Consider the Disruptors When Forecasting BY KEN THOMPSON
D As an executive and advisor, Ken Thompson has been dedicated for over 60 years to strengthening manufacturers’ and distributors’ supply chain relationships through the sharing of best practices, managing disruptions, and coordinating visions and implementation of systemic technological change to further solid strategic alliances.
ating back many years, our trade association has always used the early months of the arriving New Year to offer business forecasts for the following twelve months. The practice falls back to the Penton Publishing Welding Design & Fabrication editions, continuing with GAWDA Media as it serves the NWSA and GAWDA sequencing. Suppliers and distributors alike deployed every method from an index finger searching for the prevailing wind, to sophisticated analysis of changing markets, footprint sensitive activities, and new and changing business models, products, and services. For the public companies among our mix, these forecasting activities became underpinnings for the “guidance” provided to boards, shareholders, and other investors. Most involved in these forecasting activities base approaching budgets, activity goals, and, yes, compensation and bonus incentives on the predictions. While we all can write some numbers down on a piece of paper that estimates the future, we cannot positively identify the “disruptive activity” that can blindside us. Who, as we did our following year forecasting in December of 2019, saw COVID on the radar? Putting our spread sheets aside, what disruptive potential resides on the horizon that requires some consideration? A few surface immediately. Impacts of a digitally connected supply-chain are front and center. Consequences of “all things” connected to ENERGY surround us. Changes in our work force – retirement of knowledge and experience, skill sets and work habits of those joining our ranks, succession in so many of our family-owned businesses, and the result of industry wide consolidation.
It is impossible to read a trade association article, attend a webinar, sit in a meeting audience, or network with an associate and not be aware of the enormous shift in all distribution vertical practices toward seamless digitized supply chain activities. The “headliners” – MSC, Fastenal, Grainger, and Amazon – report huge adoption rates, significant growth in revenue and margin and streamlining of logistic services. While the welding and packaged gases hard goods portfolio matches up more closely with MRO products, other distribution verticals in HVAC, plumbing, Jan/San, office products, and electrical components are all deeply engaged in B2B relationships with their clients. The “gold standard” is likely Schneider Electric, a $26 billion French owned company (120,000 employees) manufacturing and distributing electronic components. They have not only perfected their own e-commerce platform, but have successfully integrated it with their independent distribution partners to serve clients preferring to do business with local companies. Agree with it or not, our gases and welding distribution model feel these impacts every day. The argument that “we are different” because of the gases portion of our portfolios is wishful thinking. We absolutely need our hard goods sales to help underwrite our infrastructure costs, and these SKUs are escaping us and headed through alternate, electronically connected channels. Our hard goods suppliers – many loyal to our channel to a fault for so many years see this migration, too. They are obligated to their respective investors to follow the path to greatest success. If our distribution network does not offer these electronic paths to end markets, our suppliers must follow the First Quarter 2023 • 83
