Around the Horn In Wholesale Distribution - Episode 39

Just the way that B2B distribution is transforming in the digital age. So that's just a little bit about about my background, but yet here at mdm, doing a lot of webcasts, kind of like these, where I'm serving as the moderator. So it's nice to today be on the opposite side of that and be a panelist here. Very good.

Good. Well, we're happy to have you with us. We're looking forward to kind of your thoughts and feedback on this as we dive in. But we're before we do that every week we kind of talk about who we are, why we're here. So again, I'm Kevin Brown, joined weekly by Tom Burton and we both are the co founders of Lead Smart Technologies. And Lead Smart Technologies is a smart CRM customer intelligence and channel collaboration solution that uses AI and other methodologies to drive revenue growth and customer intelligence for wholesale distribution ecosystem as we describe it, both manufacturers, distributors, dealers, independent sales agents and so forth. But what we do here is every Friday morning O dark 30 on the west coast where Tom and I are located, we sent out an email called around the Horn. And around the Horn is kind of a recap of what we thought was interesting from the news from within wholesale distribution. Information about sales, marketing, M and A and so forth. But how it impacts today and the future in wholesale distribution. A couple other things to ask you or share with you before we move on today and get started is one, you may be listening to this live on either LinkedIn Live, Facebook Live or YouTube Live. And we're appreciative and happy you're with us. But today's Friday morning and so May 5th. But later this afternoon this broadcast will be recorded and available on all the popular podcasts formats, whether it's Apple, Google, Spotify, whatever you use for podcasts, it'll be there along with all of our past issues from this year or broadcast from this year. So last piece is if you like what we're doing and you're not a subscriber to the email, simple way to get it. Email us@helloadsmartech.com and we'll get that out to you. And then if you like what we're doing, click the like and share and let your friends know. So got all that out?

Yeah, you were better on mute. It was better when we started on the mute.

Why did I not see that coming?

But yeah, Brian reminded us. Cinco de Mayo today. So happy Cinco de Mayo to everybody as well.

Oh, we're out of here. Margaritas. Well, actually that makes me wonder is we have a, a frequent, a frequent visitor and listener. Tom May, all, the business associate of mine. And Tom was having quite a good time when it was St. Patrick's Day and we were.

Yeah, I haven't seen Tom pop in yet, so I'm wondering if he's starting Cinco de Mayo.

Yeah. All right, that's it.

Good.

We're starting to see some folks come in. You know, I always, I'm always cautious to do this because, you know, we're on multiple platforms and then obviously the podcast that's recorded later. But if you're listening this morning, pop a note in and say hello, maybe tell us where you're, where you're at and where you're coming to us from. And it would be great to.

And what your Cinco de Mayo plans are.

Yeah. What your Cinco de Mayo plans are, if any. Good. So let's kind of. Tom, anything to add before we kind of dive in this morning?

No, let's do it. We got plenty to talk about.

Yeah, we do. And I want to spend some time talking with Mike later on about MDM and their upcoming conference as well.

Sure.

So for those of you that are listening to this recorded or aren't watching, what's scrolling through our screen right now, is this around the horn newsletter that I mentioned earlier? And we just have a series of articles and we talk about each one of those. So why don't we. Tom, why don't we dive in on this first one?

Yeah, the Walmart is using AI to negotiate cost purchase terms with vendors in shorter time frame. I was thinking about this last night. It's like, man, if you're a supplier to Walmart, it's like playing chess with a master guru. Yeah. I don't know how you're ever going to win that chess game, but yeah, it's interesting the amount of probably variables and things that can take into account way, way faster. And I think, unfortunately we'll see. But some of the things that will probably be negotiated with vendors, vendors won't even kind of know what the impact of those things are because they're not going to have that same visibility that Walmart has when they're looking at this through all of this different AI lens. But I do think this is going to be probably a bit of the norm with some of the big guys.

Yeah, I looked at this and this, this whole thing, you know, I commented earlier. Right. What we're talking about today is change and, and we talk about that really consistently as we do this broadcast with kind of helping folks in wholesale distribution be thinking about what is coming to the world around me so I can start preparing for it. And this, this just really hit me hard because as I read this now, it's, you know, to be frank here, that this started off with them using a California based company called Pactum that can use a chatbot that they've developed to negotiate, they're doing right now smaller contracts with suppliers who provide equipment it uses rather than the products that Walmart sells. But that's just step one. Right. And to your point, I think what we're looking at, what's coming here is that you're going to be reliant if you're a vendor to Walmart. And I, I want to shift this Walmart piece and say gm, US Steel, Saint Goban, you know, whoever you might be selling to those factories, if you're a wholesale distributor, you're I think sadly remiss right now if you think this isn't going to be coming to your customers that you sell to. And now all of a sudden the data that we talk about every week, right, siloed data that's stuck within distribution organization with your manufacturer or a wholesale distributor and you got data all over your organization. If your companies that you're a supplier or a vendor to start implementing this with all of their data and they have their data in ducks in a row, so to speak, that's quite a disadvantage.

Yeah. What I found particularly interesting here is, you know, this article mentioned that this chatbot that Walmart is using can be used to have ongoing supplier negotiations with, you know, 2,000 suppliers simultaneously. And particularly interesting, the article noted it found that 75% of those suppliers prefer negotiating with the chatbot rather than a human. And that just seems completely opposite of what our traditional thinking is. You know, just, just give me an actual human to talk to. But maybe when it, when it's these kind of small scale, I don't know how small scale suppliers that they mention, it could just be a numbers game when it's at that scale with the amount of suppliers they're working with. Yeah, some of these things might just be bare bones information that something that a chatbot can quickly figure out rather than having to have an actual human reroute them to where they need to go. But, but yeah, it's, it's one of those things that I really haven't heard of in the greater industrial supply space yet. But yeah, it's, it definitely gives us a lot to think about going forward and Just the role of supplier relations. Yeah.

It's interesting, Mike, about what you're saying about they prefer. Right. To do that. And I could see, I can see that, you know, in some cases, the convenience of that and maybe the speed and, and all of that would be good. But I also think you have to be careful what you wish for, because behind the scenes there, it's, like I said, it's like playing chest with a grand master. And it'll be just interesting to see how that all kind of ends up shaping up over time in terms of that sort of automated negotiation, but with that AI happening behind the scenes.

Yeah, I think you're both spot on with this. And what's intriguing to me about it all is, you know, when we look at this and just going back to the data discussion, right. Is when, if you're, you know, John Q. Public, right. Or John Q. Distributor, and you're negotiating with one of your customers, their chat bot, right. They're literally in real time looking at all of the pricing of all your competitors, the discount levels, the rebates, the wherever, whatever else those offers are, they're in real time calculating that versus what you're trying to accomplish with them. And to your point, Tom, about, you know, it's like playing a grandmaster, you know, chess person. It really is. I mean, you could be at a huge disadvantage from that standpoint if you're not preparing yourself on the other end of things to get in and participate in this as well. Right?

Yeah, it's just, It'll be, it'll. It's just very intriguing.

Right.

It's like just the number of things that this whole AI thing that we keep talking about, the use cases and the situations that. Where it will show up and we'll talk a bit more about, you know, change in organizations in a couple minutes, but it's. It's remarkable.

Well, it is, you know, just to kind of close on some of the data that. Or details that came out of this. It talked about Walmart saying by 2026, roughly 65% of Walmart stores will be serviced by automation and about 55% of fulfillment center volume will move through automated facilities. And that average cost per unit could improve, it says, by 20%. So, I mean, these aren't, you know, then this is work that they did with, with a Goldman Sachs report and the research internally from Walmart. And I, I just, I just can't emphasize enough whether you're a manufacturer, you know, and I think about it, you know, my background, experience. Mike, we were talking before we started today about Fastenal.

Right.

And you know, publicly traded, you know, fastener and MRO distributor Granger, you know, I, I've been in the lobby of all of those companies carrying a bag and going to negotiate deals with those people. And so if you're a small midsize manufacturer right now that still has a, you know, a 1997 ERP system in a server closet down the hall and you don't have any, you know, cloud based systems and you're maybe have, you know, thousand spreadsheets and lots of file cabinets. Right. Sometimes I think that you can, you can see the level of, of digital transformation in an organization by the amount of file cabinets that are out by the trash.

Right.

Because if we're still keeping so much paper, it was, it was funny. As a side note, I didn't tell you this time. We were helping my parents move some things last weekend and my older sister asked me if I wanted one of my dad's really nice file cabinets. And I go, what would I do with that? I think we have like four file folders in the whole company at Lead Smart. Right. And so, but it's just interesting, I think whether you're a manufacturer and you sell into some of the large national distributors, if you don't think that this, you could interchange Grainger or Fastenal or Air Gas or MSC with Walmart right here, or if you're a distributor, a wholesale distributor dealer and you're selling into large national companies, if you don't think this is coming to your customer, I'm concerned.

Yeah, well you got to throw in like Home Depot and Lowe's into that. Right into that game as well. Like if Walmart's doing this, you got to think that they're trying to wonder how they can capitalize as well. And those are two mega retailers with a huge industrial distribution operation. So yeah, yeah, it's going to be interesting to see if we see anything out of those two companies as well on the retail slash distribution side.

Right. And you know, you really nailed something there too, Mike. I hadn't thought of it that from that standpoint but you know, when we talked for a moment ago about manufacturers is, you know, I don't have any idea but I'm going to guess a significant percentage of manufacturers that sell into the industrial space have a crossover where they do some things whether that's retail related as well. So there may not be selling into a Walmart, but they are selling into Lowe's and Home Depots as well for their Business to business side of things. So anyways, back to the focus. Right. Change. Things are happening, and they're moving quickly. And. And we need to kind of buckle up and hold on.

Yep.

Should we go on to some of our other articles here?

Yeah, let's move ahead.

And while we're doing that, good morning to Mike. Good morning to our friend, Mr. Ron Paulson. Happy Cinco de Mayo to all of you. All right, which one do you want to hit first?

Well, let's just go in order, huh? Because I think these are kind of teed up that way.

Yeah. So this next one about implementing sustainable practices in manufacturing, this dovetails to one of the conversations we were having last week about, you know, industry 4.0 or technology 4.0 technologies and, you know, the sustainability part of it. We talked a bit about that, which was interesting. This takes it to another level. And, you know, the whole concept we were talking about last week was near shoring or taking offshore, you know, stuff that was gone literally halfway around the world and bringing that closer to home, whether that's in the US Or Canada or Mexico or. But anywhere somewhere closer to home. And now that's being tied in more into, well, gosh, if I do that, look at the sustainability benefit that I can have from that. And back to the technology conversation. By using technology, I can accomplish this maybe as price effect or cost effectively as I would by doing it overseas. So I don't know, it's a little bit of a win, win, win, I guess you would say, on that. And Mike, love your take on this.

Yeah. You know, we survey our audience, you know, at least once a year, if not multiple times, you know, asking, trying to get some insights on, you know, how much they value sustainability efforts. And when you traditionally think about sustainability, you think of things you're doing at your own company. You know, how energy efficient you are, how, how you're trying to minimize waste in your operations. But it goes far beyond that in the, you know, your greater supply chain as far as procurement, just who you're doing, like who your suppliers are and how sustainable they are. And, you know, our survey results show that they definitely, these companies definitely value sustainability, or at least they say that they are, and they're trying to be more sustainable in their operations. But there also seems to be a gap between, you know, how much they want to be sustainable and the actual actions they're taking. I think just given all the supply chain chaos we've seen over the past two years, the labor situation, it seems like as much as these Companies want to, you know, be sourcing more from sustainable suppliers. It seems like there's might just still be some bigger fish to fry out there in terms of the challenges out there. And maybe sustainability is still getting a bit of the back burner. But as we're seeing here, especially with the study that this article cites, more and more suppliers say that, you know, they want to buy from sustainable sources, companies that are doing things the, you know, the right way environmentally. So it's definitely top of mind. I think it's more a matter of, you know, when these companies can lean into sustainability as much as they say that they want to.

You know, I think that'll. And Mike, kind of a part two to that. Do you see if your customer, right, is saying, hey, I want to buy from companies that are manufacturing or creating things through sustainable sources. Do you think that that's going to be the thing that's going to pull this along? Because I do see this happening, and especially in the B2C world. I don't think it's quite happened as fast in the B2B world, but customers saying, I don't want to buy from companies that are unsustainable or less than sustainable in their manufacturing process.

Yeah, I mean, given the, you know, the current state of inflation, I think we've seen that price point hasn't been, definitely hasn't been the biggest, you know, factor when it comes to these buying decisions, even for some of these commodity components that are just, you know, a fastener is a fastener, no matter who's selling it. I think one of the ways that, you know, whether it's manufacturers or distributors can help differentiate themselves is through sustainability. If they can show that they're doing things in a more sustainable manner than maybe the competition is, that can be, you know, just that tiny factor that, you know, makes someone buy from you as opposed to someone else, even if your price point is a little higher. So that's certainly something that's top of mind, industry wide. Yeah. Like I said, I think it might ultimately come down to, you know, do you have the resources and the supply chain kind of set up to take action on those sustainability efforts?

I think that's a great point, Mike. I'm going to throw this out to you though, as well to comment on because it kind of comes out of this article a little bit as well is, you know, as we look at this ESG stuff and really the sustainability side and recyclability it talks here about, you know, they call it additive manufacturing where you're you know, doing 3D printing and other methods so that you are, you know, you think about, right, maybe a, a molding operation, plastic molding or something where there's all kinds of waste that comes out of it, you know, scrap that's left over, you know, doing, using manufacturing procedures that reduce all of that. I think where we're probably sitting and I'm, I'm going to throw this out. This is, in Mike, your experience might be able to throw a, throw a, a wrench into this. But my gut tells me right now that, that wholesale distributors are looking at these types of initiatives and they're saying, rah, rah, that sounds great. When you can convince XYZ Manufacturing down the street or ABC Construction or whoever my big customers are that they're willing to pay more for, you know, sustainably developed products, I'm all on board, but until you help me get there, I've got to compete against 17 other people that want to sell that fastener or that tool bag or that hammer or whatever that item belts or bearing or whatever it is they have to do that. It's, that's. My gut tells me right now that that's where manufacturing is looking at this is going. Wow, I'm going to get some government pressure pretty quickly on this. I'm already getting, if I'm a very large company, I'm getting pressure from my board. If I'm publicly traded, I've got a ton of pressure from my board on this. But how do I do that? And then until that end users willing to spend more money.

Yeah.

And I gotta think that in this age of data analytics and how distributors are leveraging that, it's going to take some, you know, proof in the pudding and in the data to show that, you know, are these sustainability, sustainability efforts, you know, the added cost to be more sustainable, is that actually showing up in the terms of, you know, volume that we're moving, you know, know, are our customers actually asking for more sustainable products and how are they going to buy them if we, you know, have to raise prices to match their sustainability? So, yeah, that's definitely a factor out there. Like you said it. I think there's just these other factors in the supply chain that, you know, a lot of distributors are talking to talk about sustainability and good things that they're doing. And that's great, but, you know, it might still take some time for this overall, you know, putting into practice of, you know, as far as when we start seeing green kind of products sourced out there widespread, it might still take A little time here as everyone, you know, tries to navigate that, you know, that between, you know, pricing and sustainability, it's, it's a, it's a, there's a lot of factors out there that still have to be.

It's a slippery slope and a thin line and a gray area and whatever you want to call it right now. But this just goes back to the preparation I wanted to mention to Chris in Brazil comment. I was on the phone yesterday with, with Chris and she's a, a referral partner of ours that works closely with distributors in Latin America and we were just talking about this, that they're seeing that in Brazil, that, you know, that mining companies in particular are pushing on that. And a couple of the articles that we referenced today. By the way, this article about sustainable practices comes from manufacturing.net, previous article we talked about was from Bloomberg and the first one today was from Fox. So we kind of move across the board and we've got a lot coming up today from mdm, Mike, your organization. But this is what we're, you know, we're going to start seeing more and more of this worldwide. My gut kind of tells me you're going to see a lot more of this regulated in Europe is probably where that's going to happen first is the regulation side. I can see my, my German heritage popping up here, but I can see the German government really regulating a lot more towards sustainable manufacturing where it's law and then that will start to trickle in from foreign manufacturers bringing those products into the US as well.

So I think it's quite. Chris's comment is funny to me is that mining companies are asking distributors for greener products. Don't you see a little irony there? Right.

And maybe that's that offset, right?

Like, yeah, they have to, yeah, right.

Be a market credit offset. If I'm doing xyz, it's not so bad that I'm doing a B and.

C. So when we touched on it before the show here how, you know, five, six years ago, it seemed like there was no such thing as a chief Sustainability officer. And now that's becoming a regular position in the C suite. I was talking with Ferguson's Chief Sustainability officer about, I don't know, six, seven months ago on an MDM podcast where she was happy to talk all about the, you know, how they're electrifying their fleets, how they're, you know, they, they've added solar to, you know, a huge number of their warehousing operations and they're, you know, the largest Plumbing distributor out there. So and for them, they're doing those efforts internally because they are seeing, you know, it's cutting down on their energy costs in the long term. So that's kind of, you know, they know that they're going to get ROI out of doing those things internally. But yeah, it'd be also nice to know, you know, what, you know, them or other large distributors are doing on the sourcing front when it comes to sustainability in addition to just whatever they're doing in their own facilities to run in a greener fashion.

Right. That's good, that's, I love hearing that.

Right.

Because it's, it's just, it's all good for everybody. It's just getting to that place where we can find the balance of the right pricing and the right facility at the right time. RP commented here about advising a company that's 100% compostable packaging, that includes the tape and the labeling. So I think it's, you know, I would agree with him. We're going to be to that place soon. In fact, he or Pete commented again, supplier agreements now ask for their sustainability initiatives. Right. Within the agreements. Right. So, and back to our first, first article today, that's that agreement's now going to be driven by AI that's going to be probably going out. And I mean think about this, right with where we're headed with from the AI standpoint is, you know, your contract could be negotiated, your pricing could be negotiated and they could call you out on your sustainability practices because AI is searching the world to see how sustainable you really are. Right. In theory. Right. There's public records that it could be looking at. There's all kinds of things just that that could be coming out of this. So anyways, I could go on and on about that.

Yeah, let's go on to this next one about driving job changes. So this is, you know, was it Jeff Bezos, Jeff Bezos from Amazon, I don't know, a few years ago that said every company is a, is a tech company. They just don't know it.

Yep.

I really believe that comment is coming to fruition, is coming to fruition much, much, much faster through this AI piece. And what I mean by that is, what I mean by that is I think whether you're an old school distributor or manufacturer or old, you know, you just have, you have got to be thinking like a tech company now. You cannot be thinking like a non tech. And what I mean by that is looking at everything you're doing, whether it's sales Supply chain manufacturing or, you know, all the stuff we've talked about, the business side of the house. If you're not thinking about how are you going to incorporate data and technology into that part of the business and start moving in that direction? I don't, I really don't. I, you know, and I don't like to go, you know, be kind of the crazy talk, but I do believe that if you're not thinking like a tech company and, and starting to act like a tech company, you won't exist in sooner than you may think. And I know that's a big, bold statement, but this is driving this much, much faster. And this article, I think starts to hit home on that. I mean, the speed of which jobs that are being jobs that have been around for, for years and you know, kind of just common roles in an organization are being replaced or can being replaced by AI and are being replaced by jobs that require technology and cyber security and all of those things. That's what I mean by starting to think and act like a tech company. And it's a culture thing too, right? It's a culture, it's a mindset. It's, there's a lot of things that, that go into that. Okay, I'm off my soapbox for now.

No, but you're right on, right. And look, we've talked about this in the past. I'm trying to remember some of the actual quotes, but you know, everybody thought that, that the assembly line, right. Fred Ford and turn of the century was going to be the end of all of these jobs, just created new and different jobs, right? Everybody thought that, you know, I mean, you could go on and on and on with change, right? How did. I mean, the light bulb changed the world. Then you think about what the Internet did, right? And we've just got new and different types of jobs. So I think what people need to do. We've even talked, you know, with some of the developers in our company, Tom, about this, right. It's like, remember we were talking a while back with one of them and, and you know, he had some concerns about, you know, AI and chat GPT being able to do programming. It's like you don't, I don't want to say never, but in the distant future, at least in his career, right. You're not going to be at a place where that doesn't need to be overseen by a human. So his job's not going to go away. You might need to make some adjustments to what you do. But this article talked about, you Know, clerical jobs and some accounting things and, you know, cashiers and ticket clerks and stuff like that. I mean, look, you know, ticket clerks are gonna, how, how many stadiums and stuff do you go into now where there's not somebody there anymore looking at your ticket? You get your, you get your barcode scanned to go in the door, right? Things are just shifting.

So, yeah, and I keep wondering just in terms of the labor market going forward, especially for management and anyone in the executive position positions, I think companies are going to keep an eye out going forward for anyone that has some background, some experience using AI tools or, you know, are, you know, have they used that to, you know, in business decisions in the past? I think that's going to be a key quality going forward for anyone in a management or C suite position. Whereas, you know, it used to be just about, you know, how many years of experience do you have in the industry and just your technical know how. But yeah, I think having something involving AI in your resume is going to be a big booster going forward no matter what position you're in. So that's definitely something to keep an eye out for.

I think that's a great point. And we definitely got to move on here. I'll make kind of a last point on this. We see this more and more. You know, we talk a lot in our company about changing buyers. We talk about it here on the podcast regularly about changing buyers. 70, 65, 70% of B2B buyers are now millennials. Well, guess what, the salespeople are too. And the salespeople that are coming in, and we're hearing this from customers, salespeople are asking about what kind of technology do you have in your organization to help me do my job right? And you know, when we, we make, you know, a smart AI enabled, smart CRM and customer intelligence software, and we talk to, you know, quarter, billion, quarter of a billion dollar in sales, you know, distribution companies who never had any CRM, let alone an AI enabled solution that their salespeople are starting to look for. So things are changing and they're changing fast and that's the margin for the day, right?

And just, just look at, I mean, I'll give you an example, right? We talk a lot, a lot of the, you know, our customers do a lot of quotes and they struggle with tracking those quotes and all of that. Now add the AI aspect into those quotes like we were talking about, of negotiating. How do you put together a quote? What's the right type of quote? What are the variables that you want to use to incorporate your pricing and your discount levels and potentially rebate, you know, whatever the case may be, contracts, quotes, whatever. The thing is, if I'm somebody in the front line doing that, I need to be able to do that efficiently. And that doesn't mean going back to my room or to my office and getting a spreadsheet out and trying to figure out all of those things. I've got to have the right tools to be able to do that effectively, because my competitors are going to be able to do that. So it's, it's. Again, that's what I mean by thinking like a tech company. It's a cultural mindset shift. And I think, Mike, your point about even, you know, the executive resume. What's going to be important on the executive resume, I think, is a really, really great point, because if you don't put that culture in and that mindset in, into the organization, you're never going to get there. And if you don't understand it or, you know, you don't have any background with it, it's sometimes hard to. To do that. So it's. I think that's really critical.

Yeah. Especially to millennials. Gen Z, these employees coming up or that are currently in the job market looking for positions, they want to know that the company, whether it's a distributor or whoever they're going to work for is, you know, they don't have to be on the bleeding edge of technology, but they want to know that they're at least embracing new digital tools out there and, and are using tools that are going to make their job easier. So they want to know that, you know, companies are embracing what's going on and embracing this change.

Yep. Well, before we move on, I just wanted to pop up Chris's other comment here about the greener product going back to our thing, a material made from sugar cane. So their MSA is manufacturing hard hats made of a material made that comes from sugar cane. Does that mean you can.

Well, they're struggling. They're struggling with it because guys are taking chips of it to try and, you know, put into their coffee.

Yeah, that's what I was going to say. Can you kind of like, you know, if you get hungry or whatever, does that help or.

No, I'm sure that's coming from the pulp or the fibers and so forth, but great point. I'm appreciative to hear that. We're going to see, you see more and more of that. Right. And that's an interesting. That's an interesting comment, too, because you Know, RP was talking earlier about, you know, compostable packaging that doesn't have regulatory requirements to it like a hard hat would have. Right. You've got to meet ANSI standards and specifications. So if you've gone that extra mile to start using green materials, you know, I wonder if they sell it in any other color than green. This came to mind. But the, you know that, that's a whole different story. Right. Because now you've got regulatory compliance that has to go into laboratory testing to make sure you comply. Interesting thought. So good stuff there. So we, we need to, we need to kind of move along here.

Okay.

We got a lot more to talk about.

All right.

Yeah, let's. We're gonna.

This is more of the same. Right. So we can kind of zip by. Unless there's some key points you want to talk about there.

No, we, we, we. That Wall Street Journal article about reshaping things, it really, it reinforces. I'll just hit a couple points. It reinforces. What we've been talking about a lot recently is near shoring automation. They talk about supplier diversification and sustainability. And all of those things are being adapted into organizations. And what they're finding right out of this is that they're returned to normal, so to speak, after the pandemic. The pandemic threw the world upside down from a supply chain issue. Right. Look what happened with toilet paper, you know, those types of things. Well, now there's a big shift coming out of this. And one of the, one of the things that have gone by the wayside with this is the whole. We talked about this a couple months ago was just in time inventory pandemic showed that just in time inventory could be a killer to an organization. So now we need to use. Start using again. We're going to go back to AI is going to say when these political impacts are happening and these other economic factors are happening and these prices of commodities are happening, you need to do X.

Right.

And it's going to trigger a great impact. There's just some interesting things. I'll cut to the chase here. But they talk as they talk about near shoring. Apple is shifting a lot of production out of China into India. The toymaker Mattel is expanding their operations in Mexico. And this is the, this is the funny part of it that I saw that funny. Interesting is Hisense, the TV company, Tom, in our Santa Barbara office where you are, that's the monitor that we use in all of our meetings. There is from Hisense, the Chinese manufacturer is moving and looking at new appliance factories in both Mexico and for the US Market. So things are changing fast and they're using technology to do it.

Interesting.

Yep. I wanted to talk, Mike, since this is from mdm, I wanted to spend a little time talking about the M and A Roundup. So again, anybody that if you're listening to this, if you're not watching us or you're listening on the podcast where you wouldn't see any of this, we're reviewing through an email newsletter that goes out every Friday morning. It's called around the Horn in Wholesale Distribution. If you don't get the. The email newsletter and you'd like to. The address to get that from us is@helloadsmartech.com each week we get a few emails from people that are not getting that that would like to. So let's talk a little bit about this M A roundup that. That your organization published.

Yeah. So M A is one of the biggest topics, you know, for our audience. They're always interested in who's buying and selling what and. Yeah, and at the end of every month, we do a roundup of all the activity from that most recent month. And for the one we just put out at the end of April here, recapping all of April's deals, it was nice to see that activity really bounced back to a very strong month. We posted news briefs of 40 different M& A news items that are either in the distribution sector or for manufacturers that are very pertinent to the distribution industry as far as industrial, commercial, and building supply distributors that we like to cover. And that followed up March, where there was only 22 deals announced that we covered. Obviously, we're not going to cover every single deal announced out there. There's probably some that were just under our radar. But in a general sense, we. The year started with January. We reported on 50 deals, which was the most that I've seen in the 8 years I've been covering distribution for 50 different M& A transactions announced during January. I think that cooled to 29 in February and then 22 in March. So that made us think like, all right, is this. Has this industrial slowdown that we've been hearing about forever finally arrived? Are deals going to keep slowing down? But then April came back with 40 deals announced, which, you know, any month with at least 25 deals is what I typically consider a healthy month as far as activity in our news coverage.

So for.

For April to roar back like that definitely showed that there's still a lot of Runway out there in Terms of the just appetite for deal making in the distribution and greater industrial supply space. You know, regardless of all these economic red flags we keep hearing about, it seems like the way that this industry continues to evolve, one of the primary ways is through M and A and that's going to continue.

Yep. So there's, there's plenty of money out there. Right. That, that people are still accessing. You know, we obviously interest rates are higher and so forth, but these deals are happening on a consistent basis. Something just came to mind though. You know Ron, RP just made a comment here about thinking that smaller and mid sized distributors might be the first adopters of AI. And I think that triggered for me Mike, as you were talking is you know, that that regional national, you know, independently owned or family owned distributor that goes, that maybe has an interest, you know, we, we hear about regularly, you know, organizations that get acquired is that are family owned, is that they, there's not a succession plan because you know, the kids maybe don't. And these are big organizations too. Right. 100 plus million dollar quarter billion dollar companies that the kids don't want to take the business over so they start looking at being acquired. Well, you want to drive up your, your value, right. Be the guy that's nipping it at Granger or Blackhawk Industrial or whoever it might be. Be the guy that's nipping at their deals constantly because you're running circles around them with technology. Right. And, and I think that you want to talk about driving evaluation up. Right? Be, be the, the nagging, the nagging gnat that they just acquire. Right. Because you're causing them headaches. And I think that ties into some of your comments earlier.

Yeah, sorry, go ahead, Mike.

So I want to touch quick on, you know, forecasting seems to be the thing that distributors want to be better at above all else. If they could pick one thing that they would be that they could get way more insight into right now, it would be forecasting. And this comes after 2021. Much of 2022, given the supply chain, it was just a guessing game to know, you know, when products would arrive and how long it would take for these backlogs to clear. So that's just driven this absolute appetite for better forecasting right now. And AI is going to be a huge part of that going forward. So yeah, that's the area where I might expect to see AI applied the most for distributors going forward is in their, you know, their procurement forecasting.

Yep. Well, you know, it's interesting you say that and Tom had Alluded to a little bit of this earlier. One of the things that we're really learning as a technology provider to wholesale distribution is Tom was commenting about quotes and it's quite interesting because what we've just seen, we just published a case study that earlier this week was, you know, one of our accounts that is a as a building materials distributor they didn't have. And, and everybody that I talked to, Mike, you and I were together a couple weeks ago in Phoenix at the Industrial Supply association event. You were at another buying groups event this week. And very few of these people have any insight into what's happening with all the quotes that they do. And when you start getting digital insights, right. And recommendations and reminders of open quotes, you close more of those quotes. I'd actually go out on a limb here and say that while forecasting is what everybody's thinking about is quote management could be a bigger, faster impact on their business. We have a customer that in Q1 of 2023 grew by 30% and they implemented our technology in December of last year. And the reason I share that is their sales manager said, hey, we're not applying all of that to the technology that we purchased, but we have the exact same sales team we had a year ago. Right. But now they have insights and understanding into their business. And that's where I think people, you know, forecasting gives you insights into what to expect. But if you can understand your quote process and your customer better to understand what's likely to be purchased because you're driving dollars from that big change that.

Happens for your quoting and your all of that is going to impact your forecasting, your effectiveness on your quoting. And I mean all of it is carries through.

Right.

What I think is, and I know we're short on time, but I just wanted to, you know, Mike, you brought up something here and it really triggered with me on this M and a process is. Let's think about it, right? A lot of companies when they buy something, it's buy versus build. You know, am I going to buy something and that already exists or am I going to try and build it myself? I think exactly what you were saying, Kevin, is that if there are companies that are smaller distributors or mid sized distributors that can get ahead of the curve on the AI or just technology in general, just call it that, it's going to be a very attractive buy for some of these larger companies who don't have the time or the wherewithal to go build.

Yep.

And so I think this M and A process could End up really going to another level. I think the M and A process, you know, predominantly has been consolidating, maybe, you know, grabbing some new land grab, getting some more regions, things like that. But if you also then factor in the ability to, hey, this can get me faster to that tech culture and to that tech operation, you know, tech part of things. I don't know, things, I think it could really help as well.

Yeah, we had an M A summit virtually during mid February and we had on there plenty of distribution executives that had been involved in, you know, dozens of deals over the past year and a couple that mentioned that it was the target's digital savviness, that that was the main reason they went after them. It wasn't so much their geographic presence or their quality of their product lines. It was the fact that they were a very digital savvy distributor and that the acquirer saw it as an opportunity of we can. By acquiring them, we're getting, you know, a technology tool that we can adopt across the company. So that's definitely a major factor going forward that just wasn't there before, you know, as technology being the main reason you're acquiring someone.

Yep, yep. So spot on there, you know, Mike Lauer. Mike's with a company who works with manufacturers and distributors in the northeast on helping them with their digital transformation. And he actually brings our solution in as one of our referral partners that we're proud to have with him as well. But Mike talks about CPQ there or configuration, pricing and quotation tools. I see that almost never in wholesale distribution. You see it a little bit in manufacturing. Mike was just asking the question, can you elaborate on what is the adoption of cpq? Tom, your team works closer in the implementation side, but I can think of one or two times in the last couple of years that that's come up. What it. I'm only going to make my comment about my experience. My experience is CPQ is a great concept that rarely gets implemented well or is executed upon in a way that drives meaningful change in an organization.

And again, I know we're short on time, so I won't spend a lot of time on that. It's a. What happens with it, why it doesn't succeed is it's a big leap. So it's. Companies start with a very poor foundation and then they try and leap to this very sophisticated framework. And that leap is too big. Right. It's, you know, I'm trying to go from sea level to 20,000ft in one big jump. That's A It's, it's too big of a jump. So I do think that over time it could become more and more relevant. But I think there's some under, there's some things foundationally that have to get in place in a lot of these companies to be able to take advantage of it. So I don't see that the adoption will be probably as fast and other as compared to other industries where they're doing that well.

But I'm going to make one last comment on that in my gut tells me the concept of CPQ and the way it's used today in some organizations or the tool to configure price and then quote is probably going to go the way of the dodo bird pretty quickly with AI it's just going to be overwhelmed because that's just something that happens within your ERP system I think is probably the, the light.

I think there's, I think there's a lot of that that will end up getting replaced by that.

So good. So hey, let's. Thanks for those that question, Mike. Appreciate it. So I think we're going to leave this, this tech spotlight that we do each week, that private 5G. I think we're going to leave that in for next week as well because that's worth a conversation. The last thing we in the newsletter that we have each week is we have what we call our Goodreads and this is another MDM piece that's making procurement strategic again. So that's a pretty good read as well. So again, if you don't get the newsletter, let us know. So before we cut out today and move ahead, Mike, let's talk a little bit about what's happening at mdm. You've got some events coming up soon. Let's hear a little bit more about Mike, Tom and the team at MDM and what's going on there.

Yeah, thanks. Yeah, it's nice to be able to spread the word on what we have going on a little bit more. So in the near term coming up we actually have a virtual profitability summit and that's going to be Wednesday, July 19th. It's about a half day program, it's closer to six hours but we're basically assembling some great thought leaders in distribution on everything involved with profitability. And pricing is going to be a huge part of that discussion. It's basically going to be some concurrent panel discussions, some presentations on best practices in all things profitability for distributors and yeah, so that it's going to touch on obviously inflation is a Huge part of that with pricing. So it's going to touch on, you know, how you can best, you know, execute some of these pricing actions. Whether it's, whether you're, you know, keeping pricing steady or whether you feel the need to continue to increase prices and all the above there. So that's going to be a great just virtual summit and it's completely free which is the best part about it. So definitely have a chance. Yeah. So if you want to check out more details about it and register, just go to mdm.com go to our events tab and just see we have our profitability summit on there. Yeah, it's going to be a great six hours. We're partnering with dorm group on it. They have great insights into both the industrial manufacturing and distribution side. So they're doing some good heavy lifting in this. But yeah, it's going to be great thought leadership on profitability and distribution.

Good.

And then a little further out in September we have our annual in person shift conference that is September 18th through the 20th in downtown Denver. It's a great place. It's usually easy for everyone to get to Denver but that's our more all encompassing in person thought leadership conference. You know, we ballpark it where we, we expect you know, 200ish people, hopefully even more than 200 people in the, at the event. And it's kind of the same concept as the profitability summit. It's going to be, it's pure education about some major topics in distribution and the 10 poles in there are digital transformation, sales and marketing best practices and, and then we're also going to have sessions on the discussions and culture and I know there's one more I'm touching on. Yeah, culture and the labor just kind of aspect out there and we're, we're currently wrangling up a lot of just well known distributors who are known to be doing these things right that can share their expertise out there. We have some great distributors locked in for this and we're, we're kind of finalizing our agenda right now. We're hoping to get that published here in the month of May. But yeah, it's going to be a great in person event for everyone to kind of learn best practices about a lot of these top of mind issues when it comes to digital transformation. Supply chain challenges, procurement, pricing, all the above. Yeah, it's, it's basically two, two full days of content and then the opening date has kind of some pre networking functions and there's receptions throughout. So it's a great mix of education and networking for. And we're targeting kind of C suite people at, in distribution. So we're trying to get as many distributors in the room there as we can. And yeah, it's just going to be a great event of education for a lot of executives out there.

I think, Mike, you and some of the others like ISA and that have all these great events, I think you're gonna have to like start doing them like every week in order to keep up with everything. Because I do think that, you know, you were just saying that peer learning from your peers, we're all kind of learning together, right? It's like no one's, no one's an expert in this. And so I think a lot of the peer to peer interaction, learning what's happening and working together, the community part of it I think is important. And I, and I, you know, in all seriousness, I probably see a need for probably more frequency of some of these things that you guys are doing just because of the speed of which things are moving.

Exactly. And like you said, distributors, they want to hear from other distributors that are doing these things.

Right.

They want to hear about the lessons learned, the successes, the failures. Yeah, they don't want to hear just from tech providers that, you know, they have a lot of industry knowledge. But yeah, they also want to hear from distributors who are doing this, you know, either right now or, you know, that, that can speak on past experience on a lot of these technology topics.

Good.

Well, you know, when I think about thought leadership in wholesale distribution, specifically in the industrial building material and related markets, I think, you know, MDM is right there at the top. Right. We, I don't know what the right term would be. Republish or repurpose here each week in and around the horn, some of your data as well. So we appreciate you doing that. We need to hustle out of here today. Mike, thanks so much for joining us. Before we leave, if someone wanted to be on the mailing list for updates from mdm, Modern Distribution management, how would they do that?

What's the, yeah, the best way would just to go, go to our website and then there is a button, if you scroll down to the bottom of the webpage, it just says, you know, subscribe to mdm. I, I think it just says become a subscriber is basically what it says.

That's what it is.

Yeah. And so that'll take you right to, you know, all you do is drop in your email and then you get our daily newsletter.

Okay.

Simple as that.

All right, well, this has been a great session. We appreciate everybody's comments. Mike, thank you for being with us. Love to have you. Maybe again later in the year, maybe you can help us to convince Tom to come on and and join us as well. Tom, Gail there would be great but always appreciate the feedback. We'll wish you a fantastic weekend. Mr. Burton, the same to you. Anything in closing, Tom Burton.

No. Thanks for everybody for all their comments and have a safe and fun Cinco de Mayo.

Yeah, enjoy I guess.