Driving Cost Efficiency

..."be quick but never in a hurry" - John Wooden, UCLA Basketball coach

Without losing their focus on heightening operating efficiencies, preserving cash flow, and continuing to do more with less, companies must also turn their attention to a possible recovery.  This means building organizations and process capable of quickly scaling up and down, and investing in management systems that can sense and respond quickly to changes in customer demand.

Going forward, wholesaler-distributors must not only simplify operations to better manage complexity, they must embrace iterative strategies, make quick rather than thorough decisions, and execute with speed.  Specifically distributors should:

• Accelerate internal and external collaboration initiatives to create differentiation.
• Apply more predictive analytics in key decision areas.
• Build a management system and culture that supports rapid decision making and execution.
• Optimize operations and processes for efficiency.

ACTION POINT: Simplify your organization and execute decisively.

Getting ahead of Scarcity

This situation will change

The economic crisis interrupted the trend toward increased scarcity and higher prices--especially for critical supplies, talent, real estate, and other key commodity inputs.  In some cases, prices for resources and assets--including real estate, steel, copper, and labor--dropped sharply, often below fair value.

This situation will change, however. Many commodity prices have already rebounded, and scarcity will return, creating talent shortages.  Wholesaler-distributor's should act now to gain long term advantage.  distributors should:

• Secure access to critical resources and relationships
• Find and keep the best available talent
• Move quickly on mergers, acquisitions, and other opportunities for consolidation
• Embrace green business to grow revenue and reduce resource usage

ACTION POINT: Look for the opportunities to strategically expand your businesses operations, product and service offerings.

Confronting the New Economic Environment

now is the time for leaders in wholesale distribution to make bold moves 

In this environment, it is easy to feel overwhelmed and adopt a cautious approach to strategies and decisions.  This is the wrong strategy; now is the time for leaders in wholesale distribution to make bold moves in three areas that will position them for the future.

• Get ahead of scarcity
• Drive cost efficiency through productivity and agility
• Develop targeted approaches to growth.

ACTION POINT: Be bold in the three areas above to confront the new economic environment.

Confronting the New Economic Environment

Volatility, complexity, and uncertainty are very much top-of-mind for business leaders.

Going forward uncertainty and uneven growth is the new economic reality for business in general.  Debt reduction is now a priority for individuals, businesses, and, we hope,  government.  Volatility, complexity, and uncertainty are very much top-of-mind for business leaders.  Collectively, these factors represent a fundamentally new economic environment that distributors must understand, plan for, and respond to with decisive actions.  Three realities that will continue are:

• Economic shifts will continue.  The overall structure of the U.S. economy continues to undergo deep structural changes.  The shift from "manufacturing led" to "service focused" will continue.
• Competition will intensify.  As a result, it is more important than ever to reinforce existing business relationships and protect revenues with existing customers.  This environment will demand that distributors: sharpen product and service pricing, better understand cost structures and become more efficient.
• Reassess your role in the channel.  Companies should focus on: Collaborating more deeply with customers, assessing their organizations for elements that add value in the channel, and form partnerships with other distributors to leverage individual strengths and effectively deliver differentiating capabilities.

ACTION POINT:  Understand the current realities and plan for and respond to them with decisive actions.

Capitalizing on Key Trends

two trends that appear to have sufficient breadth and depth to maintain their relevance to wholesale distribution

Given the lingering amount of uncertainty, unpredictability, and volatility in the global and domestic economy, making predictions of any sort is likely to be a risky proposition.  However, two trends that appear to have sufficient breadth and depth to maintain their relevance to wholesale distribution are as follows:

• The continued expansion of the broadly defined "green business segment," including renewable energy generation; energy efficiency; carbon and water efficiency; waste reduction; recycling; and in the food sector, organics an sustainability
• An expanded role or government in areas such as environmental, labor, and safety regulations; international and domestic trade; and of course, taxes and tax incentives.

ACTION POINT: These trends are more relevant than ever to wholesale distribution--both in terms of opportunities and challenges--and therefore must capture a share of management's attention and investment going forward.  Capitalizing on these trends now can help distributors gain a substantial competitive advantage down the road.

The Transformative Role of Information Technology

 IT applications have freed resources for other, more productive and valuable activities, reduced errors and rework, and enabled better decision making. 

Many customers, suppliers, and competitors have more mature, sophisticated IT infrastructures and capabilities than their distributor counterparts.  Individual information technologies have become a pervasive and integral component of wholesaler-distributor operations-automating low-value, repetitive activities; increasing visibility into and across the supply chain; and creating a common, updated view of the business.

In doing so IT applications have freed resources for other, more productive and valuable activities, reduced errors and rework, and enabled better decision making.  At the same time, new information technologies and business trends are creating truly transformative business opportunities for innovative distributors.  Offerings such as cloud computing, software as a service (SaaS), infrastructure hosting and outsourcing, and virtualization provide distributors with low-cost, flexible access to the latest technologies.  Also social networking, location-based services, and new ways of collaborating and sharing information online are changing the ways individuals and organizations interact.

ACTION POINT: Leading distributors will understand, prioritize, and harness these trends, where it makes sense, to transform their business and create lasting competitive advantage.

Leveraging Human Capital

...highlight the critical implications of recruiting, training, managing, assessing, enabling and rewarding employees and to reinforce a more rigorous approach to managing this component of the business.

The term "human capital" may seem overly formal and perhaps even a little clinical, especially for an industry still characterized by relationship-driven sales and strong ties to its employees.   However, the term  is used to highlight the critical implications of recruiting, training, managing, assessing, enabling and rewarding employees and to reinforce a more rigorous approach to managing this component of the business.

As much as distribution is about products, services, customers, and vendors, it is also about human capital, which is at the heart of a distributors capabilities.   The growing acceptance of online tools actually increases the importance of the human dimension by freeing employees from repetitive, routine non-value-added activities--allowing them to focus on tasks that can add value and differentiate the business.

ACTION POINT: Develop a long term human capital strategy to guide your tactical decisions about where to recruit, who to hire, what training to offer and how to assess and reward employees.

Leveraging Human Capital

...distributors must now focus on acquiring and building those skills that will differentiate them in today’s hypercompetitive environment.



After an extended period of growth and relative stability, the economic crisis forced many distributors—some for the first time—to make painful headcount reductions to stabilize and protect their businesses. For some distributors, this was their first time taking such action, and for many it highlighted gaps in their ability to target underperformers, identify high-potential employees, and align workforce-related decisions with their business strategy.


If they haven’t already, distributors must now focus on acquiring and building those skills that will differentiate them in today’s hypercompetitive environment.


ACTION POINT: Developing and leveraging the organization’s human capital must be a top priority.

Differentiating with Analytics

It is equally important that a distributor’s people and processes adapt to and embrace analytics


These capabilities will be especially relevant going forward, as distributors of every size and in every line of trade look to manage the lingering effects of the economic crisis, an intense competitive environment, and ever-increasing customer expectations. Add to this agenda an increasingly complex portfolio of products and services and a more global integrated supply chain, and the pressures on the business are, indeed, immense.

Always important, analytics are now a required core competency that must be embedded with thin the distributor organization, elevated to a strategic level, and play a crucial role in leveraging complexity and improving decision making. It is equally important that a distributor’s people and processes adapt to and embrace analytics. This is a key human capital issue, as many wholesaler-distributor employees will be challenged as they are required to adapt to new ways of working and new approaches to problem solving.

ACTION POINT: Complacency is not an option on the road to becoming an analytically driven business.

Differentiating with Analytics

the effective application of analytics enables distributors to deepen their customer insights,

Successful distributors continuously refine and enhance their ability to negotiate the best deals with vendors, identify and address areas of operational inefficiency, determine a fair price for products, manage inventory levels, and motivate and reward those individuals who help distinguish the business with customers and suppliers.


Each of these activities leverages analytics. From a business perspective, the effective application of analytics enables distributors to deepen their customer insights, improve and accelerate spot decision making, identify and respond to market dynamics, and operate more efficiently.

ACTION POINT: Recognize the analytics that you use in running your business every day.

The Expanding Role of Services

It must be the distributor--not the customer or supplier--who conducts the analysis, identifies opportunities, and defines the service(s).

Going forward, distributors must not only view services as important, but as the most strategically important component of their value proposition--the one they must master to succeed.  This holds true even in situations where services currently represent a relatively small proportion of total revenues.  Underlying this is an important shift in the nature of supplier-distributor-customer relations.  

It must be the distributor--not the customer or supplier--who conducts the analysis, identifies opportunities, and defines the service(s).  Distributors unable to achieve the required level of mastery may well still be profitable, but their ability to influence those profits will likely diminish.  In such cases, the distributor's customers and suppliers will largely dictate profitability.

ACTION POINT: Analyze and identify opportunities to master services that your customers need.

Things to get Right at FSG

Set big goals and work hard to achieve them.


New employees to FSG are welcomed to the company by CEO Bill Graham and introduced to the things you need to get right in order for personal and professional success. 

• Never Quit - This means hard work.  Getting things right requires effort.  We can’t assume that things are going to be easy and we can’t assume that things are always going to go right.  It takes hard work and effort to overcome.
• Relationships - This means saying thank you and contributing to others so that they have a reason to thank you.   Serving others builds relationships.  Gratitude to you co-works builds relationships.   Relationships will  hold us together through trying times.
• Continuous Education  - We can always be better and the way that happens is through continuous study.  Invest time and effort into books that will keep you abreast of the changing times. 
• Build something great -   Set big goals and work hard to achieve them.
• Direction - We need to know we are headed in the right direction.  Collaboration is what will help us understand where that is and how to get there.
• Profitability -  This is the win we are all looking for.  “An unprofitable corporate does nobody good, not society, not its employees, not itself; therefore it has the right and the responsibility to make a profit”
• Christian Values - Business is not everything.  Enduring values are.  Christian values inform and direct us.  Consider your faith.

ACTION POINT: Understand the hard work, relationships, self study, goals, direction, profitability and values that will contribute to your personal and professional success.

The Expanding Role of Services

A common underlying problem is that distributors often have only a limited understanding of the true costs of providing individual services, let alone their ultimate profitability.

In far too many instances there also remain disconnects among (a) the costs associated with delivery of the service, (b) the customer or supplier's perception of the value the service delivers, and (c) as a consequence, the revenues and margins realized by the distributor from the service.  A common underlying problem is that distributors often have only a limited understanding of the true costs of providing individual services, let alone their ultimate profitability.

Wholesaler-distributors must take three decisive actions to overcome this issue: (1) get much close to customers to understand their processes and service needs, thereby becoming a truly collaborative business partner; (2) develop a services strategy that is adopted and understood company-wide; and (3) actively manage their product and services portfolio to ensure they are providing the right solutions at the right prices with the right profit margins.

ACTION POINT: Become part of your customers business process.

The Expanding Role of Services

Capability gaps remain in a number of important areas

Most distributors already offer some form of services as part of their portfolio of offerings--whether as an element of an integrated product/service bundle or as a discrete offering available regardless of whether or not a product is purchased.

Capability gaps remain in a number of important areas, including accurately defining the scope of the service, ensuring the service addresses a specific customer or supplier need, managing the portfolio of services as an integral part of the business rather than a side offering, creating a consistent approach for delivering services efficiently (that is, at cost acceptable to the distributor), and convincing customers of the value of being delivered.

ACTION POINT: Understand the scope, need and costs associated with delivering services to your customers.

Confronting The New Economic Environment

Operating in this new economic climate requires new ways of thinking, innovative business models

One of the primary ways distributors create value is by aggregating a diversity of products form multiple vendors and selling them to an often fragmented customer base.  Operating efficiency and product availability are essential to the profitable execution of this break bulk-focused model. 

However, with customer demands increasing and competition intensifying the ability of even the most efficient distributors to rely on this model for profitable, long-term growth has sharply eroded.  The recent economic crisis ushered in a new economic environment, the likes of which distributors are largely unfamiliar with.  In this new environment, predictability and stability will largely disappear, replaced by continued volatility and uncertainty and ever-high levels of complexity.

Operating in this new economic climate requires new ways of thinking, innovative business models, and creative leadership.  From the assets they own, to the services they leverage, wholesaler-distributors are entering an extended period of profound transformation.

ACTION POINT:  Adjusting to these changes and capitalizing on new opportunities will be essential for survival in this new business climate.

Facing the Forces of Change

The business world is moving too fast, and wholesaler-distributors must be informed, intelligent, and nimble 

Given the lingering uncertainty in the economy, wholesaler-distributors must continue to take decisive actions that will position their companies for growth and prosperity.  Gone are the days of overly cautious and slow decision-making processes.  The business world is moving too fast, and wholesaler-distributors must be informed, intelligent, and nimble enough to make rapid but prudent decisions, and then adjust and iterate as necessary.

The successful distributor  must understand the economic challenges that lie ahead, the expanding role of services and their importance; the value of analytics as a tool to help distributors stand apart, better serve customers and prepare for future demands; the value of "human capital", the vital and ever growing role of IT.   Distribution must also be able to understand and embrace the two growing trends shaping the industry; the "green" movement and the growing role of government.

ACTION POINT: Be informed, intelligent and nimble to act decisively with prudence.

Trends: Emerging and Future

...the growth of the green business segment and the expanding role of government.

Distributors must understand the trends facing their business today as well as what lies ahead.  The recent trends that have shaped where distribution is today include, acquisition activity, the changing U.S. workforce and a slowdown in commodity prices.

The two key  trends that distribution must recognize for future success are the growth of the green business segment and the expanding role of government.

ACTION POINT: Understand the underlying trends that affect the distribution business.

The Value of IT

IT is not a separate part of the organization, but an integral part of the distributor value proposition.  

Distributors have long been investors in differentiating technologies, especially in the supply chain and in particular, in the warehouse.  What has become abundantly clear, however, is that IT is no viewed as an essential component of a distributor's business--an enabler of the company's growth strategies, a tool to help capitalize on the complexity of the uncertain economy, an accelerator of core business processes, and a weapon of competitive advantage.  

Distributors must craft and IT strategy that positions them for the future (managing complexity, reducing costs, and enabling growth) and is aligned with their business strategy.  IT is not a separate part of the organization, but an integral part of the distributor value proposition.  

ACTION POINT: Strong leadership, business knowledge, and innovation must be hallmarks of the distributor IT function, positioning the company as not just "easy to do business with," but the preferred solution provider and business partner.

Human Capital

Distributors face some unique challenges as they...embrace the next generation of employees; and leverage the skills, talents, and knowledge resident in the existing workforce.

The importance of effectively managing the the workforce continues to be a critical skill that distributors must master.  Distributors face some unique challenges as they look to capitalize on emerging business trends and technologies; embrace the next generation of employees; and leverage the skills, talents, and knowledge resident in the existing workforce.

A heightened focus on training will be key as well as new approaches that will be required to identify and encourage top performers, along with the tools that can maximize employees impact across a range of functional areas.

ACTION POINT: Never underestimate the importance and value of your human capital.

Differentiating with Analytics

Distributors must master the vast amounts of data flowing into and around their organizations, leveraging the available information to create actionable insights.

Analytics will play an absolutely critical role in effectively and efficiently managing a wholesale distribution business going forward.  Distributors must master the vast amounts of data flowing into and around their organizations, leveraging the available information to create actionable insights.

Look at customer segmentation, cost-to-serve analysis; price, inventory, and optimization.  Distributors can also look at Lean and Six Sigma concepts to reduce waste and inefficiency, while at the same time innovating and delivering exceptional service to customers and suppliers alike.  There are two types of complexity within this area--one that is essentially non-value added, non-differentiating and should be reduced or outsourced where ever possible; the other is complexity that creates a meaningful point of differentiation with customers and/or suppliers.

ACTION POINT: Identify and work with the data that will deliver meaningful differentiation for your customer and vendor partners.