Distributors Offer 2010 Industry Forecast

Feb. 4, 2010
In January 2010, the Material Handling Equipment Distributors Association (MHEDA) released its 2010 Industry Forecast.

Some highlights:
● 68% of distributors think sales activity will be better in 2010 than it was in 2009
● 4% think it will be worse
● 28% think it will be the same.

This is in comparison to:
● 85% of suppliers (manufacturers) think sales activity will be better in 2010 than it was in 2009
● 0% think it will be worse
● 8% expect it to be the same
● 7% are unsure.

In addition, 68% of distributors expect sales to increase anywhere from 2% to 25%, with the average being 9.8%.
Distributors also identified ten challenges, ten trends, ten predictions, and ten ways to succeed for 2010 (see sidebars).

MHM asked Greg Morrison, vice president of Morrison Industrial Equipment Co. (Grand Rapids, Mich.) and 2010 president of MHEDA, and Liz Richards, executive vice president of MHEDA (Vernon Hills, Ill.), to share some of their thoughts on what kind of a year 2010 will be for distributors.

Q: What are some of your thoughts on the Ten Challenges that distributors identified?

Morrison: In terms of the challenges, we have faced most of these before, when economic times were better. Right now, distributors need to be making money, or they aren’t going to like the rest of 2010.

First of all, it is important to communicate with our employees about the economic realities of being in business. Everyone needs to contribute through teamwork and involvement to help the bottom line.

Overall, business for distributors will be better in 2010, but I don’t think it will be incredibly better. A lot of bigger companies will be ordering a lot of equipment, but smaller ones may be struggling.

Richards: Given the economy, people are doing more with less and aren’t as willing to spend as they might have once been.

Economists have told us that 2010 is the beginning of the recovery. However, a full recovery won’t start taking place until 2011 and 2012. Some have even predicted that we won’t see numbers similar to what we saw in 2008 for another five years.

Q: What are some of your thoughts on the Ten Trends that distributors identified?

Richards: Because of all the consolidation that has taken place, especially on the customer side, industry professionals need to be aware of and identify where the new business opportunities might lie.

In terms of technology, energy-efficient, money-saving battery chargers are becoming more popular.

Morrison: Distributors are looking at some new industries. Some that were once strong, such as automotive, aren’t as strong anymore, so distributors are looking at other industries where growth may be occurring.

In terms of technology, such as lithium batteries and robotics, we are seeing a bit of growth. These aren’t really strong now, but they are trends to watch.

In specific, end users are looking for ways to reduce energy costs and go “green.” The newer battery chargers tend to be “greener,” in that they take less energy to charge a battery. This technology has really taken off and is pretty exciting.

Q: What are some of your thoughts on the Ten Predictions that distributors identified?

Morrison: Our customers are more open than ever before to sit down and discuss cost-reducing strategies—how we can come in and help them reduce maintenance costs, energy savings, fuel savings, operator training and so on. When times were better, they didn’t have a lot of time to sit down and hear some of these value propositions that we offer.

Forklifts are obviously not maintenance-free. This is a big part of the service that distributors offer.

Richards: Most manufacturers will have a direct sales channel when it makes sense. However, there will always be a need for distributors. One reason is that, even when manufacturers have direct sales channels, they will continue to work with distributors because they understand that the distributors are the closest people to the customers. Customers want faster response time and service, so it is important for manufacturers to keep their distributor network intact. The key is to make sure that the communication channels remain open between the manufacturers and the distributors.

Distributors understand that there has never been a better time for them to demonstrate their value to customers, such as by providing cost saving ideas.

Government regulations are on everyone’s mind, especially in what ways government oversight will continue, and what that means to the business owner. Businesses need tax breaks if we are going to make this economy work again.

Q: What are some of your thoughts on the Ten Ways to Succeed that distributors identified?

Richards: One big area that has been growing and will continue to grow is online marketing and search engine optimization. If distributors are looking for new business, customers need to be able to find their websites easily and be able to navigate these sites easily.

Of the distributors we surveyed, 51% said they will be hiring this year, which is good news.

Morrison: In Michigan, where we are located, we are starting to see a trend where companies are hiring more people.

William Atkinson is a freelance writer specializing in supply chain management.

Ten Challenges Distributors Will Face in 2010
1. The economy
2. Expense control
3. Consolidation of customers
4. Increased competition
5. Commoditization of products
6. Selling the value of the distributor
7. Finding qualified technicians
8. Margin pressures
9. Retaining employee morale
10. Rising healthcare and benefit costs

Ten Trends Distributors Believe Will Occur in 2010
1. Continued consolidation among suppliers, distributors and end-users
2. End users will increasingly look to robotics to automate their operations
3. Introduction of new power sources, such as hydrogen fuel cells and lithium-ion batteries for material handling equipment
4. Internal office computer technology, software and telemetry improvements
5. More stringent emissions regulations
6. Growth in third-party logistics companies
7. Customers seeking single-source suppliers
8. Consumers’ continued focus on going green
9. Changing composition of available customers in the market
10. Emphasis on safety and ergonomics for end-user employees

Ten Predictions Distributors Are Making for 2010
1. The industry will have fewer, larger players in the distribution channel.
2. End users will do much more of their purchasing online.
3. Automation for customer applications will take a quantum leap.
4. RFID will be mandatory.
5. Manufacturers will do more direct selling as they look to cut costs.
6. Government oversight will increase, particularly with permitting.
7. Warehousing will replace manufacturing as the top market for material handling equipment.
8. Customers will demand faster response.
9. Fewer operators will become the norm.
10. The industry will move away from engine-powered lift trucks to other solutions, specifically AGVs and robotic equipment.

Ten Ways to Succeed Distributors Have Identified for 2010
1. Make it easy for customers to find you.
2. Spend time with customers to build relationships.
3. Offer new products and services.
4. Expand your facilities and personnel.
5. Improve internal processes and procedures.
6. Sell the added value of distribution.
7. Concentrate on the aftermarket.
8. Focus on training.
9. Restructure your business development teams.
10. Purchase more inventory.