NAED 2019 National … Optimistic Outlook

Last week’s NAED 2019 National Meeting culminated the 2019 NAED meeting season and, according to many, “thankfully”.  While San Francisco is a nice city and may have contributed to some of the attendance, for many, the trek to the West Coast for a long weekend was “nice”. The unexpected highlight, however, is that many distributors were optimistic.

Given the attendance, however, and feedback from manufacturers regarding their overall performance, a question became “is it better performing distributors attending the meeting or is the market better than what some are reporting?”

According to a last registration list, the conference was projected to have 577 attendees.  While seemingly “decent”, the size and layout of the hotel made one wonder “where is everyone” and then there is the need for many “back to back” meetings in suites and hence limited “hallway interaction.”

Of the 577,

• 295 were manufacturers
• 242 were distributors representing 76 companies (inclusive of 6 individual Sonepar OpCo’s)
• 22 service companies
• 18 from marketing groups, NEMRA and NAED guests.

And there were only about 20 manufacturer booths in the “strategic booth” area with many preferring to take suites or schedule meetings in the lobby.

A number of medium sized manufacturers ($50-200M) as well as smaller distributors commented that they were not able to get many meetings, and not for a lack of trying. They expressed disillusionment in the meeting and questioned if they would come back due to their own ROI on the meeting. The meeting, according to them, is more “for senior manufacturer management that doesn’t attend the regionals to meet with senior large distributor management.”

And at the same time, many in large companies feel that not much gets accomplished at the meeting as too much “feel good” meetings as well as the meeting being late in the year.

The question becomes, how to make the event more effective as well as how to attract others (if possible).

(And don’t get me wrong, CMG prefers that there is an NAED National as it provides another industry touchpoint with distributors and manufacturers. Overall had about 20 meetings.)

NAED Notes

• Atkore was a big sponsor of the conference, sponsoring the welcome reception and the Women’s in Industry luncheon. Other key conference sponsors were Eaton, ABB, Legrand, Siemens, Milbank, Nucor, Schneider Electric / Square D and Zekelman. While Atkore, Eaton and ABB got feted by NAED, all should be appreciated for “giving back” and receive some preference at the conference.
• NAED is launching a leadership training program with Dale Carnegie. Some felt this was very positive.
• Continued mention of the NAED Market Data program (but still no sense if the program is gaining any traction as continue to hear comments of “is anyone participating / what data is available today?”
• George Vorwick from United Electric and the NAED Chair shared that the key to success is keeping pace with customer expectations and that companies need to “dare to be bold”, utilize technology to improve customer experience and use people as their competitive advantage.
• The keynote speaker, a futurist, was well received as he synthesized a number of trends that are occurring in other industries. Copy of his slides is available at www.mike-walsh.com/go.  Talked about “Dawn of Algorithmic Age” and the benefits of how data can help drive customer connectivity to drive predictive relationships.  The “war” is to collect data and then identify the determinants that drive decisions, eventually getting to predictive analytics (which is “AI” / artificial intelligence and/or machine learning).  This will impact supply chains as well as customer experiences. Presentation was well received by the attendees.
• Mike Marks led an industry panel consisting of George Vorwick (United Electric), Steve Helle (Granite City Electric), Scott Scheunke (Sonepar) and Frank Gardner (Kirby Risk).  Nice to have “real world” examples of what companies are doing to differentiate themselves.  Areas covered included:
  • United Electric – review of company demographics 5 years ago led to development of leadership succession planning program where they assessed strengths / needs of individuals, communicated the “opportunity” to the individuals but did not guarantee roles and then have focused on these emerging leaders to “make them better.” This highlighted a distributor focused on leadership / people improvement.
  • Granite City – shared insights from their “NightTrain” service which is overnight delivery. Today 61% of orders are picked after 6:00pm and delivered by 6:00am. Given the dynamics in the marketplace, after hours pick / pack / delivery add value to the customer. This was an example of a process improvement that doubles as a value-added benefit to the customer.
  • Sonepar – discussed how they are using analytics to reduce customer attrition as they monitor unassigned accounts for trends and have developed “triggers” to drive action.  This “reactivation” and “re-engagement” process is an example of marketing and a growth driver.
  • Kirby Risk – shared how they analyzed customer needs / trends and the motion control market to further diversify into the robotics field and get further expand into the mechanical side of the business. This was a product diversification initiative.
• The second speaker, which was billed as the “General Session” had relatively weak attendance given the size of the ballroom.  Seemed to speak more about labeling than the topic of “How to be a Great Leader in Exponential Times.”
  • According to one distributor “What did the speaker’s comments on Monday have to do with leadership development? Must have been only about 20 companies represented in the audience that day and all seemed to be on their phones!
• While I didn’t attend the last speaker, who spoke on “The Future of Robots, Humans and Work”, while lightly attended, a few people I spoke highly of the presentation.
• And congratulations to the NAED Award Winners who were recognized on Sunday night:
  • Honorary Lifetime Award – Dave Bucklew, Eaton
  • Distributor Distinguished Service Award – Dan Dungan, Springfield Electric
  • Associate Service Award Steve Antenucci, Hubbell Wiring Devices
  • Industry Award of Merit ABB
  • Arthur Hooper Award Glenn Goedecke, Mayer Electric
  • Trailblazer Award Molly Murphy, Eaton

A challenge NAED has with speakers and break-out sessions is that companies attend the conference to meet with their suppliers / customers and rarely either allocate the time to attend the sessions or are not willing to have someone from their group attend the session to share the input with their company. This is unfortunate, however, with a limited amount of time and a need to get an ROI on the meeting expense ($ and time), meetings take precedence.

And the hotel, no need to go back to this property. While they had renovation going on (many commented that NAED needed to get compensated for the disruption), the elevators are slow, three different sections for elevators to different floors, not a good lobby, 1 restaurant, this Marriott offers no room service (1 company wanted 10 bottles of water delivered to a room for a meeting and there was a $150 delivery charge! … they went down to the Market Pantry instead).  For $300 / night, not representative of a “Marriott experience” for a conference.

Observations:

• Overall distributors reported that their business was good through April with many reporting mid-single digits to, in some cases, low 10’s.  The business appears to be more project-driven with stock / flow slowing.  Some reported “tightening” inventory. Many report good backlog.
  • Contractor-oriented distributors reported higher performance than industrially-oriented performance.
  • Those with strong project groups and tied to larger contractors seem to be prospering.
• Manufacturers were a little less, typically reporting in the low single digits, however, some smaller manufacturers, who are focused in their product offering, shared that they are up 10-20%.
• A couple of manufacturers mentioned having good discussions with distributors regarding supply chain optimization opportunities and inferred that there is significant net profit improvement, and sometimes top-line sales improvement, opportunities.
• Acquisition activity may be increasing, especially in the $10-50M range. Heard that CED acquired Sun Valley Electric / Energy Electrical Distribution which has locations in Texas, Nevada, North Dakota and Utah.
• A few more distributors and manufacturers endorsed the NEMRA POS Minimum Reporting Standards.
• Progressive distributors and manufacturers expressed the desire / need for more data regarding customers and the market. At the distributor level this is customer specific. At the manufacturer level it changes based upon type of product and level of customer intimacy. For most, however, it is greater insight into what is happening throughout the channel and gaining insight into customer needs as well as how the supplier is positioned. Look for progressive distributors and manufacturers to “team” in this endeavor. This is also becoming a barometer for manufacturers in how they are evaluating distributors.
• Some conversations with suppliers on their “total distributor investment”. This relates to rebates, marketing funds, training, etc and determining ROI. Feedback is that investing in deliverables is more acceptable than the continue push for rebate percents. They are seeing that distributor gross margin goals should be distributor responsibility, not solely manufacturer responsibility. And some of this change may be coming due to personnel turnover at manufacturers. New people questioning “old” / established norms and saying “what are we getting for this?”
• Many reporting slow progress, as defined as revenue adoption, through websites and eCommerce initiatives. Some on version 2.0 or working on 3.0 of their site. Increased recognition that websites support channel experience as well as need for better quality / more robust data. Some see “direct connection” with customer as where eCommerce will really come from and are trying to learn more re: contractor estimating systems.
• Heard of more companies interested in improving their warehouse management systems and looking at systems such as TECSYS, albeit larger sized companies with RDCs / CDCs.
• Seeing / hearing more management “turnover” as well as the continued challenge in finding people. “Finding people” inevitably is defined as “people who know the industry”, which can be a challenge. This will lead to employee / management “churn” within companies and the industry as people achieve their goals and then seek their next level (or next level of compensation) which will cause them to seek new opportunities. The resulting loss in “institutional knowledge” is leading companies to identify where it can automate processes, document processes, capture data and have better leadership development strategies. Retention will become a bigger issue for companies. Smaller companies can win through loyalty to people as well as piloting some of the “larger company initiatives”.
• And a thank you to industry stalwarts Ken Hooper (NEMRA and Mersen) and Mike Wentz (IDEA, Activant, Trade Service) who are both retiring from the industry.

Overall it was a productive 2 1/2 days in San Francisco in meeting with distributors and manufacturers. Market optimism is good. Perhaps best wording may be “cautious optimism.” Leading distributors are investing to differentiate themselves via data, supply chain, automation, process improvement and marketing.

If we know one thing, expect more change.

If you attended, what were your observations (or email them to us and we’ll post anonymously for you.) If you didn’t, why and what may be able to get you to attend?

While some question “why have a National”, and recognizing that NAED has meetings booked for the next 3-5 years and it would be costly to cancel, the question becomes, “how could the meeting be improved?”