The Business Cycle lives on! Despite the last 9 years of seemingly unstoppable growth, it appears that the cycle once again is causing a reverse in the curve of sales and profits, and an inverse on the pricing curve. Companies start, then consolidate as markets mature. New firms eventually crop up to cherry pick business from the big firms - right now we are in the transition and consolidation phase.
When this phase is finished, and it’s time for fresh growth again, entrepreneurs will find that the game has changed. Today, any start up really does have to worry about competition from Mexico, China, and elsewhere, not just the shops down the road - whether you are a manufacturer, distributor, or fabricator.
Another transition period we’re entering is that of the value proposition of the local, service-oriented distributor – on the rise again, as the business cycle swings back to the future. Ten years ago the biggest plastics users refined the art of negotiating the lowest "price" at any "cost". That trend was fueled by the dot-com fever that peaked last year when reverse auctions and open bids were going to make the market for plastic shapes more efficient. The results have typically been nightmares for users in terms of time and effort expended versus actual money savings – providing the correct product showed up and on time.
So while price is still an issue, the specialized application and problem solving knowledge a local distributor provides is looking good again by comparison. Plastic shapes distributors should once again be assisting customers with prioritizing inventory levels, product standardization, and identifying use reduction opportunities instead of just price reduction. It is a slow shift from a buyer’s image of the middleman to the "partner" helping the end-user to buy smarter.
An excellent and timely (think GE PolymerShapes) analysis of how the distribution business is changing can be found in Adam Fein’s "Winning Strategies for a Consolidating Distribution Industry", published by NAW. In this new, thoughtful treatise, he postulates that consolidation does not always result in overall market share loss for a company. In fact, the same forces that put negative pressure on some distributors can provide strategic advantages to another. This paperback book can help you build a game plan for the future by using case studies and resources that address the following crucial questions?
- Should you get bigger? Can you grow larger through an alliance? Would consolidation be a threat?
- Should you get focused? Is it time to concentrate on specialized services that boost your competitiveness?
- Should you get out? Could it be that the time has come for a sale? What will happen to you, your employees, and your reputation?
No matter what your answers, you must consider all eventualities, especially in light of consolidation developments in our industry this year. Fein takes you through them, offering levelheaded advice at every turn. Take it from this writer who answered all the above questions about 4 1/2 years ago, its time to think.
For more information, click on the Author Biography link at the top of this page.