HD distributors must have a plan

March 1, 2009
With a constantly changing landscape, what is the sustainability of independent distributors? Paul Raymond, president and co-owner of Parts For Trucks,

With a constantly changing landscape, what is the sustainability of independent distributors?

Paul Raymond, president and co-owner of Parts For Trucks, said the positive aspect is that their work can't be outsourced, as much of manufacturing has been.

“It's pretty hard to outsource what we're doing,” he said. “Our stuff is application-specific. It's heavy. If you look at the world we live in in Canada and the US, a lot of things are shipped offshore. But I use the analogy of trying to get fresh broccoli in the middle of February to the northern parts of Canada. The only way it's going to get there is by truck. We are not moving as much as we'd like to do, but it's still there and there's going to be a need for our services.”

He said that he feels “fundamentally very good” about the industry, but the challenge is dealing with the reality that there is no longer the opportunity to be a niche player.

“You're competing directly,” he said, “and as we've seen in Canada with Genuine Parts and often see in the US as mega-distributors merge and get stronger, independent aftermarkets are going to have to compete with national chains. We don't have the luxury to be a niche player. We've got to compete with those guys. That's the answer in my mind. I feel quite confident we can market as well or better than any large group. You have to be diligent about that.”

Said Dominic Grote, VP of sales and marketing for Grote Industries, “For the independent aftermarket, the competitive advantage is with your people and knowledge. You have to see that as your major strength in the heavy-duty aftermarket. The big challenge is having the resources to compete at the national level as things consolidate. There will be a lot of tough decisions for companies.”

That was one of many topics dissected in Heavy Duty Aftermarket Week's “Essential Elements of Your Business Plan.” The forum was moderated by Bill Wade, managing partner of Wade & Partners, and featured Raymond, Grote, and John Minor, COO of Midwest Wheel Companies.

Minor said more consolidation will have strategic implications for suppliers that could affect the competitive landscape. They will need to develop and train new and existing personnel.

“Managers need to keep their ears to the ground,” he said. “Every now and then good people will become available because the competition they were working for made some changes. They need to know when good people are available, and react to it.”

Said Raymond, “The first step is look internally and groom people. One of the things that has worked well for us is taking guys in the warehouse and getting them to work a Saturday shift in parts. Things are a little calmer and the customers are more patient. That's a good way to get them on the counter. If you have someone who says, ‘I'm a driver,’ or ‘I'm a delivery person, and that's all I want to do in my career,’ that's not the person you're looking for. You want someone who aspires to that position.”

Customer in the business plan

Wade, discussing survey results, said the customer is not a central part of the business plan, with competitors getting more attention, and the majority of distributors feeling that they have strategic alliances with suppliers.

“We are inward-looking,” he said. “We look at how our operations are going, how our suppliers are going, how we're going to fund the sales force. But we don't spent a lot of time looking at what our customers need and want, and how we can segment them to give them what they need.”

He said he was concerned that few survey respondents listed “Sales Forecasting by Customer” as an important part of their planning process. He asked the panel, “While it is a tough thing to do, don't you feel it's essential?”

“A lot of times, especially when you're going through the planning process and going through data, you think you know what the customer wants — products, features, programs — but until you really get out there and start asking, a lot of times it's not readily available data,” Raymond said. “The planning process needs to include asking, ‘What are you going to sell? Who are your primary markets?’ Really, it does start with the customer.”

Said Minor, “Customers are product-driven. We do profiles on each customer and make sure we're looking at who they're closest to, who they're buying what products from. We try to work from the bottom up.”

Added Raymond, “Our company may be different than others but we have a very diverse customer base. Even our largest customer would be only 1.5 % of sales. You can spend lot of time focusing on the customer but at the end of the day, when we're doing planning, we tend to think more globally. We devote our energy on making things happen as opposed to spending a huge amount of time on forecast numbers.”

Wade said that while a succession plan often is referred to as a major factor in the future of their business, 60% of survey respondents noted that it gets “little or no consideration” in the plan process.

He said older companies without a defined succession plan can affect vendor market decisions, as well as employee workplace decisions.

“Having a plan and communicating that there is a plan puts an end to a lot of uncertainty,” Grote said. “Is it a critical factor when making a decision about a customer? No, it probably isn't. But it's certainly on the horizon. About 50% of business ownership will be retiring in the next 10 years. That's a lot of transition taking place.”

On the subject of green alternatives and the demand for them, Minor said he thinks it's “too new to understand where it's going.”

Raymond said the industry has not done a very good job of promoting the ways it is environmentally friendly.

“When we switched from asbestos brake lining to non-asbestos 20 years ago, we didn't promote that,” he said. “Every time we sell a rebuilt product, we're recycling steel. We recycle a lot of steel in our shop. We do a lot of green things. We just haven't been good at telling people about it.”

About the Author

Rick Weber | Associate Editor

Rick Weber has been an associate editor for Trailer/Body Builders since February 2000. A national award-winning sportswriter, he covered the Miami Dolphins for the Fort Myers News-Press following service with publications in California and Australia. He is a graduate of Penn State University.