and a rich payback ensues.

Smart mobile apps
According to a recent distributor survey, 94.5 percent of the distributors surveyed are using smartphones, and more than 63 percent are toting around iPads. My guess is our customer base mirrors our adoption of this technology. With these facts in mind, we must consider apps as an investment. Before we launch into their merit, let me provide a quick tutorial. A mobile app, short for mobile application, is software designed to run on smartphones, tablet computers (like the iPad) and other mobile devices. In short, they are the programs that make these things useful.

Until last year, I had my doubts about the worthiness of the whole mobile phenomenon. Here’s why: I had never seen an app focused squarely on our business. Most of the apps I saw people using were fine for finding restaurants, getting sports scores and keeping in touch with friends. All cool stuff, but not really investment material.

In the last year or so, all of this has changed. Companies are developing apps which tie directly to their business system. Salespeople can select products, check inventory and arrange for special delivery instantly. Imagine the power of standing at a job site and solving customer issues quickly. Think about the possibilities of a seller walking a customer through exactly what products could be shipped out tomorrow.

Based on recent work with industrial distributors, we see salespeople spending less than 20 percent of their time actually engaged in customer-facing activities. At the same time, we are hearing recruiting horror stories from the field. Manufacturers are cranking out apps to steer salespeople through the selection of products.

Investing time in the selection, application and use of these new generation “product application” apps will empower distributors in two ways. First, new salespeople become effective much faster. Second, properly applied apps make experienced sellers work faster. Simply stated, the veterans can handle more business transactions.

According to Pew Research, smartphone usage continues to grow, with 58 percent of the U.S. population carrying one of these devices. The percentage for the “younger generations” pushes well beyond 80 percent. Further, more than half of all Internet usage these days is, you guessed it, via mobile devices. Investing in understanding the latest mobile technology will pay dividends with customers, too.

Invest time in thinking about people
The old cliché lives on: “people are our biggest asset.” Yet, if distributors took care of our delivery fleet the same way they take care of their people, we’d have a herd of dirty, rusted out hulks with our name spray painted on the side. Here are some thoughts on people investments.

Sales training, not product training
I give our industry high marks on product training. Mostly, our people know the stuff they’re selling. What we lack is a system for training on processes. Topics like setting appointments, call scheduling, long-range territory planning and, even, understanding our value remain untouched.

In a recent issue, we talked about the rare commodity of selling time. After deep dives with a dozen or so distributors, we are finding our worst fears realized. Most distributor sales teams spend less than 20 percent of their time actually selling. Developing strategies for driving just a few more hours a week into active selling could be equivalent to adding a new salesperson to the team. We think this is investment grade stuff.

Think about a support staff
The pendulum swing in the distribution industry may have overshot the mark. During recent decades, lean has been cool. Everybody does everything themselves. From the corporate office on down, people are hustling to somehow replace support teams with technology. I believe we’ve taken things a bit far.

Time spent with vice presidents, sales managers and even distributor CEOs reveals high-level guys doing entry-level stuff. One company president remarked he gets 15 phone calls a week that a clerical assistant could easily handle. Another sales VP remarked he would have more customer events, but he just doesn’t have time for the logistical details. We want to hold down our headcount, but it’s high time for some investment.

The current situation has $100-an-hour people doing $10-an-hour work. If you are a company executive, ask yourself how much more effective you might be if somebody else made your hotel reservations, set your schedule and screened some of your calls? Some of you are wondering if I’ve lost it, but I believe this could be a positive time investment.

Invest time in your business strategy
Making some of the investments outlined above is synonymous with business investment. Freeing your people’s time to work on strategic issues equates to business investment. However, there are a couple of points which your leadership team should explore.

Invest time in developing your pricing process
One of the easiest ways to impact the value of a distribution business is driving higher gross margins. The median bottom-line performance in our industry hovers near 3 percent. Most of us have heard the “power of one” story dozens of times; improve margins by 1 percent and it means greater profitability. But, after hearing these talks, the margin stays the same.

Distributors need to invest time, sometimes management time, into driving a pricing process. You can’t wish yourself to greater margins. You can’t cheerlead your people to better pricing. It takes a process. I have seen the results.

My friend, David Bauders, at Strategic Pricing Associates, has developed a process that works for this industry. SPA has shared the mechanics of their process and allowed me to interview many of their clients. The results speak for themselves, a process which is guided by scientific analytics and backside training works. And their clients claim a 60-day payback; that’s a 500 percent ROI. Definitely investment stuff. But, getting started and pushing the envelope forward requires leadership involvement. This is important stuff, yet, I still find distributors who attempt a “start it and forget it” launch of the program. There are few things that prepare us for growth like having money. A pricing process puts money in the bank.

Demographics might provide investment opportunityBaby boomers dominate the leadership position of our industry. On the periphery of your territory, there are probably companies with owners in the 60s who are wondering how they gracefully exit into retirement. Some have succession plans, but many do not. Adding already trained people and acquiring their customers is a good investment. Again, it takes time to develop a network focused on acquisitions. Talking to neighboring distributors about their succession plan, and letting them know you are interested in acquisitions is a sound investment of time.

A final word
Investment implies return. Don’t spend your money, invest. But more importantly, think of the one commodity more precious than good old greenbacks: time. Are you spending your time or investing?

Frank Hurtte speaks and consults on the new reality facing distribution in a post-recession world. Contact him at River Heights Consulting at 563-514-1104 or at frank@riverheightsconsulting.com.

This article originally appeared in the July/August 2014 issue of Industrial Supply magazine. Copyright 2014, Direct Business Media.

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