NAED 2022 National … A Success

Last week the NAED National was held in Scottsdale for the first “face-to-face” conference in a few years and for those in the west, it was their first face-to-face in 3 years since Western was cancelled in January.

The conference was a success.

The Numbers

Overall, the conference had 526 registrants.  This included:

• 53 attendees from “allied partners” / service providers
• 265 manufacturer personnel
• 209 distributor attendees representing 63 operating units from distributors (i.e., individual distributors and operating companies a la from Sonepar)

And of the 474 manufacturer / distributor attendees, NAED, and various companies, brought back a number of industry “icons” that have retired over the past few years who historically “traveled the circuit”. These individuals were honored at the Chairman’s Award Dinner.

Heard Around the Conference

During the conference I heard, in various sessions:

• Everyone was pleased to be back “face-to-face.”
• No surprise, supply chain was a topic. It ebbs and flows. Most manufacturers have challenges and don’t see it changing much. Most distributors have come to accept, especially the larger ones. The smaller ones seem to “push” manufacturers more, albeit to no avail. Some manufacturers “share” more with their key distributors.
• Business for all seems to be good. No one complaining and Q2 is strong. Outlook is good for the year although some expressed concern that, with backlogs strong, they will need to be diligent to identify any weakness.
• Strongest growth is regional (Southeast, Southwest) and industrial.
• Distributors on the West Coast are lamenting labor costs, labor availability and fuel costs.
• Much discussion about staffing and finding people. Some discussion on managing the new “work from home” generation and connecting them with company culture.
  • CMG, in conjunction with GRN Coastal, recently completed research on employee / candidate and hiring manager trends. We’ll be releasing this information next month with some of the information segmented by distributor and manufacturer. For an advance copy contact either CMG or GRN Coastal.
• Fuel costs, especially diesel, are biting into companies. A number of manufacturers have increased their pre-paid freight minimums. Some are thinking of fuel surcharges. This may be something distributors revisit with unleaded gas being $5-6 this summer (already this in some markets.)
• Lots of technology companies at the conference as they pursue a small number of the “mid-larger” distributors who have been investing in this area. All of the companies have “higher ticket item” offerings.
• NAED is soliciting input from manufacturers and distributors on how to improve their conferences … format, timing, content and appears to want to listen.
• Heard “rumblings” from some manufacturers that are exploring changing their SPA process from reimbursing based upon replacement cost and moving to distributor acquisition cost. This could impact distributor reporting systems.
• More distributors and manufacturers interested in understanding their share, potential by NAICS for product categories (not SKUs) and being more “intentional” with their business. During these discussions we directed these individuals to DISC with the recommendation to utilize this as their foundation given that it is a common “market size language” for the industry’s largest distributors.
• Some concern regarding potential recession, however, most feel “in the future”. The sense is that, if there is a recession, especially one driven by inflation, rising interest rates, labor constraints, etc. that is will be felt more on the construction-side of the business and be more regional in nature (given population trends, where companies have moved to and recent large project announcements that will sustain areas.)

Management teams, for the most part, are “stressed” and focused on “day to day” and short-term initiatives. In speaking with companies regarding potential CMG opportunities we discussed that the most successful companies, and leaders, are looking 6,9, 12, 18 months down the line.

Conference Speakers

The NAED agenda was one of the better ones in a long time.

• The keynote speaker, Peter Zeihan, who spoke on geopolitics, also weaved in population dynamics, the rationale for the various issues occurring, and, most importantly, the implications of what it can mean. While some didn’t like the message because it can be sobering and there were some political comments, if you filtered that out and focused on the message, the end result is that the US is in a good place because we are energy independent as well as food independent. Further, in listening to his message, there were many opportunities identified for the electrical industry (but Peter didn’t make his presentation this direct … needed to intuit for oneself) that could power the industry, and specific opportunities for the next 5-10 years (and in some cases 20 years due to population trends.)
  • I was able to obtain a copy of the slides as well as source, online, a similar presentation (although longer and with Q&A from the audience.) If you are interested, contact me. I also had some discussions with industry leaders regarding developing a roundtable of non-competing companies to discuss how this presentation could impact their companies.
  • This was one of the best, if not the best, NAED speaker I’ve heard in 25+ years. A number of others also felt the same way.
• The second speaker was an economist and shared his economic forecast with the caveat, “this could happen” (as an aside … economic forecasters can be so much like a meteorologist!)
  • Some key points included:
    • Labor market “is back” to pre-pandemic numbers but is impacted by people retiring (many earlier than expected), people dropping from the workforce due to kids, some still concerned about COVID, some not needing the money. We’ve also seen that there has been an increase in LLC formations, indicating more “start-up” companies …. People leaving to start their own business, consultancy, graphic design, programming, etc)
    • Market in the future will be a little better
    • Population changes and working age population “growth” is now at the lowest point since the Civil War.
    • Keys to future are productivity, employee retention and employee recruitment (which means … automate repetitive processes and labor costs will increase, especially if “labor cost” is defined as anything to support culture development plus direct costs.)
    • Expect a housing slowdown, even though there is a housing shortage for entry-level housing in many parts of the country.
  • Digital Transformation
    • Mike Marks facilitated 3 panels, two of which focused on “digital transformation” and the third was on recruiting / being appealing for Gen Z employees (unfortunately I missed this session due to a prospective client meeting.)
    • Some thoughts:
      • Important topic, although many in attendance are already on this journey as they are the “better” distributors. Need to broaden the message for a broader audience, otherwise the industry becomes an industry of 50-60 companies.
      • The term “digital transformation” can intimidate many, especially since it sounds “expensive”. In reality it is “digital evolution” as all companies need to move down this journey and there are low hanging fruit to capitalize upon, elements that support customers that are expectations of distributors / manufacturers and then initiatives that can differentiate a company to help capture growth.
      • George Vorwick, United Electric, shared a question that all leaders should ask within their companies “What could we be better at?”
      • The second panel had members of the NAED Foundation and the CAP (Channel Advisory Partnership). They shared:
        • A major focus for NAED is communicating the Building a Connected Future white paper into “bite sizes” and actionable steps.
        • That the Foundation approved a role (headcount) for adding someone to spearhead this initiative and can provide guidance to distributors and manufacturers. The person must have industry background, technical awareness / understanding, and be consultative in nature. A vision is to develop a team of consultants, and perhaps relationships with tech companies / VARs, to help companies accelerate the journey and implement industry-utilized best practices.

For a mid-May conference, it was time well spent in the desert. Had a number of meetings with manufacturers and distributors, the lobby was conducive to hallway interactions and the speakers were time well spent.

If I had to sum it up in a phrase … “data in the desert.”

• Data on market insights
• Data on geopolitics and population dynamics
• Data on economic outlook
• Data needed for driving decisions
• Data to drive digital engagement

But, the key, is not going too far down the rabbit hole with the data so that it is too granular, delays decisions and becomes not actionable.