CONSULTANTS TO THE AFTERMARKET

Bill Wade

 

The First Rule: Only Do What Only You Can Do

By Bill Wade

As Appears in Industrial Distribution Magazine, August 17, 2009

I‘ve had a lifelong love affair with big machines. Steel forges and paper mills, draglines and haul trucks, large aircraft and huge ships, heavy trucks and locomotives… virtually any cool industrial or military gadget likely to show up on the History Channel’s Modern Marvels.

Specifically, I stand in awe of both the focused creativity and the audacious application of engineering and capital on such an amazing scale.

It was while I was indulging this fascination, watching another Union Pacific freighter cut through our little town west of Chicago (dragging the equivalent of 250 semis worth of Asian goods) that I noticed the corporate logo proudly displayed on each of the GE power units.

Union Pacific: Building America.

Building America: one import container at a time. What a concept.

A little research showed that over one third of UP’s carloadings are intermodal containers and trailers, by far the fastest growing part of their market mix. Coal, grain, chemicals and other traditional bulk commodities now account for only 45% of their carloadings. Certainly not your daddy’s railroad.

No surprises here. Every single component of this economy is changing with such velocity that the “good old days” refer to anything prior to 2008.

Information driven forces at work today are not a minor dislocation. This is the biggest structural change since the famous Lucas gusher in the Texas Spindletop field announced the arrival of the petroleum economy in 1901.

A resurgence in hand wringing over globalization and outsourcing has been inspired by CNN’s Lou Dobbs and many irrelevant union leaders. Philosophically, I guess it is ok to have strong feelings about the “Exporting of America.”

Practically however, it is far more critical that we devise plans to thrive in these unknown crosscurrents of international commerce. This has to become the planning goal for every participant in independent distribution: supplier, distributor or manufacturers' rep.

Why? Competition no longer appears only after a series of well publicized baby steps (or missteps). It no longer creeps in from traditional sources within the industry. It is no longer simply some foggy China menace or the OEM threat du jour.

Flexibility, experience and quick customer response have long been the service anthem for industrial distribution. To effectively direct our endlessly morphing organizations, however, there has to be a prime directive; a principle that absolutely will not be violated.

Since most of the independent aftermarket lives in a fast-water entrepreneurial reality, the first planning hurdle is recognition of finite resources.

Finances, sure. But it is becoming increasingly obvious that the real finite resource is human. For reasons too numerous to mention (or to correct in the short term), the scarcity of ready-to-work help defines today’s first rule of strategy.

Only do what only you can do.

Get in a commodity shootout supplying commodity parts differentiated by price alone and you will lose.  Even if you “win” the customer in question, you will not be able to sustain life, as tiny margins create operations that are unforgivingly dependent on perfection.

That is not the nature of profitability in this business. The only realistic strategy for growing a customer base, a service radius or product offering is through the growth of an information-based specialty.

Sell the hell out of something that plays to the strength of your most valuable competitive tool - your workforce. What you can charge for what you know is inversely proportional to the number of others who know what you know.

Customers seek out specialists and price is nearly always secondary … ask any surgeon.

Since most industrial parts and service lines are fully distributed within NAFTA, one conclusion that can be drawn is that distributors must offer service (of some kind) as the critical point of specialization and differentiation... and charge for it!

Whether its hydraulics, power transmission modification or great street-level diagnostics at the counter, specialized technical service is what successfully supports even the small independent in the land of multi-branch giants.

And it can be the trick that only you can do.

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