QuickTake: Playing Offense in Defensive Times

Flat growth is not an oxymoron; it’s how the current business cycle is working out in 2023’s fourth quarter and current 2024 forecasts. In this week’s MDM QuickTake conversation, Mike Marks of Indian River Consulting Group and Tom Gale review highlights of the 3Q23 Baird-MDM Industrial Distribution survey that was conducted in early October, as well as the latest MDM Forecasts report indicating low single-digit growth next yar for wholesale distributors.

The headline for the overall Baird-MDM Q3 survey results: “Anemic trends continue, slightly better Q/Q but flattish overall.” One of the key comments summarizing general sentiment from the survey was from a power transmission distributor:

“We ended the quarter virtually flat with last year. September our sales were down year-to-year for the first time in three years. At the same time, if you compare this quarter to anything historical, it’s way over what we’ve done in the past. I just get the sense we’re in a normal environment with the supply chain having worked itself out, manufacturers having shorter lead times, customers aren’t ordering out 18-24 months, etc.”

But it’s not all murky news. There are some positives and opportunities distributors can leverage to drive growth over the next several quarters beyond taking what the markets may give them. So with a forecast sluggish growth environment, what’s the playbook for not getting caught on your heels while competitors get aggressive with share-taking moves?

There are proven plays for maintaining a strong defense, while also deploying some offensive moves to out-maneuver competitors. In our conversation, Mike Marks offered five of them:

1. Evaluate last price paid activities. Pricing has changed a lot; an audit will identify the degree everything you’re selling to last price paid is out of date, and what needs adjustment now. Double check that your purchasing and supply chain managers are leveraging every possible stock rotation with a supplier. This is also a good time to deal with longtail inventory.
2. Invest in innovation. The forecast low-growth environment of 2024 makes it a good time to invest in technology to create competitive advantage. When growth does accelerate, the gap between innovators and laggards will be larger.
3. React to threats and opportunities quickly. Speed is a major lever in volatile times. Many competitors will stay conservative in times of change, which opens opportunities to be faster and more responsive with customers.
4. Get a better buy price. If manufacturers are choking on inventory, negotiate special terms that offer win-win benefits through non-cancellable blanket orders with monthly releases (the tried-and-true recession strategy).
5. Make a Value Creation Plan with key suppliers. As customers become more price sensitive, get creative with manufacturer partners to put together consignment or vending plans to capture share.

For more ways to position effectively for 2024, be sure to attend MDM’s virtual Data Analytics Summit on Wednesday, Dec. 6. Stay tuned for more information.