Around the Horn in Wholesale Distribution Episode 143

Sa. Sam.

All you got to experience it.

A double spin move.

Double spin?

Yes, double spin.

That's like a double salchow in ice in figure skating.

Except I can spell double spin. I don't think I could spell saukow. So we've got that piece working there.

And I'm impressed you didn't kick out all your wires and everything shut down just so.

No, no, no, no. And look, no blood today.

All right? Yeah.

And I'm home office.

Good. Well, welcome home.

Thank you very much. Although we should be telling Paul that I came. I came home a week ago tonight and I think I actually need to think about next time I'm complaining about too much travel or too many airplanes. I need to think about our friend Paul here and all the places he's at and going non stop. So you're a man on the move, Mr. Kennedy.

Yes. Just got back last night from the NAED national meeting in Marco Island. Had a great group down there. That's the big NAD national meeting. Happens every year. And it's also when we give out the hardware. So. Had an award ceremony on Wednesday night. Wes Smith, the current CEO of naed, received the Arthur W. Hooper Award, which is the highest honor that we have. So it was. It was a great. Kind of a great celebration.

I might have seen a picture of you on stage there too.

Yes. They'll, you know, if you put words in front of me, I can read them. And I. I didn't stumble, didn't fall off the stage. And.

Oh, look at that.

Our producers are good here.

Yep.

You mentioned something and it pops up. It's, you know, like A.I. almost. Almost.

You know, we can't really do it here, but if we were able to zoom in on that. You look like you're holding cord up there, just speaking words of wisdom.

Well, great group. Great group of folks there. And that's, you know, manufacturers and distributors both there. So it's. It's a great mix of people and you get to be around a lot of smart people. And anytime I could be around a big smart group like that, I come away more well informed and informed, too, and learn a little something along the way.

That's very good. Yep. Well, you know what I always look at that I want to be in rooms where I'm not the smartest guy. So that looked like one of those for sure. I did that last week with the folks at shift. You know, we're already off the rails here a little bit because I haven't even introduced you, Paul. So let's let's do that. Why don't you tell our guests, or excuse me, our audience here, who you are, what you do in the wonderful organization, actually organizations that you lead because you're involved in.

Not Kevin freeze for you too.

He did and it's.

He tried to do so he tried to kick. To do some dancing and kick the.

Thing up his mouth is a gape. Tom, I'll take it from here.

Let's go. We can run this damn show.

We can go. So I'm Paul Kennedy with. With dsg. I have the honor of. Of serving a thousand employee owners across 62 locations, 10 states across the upper Midwest. A diversified distributor of electrical, plumbing, H VAC and waterworks. And also have the honor of being the current chair for the national association of Electrical Distributors and involved with AD affiliated distributors and serve on their LLC board.

So.

A lot of industry touch points for me. Again, the more smart people I can be around, the more well informed I feel like I am.

Yeah, well, and that's. And as you said, you already had a busy morning today. You got back into town last night and what, had two doctor appointments and made it here. So we appreciate it.

Absolutely. For sure.

Well, Kevin has dropped completely, so we.

Must have overwhelmed him.

Yeah, that. You know, so. Hey, I wanted to say good morning, Dirk. Our friend Dirk beverage. He'd like for you to do a double salchow, Paul.

So I might pull. Pull a hamstring or something, Dirk. So I don't want to do that, but good to see you, Dirk.

And good morning to John Gunderson. We were just mentioning him and Brian Conley. And if you're out there, please jump in, say good morning to Paul and welcome him home because he has been a frequent traveler. All right, so let's. So at this point, Kevin would usually do what he calls housekeeping. I'm going to do a very abridged version of it because that's just what I do. So welcome to the show. If you probably know. Most of you probably already know the format of around the Horn and Wholesale Distribution. We have a newsletter that goes out every Thursday night and it has a series of articles on it that we then go through today. And if you don't get the article, hello atLead smart tech.com. you can also reach out to us on LinkedIn and we have a website aroundthehornpod.com and it looks like Kevin is.

Back and you're horrible at that.

No, it's. Wasn't that kind of snap pop? Wasn't that just kind of like, hey, we're right. Right back to it.

Who sponsors the show?

Tom Lead Smart Technology sponsors the show. I want to thank them for that. We couldn't do it. I'm not so sure about that. But it's. Anyway, no, I mean, they have the. The world's best AI enabled CRM for wholesale distribution and manufacturers. What else do you need to know?

I need to know that my Internet needs to stay a little more solid. So you don't do this anymore.

So everyone's going, hey, this is the best housekeeping we've had yet.

So I'm not seeing those comments, but maybe mine are delayed or something.

So your Internet doesn't work. So.

Yeah, very good. Hey, you might have mentioned. It's good to see. Good to see Dan judge with it.

There he goes again. All right.

I think that's his Starlink around the.

Yeah. All right. All right, Paul, I don't.

We got this, Tom. We got this.

We got this. We can't. We can't count on Kevin's Internet. So. All right, let's jump into the articles. So, hey, as always, we are going to start off with the economy and supply chain. It's kind of funny. Our article here, our first one here. Kevin, are you back or you're kind of.

I am. I think that we got some Internet problems in our neighborhood, but I'm here. You can't get rid of me that easy.

Okay. We were trying. We were moving forward.

You think I'm gonna let you enjoy this conversation with Apollo by yourself all day?

Yes, exactly.

No chance.

All right, well, we were just starting off with the first article, the Weekly tariff update, which is already a little bit out of date, given that this, what, this morning or last night, the President tweeted out that the talks are going nowhere with the European Union and that he wants to. I liked his term, or I liked his wording. It was. I recommend that we're going to. I recommend that a 50% tariff is added. So. He didn't say a 50% tariff. He says, I recommend. I don't know who he's recommending it to, but stock market reacted this morning, modestly. Don't know how seriously they take them. But anyway, I guess. Paul, start with you. What's your. What's your overall take on sort of the weekly tariff update and. And kind of where we think we're at. Yeah.

So, one, I appreciate getting a weekly update tariff because, well, like you said, it's outdated as soon as it's published.

Right.

And it is such a moving Target that makes it difficult to manage the business sometimes and creates a lot of uncertainty. But you know, you've got to stay on top of it. And you know, the one certainty is whatever it is today, it's going to change. So just if you're understanding that and flexible enough with it, I think that's, that's a good way to approach it. You know, had the opportunity to talk to a lot of manufacturers this week at nad and the one thing I kept hearing was, well, we're, we're scenario planning and you know, we have seven or eight different scenarios and you know, we'll kind of implement. But some of them have gotten a little gun shy on putting out new price increases because is it going to be enough? Is it going to be too much? And they don't want to whipsaw their customers. And I will tell you from a distributor's perspective, I think, and Stefan would know this number right off the top of his head, but I think we had 147 price changes that we were trying to get into our system and as you can imagine, they come to us in all different formats. You know, some of them are, you know, you know, hammered on a stone and some of those are in nice files. And so it's just, it's a lot of disruptive work and it's non productive for frankly.

Do you mean your vendors, your vendors send you data just like your customers do?

Yes. A picture of a 2x4 and all of that?

Yeah.

So it's, it's really been interesting. But I, I think the uncertainty has been, you know, probably the biggest frustration is just you wait a day and it changes. I, I think I also saw, and I, I don't know if it was uh, the same tweet or truth or whatever, whatever we call it, that Apple, if the iPhones weren't going to be made in the US that there was going to be a 25% tariff on Apple iPhones and I think their stock, you know, was down 3% this morning on, on that news. So it's.

Yeah, I was wondering about the legality of that. I, I don't know if you could create an executive order that would slap a tariff on a company. Maybe you can. I just, it's. That's the first time he's done that and why he picked on apple. I'm not 100% sure either.

Well, I mean I think if you look at that, right. Tim Cook went and played nice pre election in between election inauguration, lots of meetings at the White House and Clearly, something went sideways. My assumption would be something went sideways in those discussions long before tariffs. And then the word got out about all of. Because was it two or three, like, you know, mega, mega cargo jets that Apple moved iPhone, parts and stock to India. Now those are already facilities with Foxconn, that's their major manufacturer that now he.

Looks like he's asleep.

Yeah, he's looking asleep. Yeah.

You know, back to, back to the tariff, you know, conversation, you know, from a distributor's perspective, hey, we are largely able to pass those price increases on. Right. But we want to give our customers some level of, you know, confidence that the price we have today is, is going to be consistent. So that's a little bit of a frustration. The biggest, the overriding biggest concern for.

Me is is there going to be.

Demand destruction down, down the road? And that's the piece that we don't know. At what point does increased prices based on tariffs destroying demand down the road?

Do you see, Paul? Obviously, there's a lot of talk about. And there is some new manufacturing and new initiatives in the U.S. a lot of money coming into the U.S. from overseas. Big deal with what, Saudi Arabia and UAE a week ago or so. I would think that that's bullish for the industry in a sense that they're going to need to buy parts, they're going to need to buy things. And how do you factor that in? You know, there's, there's the tariff aspect of it, but there's also. Is there. Do you guys also see the upside?

Yeah, I absolutely think there's, you know, reshoring or on shoring, whatever it is, if it's, if it's new manufacturing or bringing manufacturing back, I think there's absolutely going to be investment that's going to be made. You know, we're seeing that, you know, with data centers. When you look at the, you know, the increased capacity that's required from a power generation perspective and, you know, bringing manufacturing back is going to increase that demand on, on, you know, the electrical power generation. 1, 2. I think there's a, there's going to be a labor component to that and then three, the actual construction, the other piece of that, a lot of the manufacturing equipment, you know, comes from companies that have tariffs on them. So while they can put a building up or refurbish a building to do it, they've got to get the actual manufacturing equipment here. And if they're going to be burdened with tariffs on that, it changes the economics of the project a little bit.

It's not just as easy as saying we're going to move some machinery here and we're going to open up a new plant. Right. There's so many nuances to that. Hey, before we jump and move ahead, Tom, I'm sorry that my having some Internet problems and I dropped off there a little bit ago again. But Paul, I don't want to put you on the spot about specifically dsg, but because of your work with NAED and also Affiliated distributors, the wonderful buying group that you're on the board of there as well, maybe. And if you already mentioned this while I dropped off, I apologize. But you know, obviously this is a big deal as we talk about tariffs and the changes within manufacturing. You know, you were, I was getting ready to say when I dropped off last there for a moment was, you know, I was talking to a large industrial distributor recently and they said, you know, one of the impacts of this, the tariff component is. And you had talked about all the changes in pricing and the numbers that Stefan's working with in your organization there. But the impact on the organization from just the resources and time is significant in managing this. That's taking people away from other important things in the business. So I wanted to one, see if you could maybe address that a little bit. But then two is what's maybe a broader sentiment of the impact that this is having across the board within, you know, your peers, not just dsg. But is it every day we're having meetings, is it, we're got a task force. I mean what are most people doing out there related to this? Because I think, you know, we've got a broad mix of, of service providers, of distributors, of manufacturers and other people. I mean, what does it look like day to day? And again, I don't want to put you on the spot with what, what's going on at DSG unless you choose to share that. But what's just the sentiment you're seeing from your peers?

Yeah.

So back to your first question. There is a lot of unproductive activity that's being created with all of this that could be better, you know, better use somewhere else. But that's the nature of the beast. So we're attacking it. I will tell you, I think on whatever day that was, Liberation Day or whatever, I think there were probably a whole lot of task force that were stood up and as I mentioned earlier, scenario planning on what ifs and country of origin and making sure people really had good visibility into where their products were coming from. You know, and I'm talking about More from the manufacturer's perspective, a distributor's perspective as well. But we're a little bit at the mercy of the manufacturers because, you know, we don't have full visibility into some of their components that may be a manufacture product that's manufactured in the US but it may have 40% of its, of its componentry coming from, you know, a country that is now subject to tariffs. So we don't have good visibility into what, you know, how whatever tariff for a particular country translates into their finished product.

Right.

I was talking to another manufacturer earlier this week and they were just, you know, contemplating the, the impact of automation and how they could absorb some of these tariff impacts through automation in their, in their manufacturing process. So I thought that was an interesting, an interesting take as, as companies try and absorb some of this and then, you know, how much can they really pass along without, without demand instruction? So I think there's a, a wide array across both manufacturing and distribution on how people are approaching it. I think there's a little bit of hangover now of, you know, this whipsawing of 50, 130%, 10%, you know, so you can spend a lot of time planning and that, that, you know, we're one tweet away from, you know, all of that planning being, you know, thrown out and start over. So I, I think it's staying close to it, understanding it, making sure that you have a good understanding of, you know, your supply chain at, you know, some level of detail, but in being ready to make decisions and have alternate plans.

Paul, did you see a, what was it now, a week or maybe two weeks ago when the whole China thing, the China thing got resolved or not resolved, but relaxed, I guess, for the moment. Did you see a breath. Yeah. Paused. Did you see a sigh of relief? Kind of come across a lot of the organizations and are they letting down their guard a bit as a result of that? I'm sensing that, but I don't have any direct evidence of that.

Yes, I think you're right, Tom. I think there were, you know, many manufacturers who had a heavy reliance on, on product from China who had not implemented price increases because they did not think that 130% was going to be the number, but they didn't know what it was going to be. They knew it was going to be something. So now it's, I can't remember what day is it? June, what second is the next. Whatever day it is, is, is where this, this hold, you know, is going to be on, on the China tariffs is going to be re. Looked at. I, I think there's this now, this anticipation of what's that? Or apprehension of what, what's that going to be. So there's still a heightened sense of awareness, but I think the immediacy of 130% has kind of gone away and I think everybody is settled to okay, it's going to be something less. And it's, it's interesting because you almost think, hey, if it's only if it is 10%, boy, what a sigh of relief. Or if it's 30% or whatever the number is. Right. Because that just means it wasn't 140%.

I, I think you're spot on.

Yep.

What really comes to my mind in this is that when they had that meeting was the la. I guess it was last Saturday in Switzerland, and then read this morning that there's been ongoing dialogue in between that is that I don't think anybody said, okay, this is over, but I think people are able to now say, okay, we're gonna find there's gonna be something balanced. I think it's a little bit of what you're alluding to there is it's not going to be 130, 145, whatever the number is, it's going to be, there's going to be tariffs there. But it actually takes me back to the, to something Tom asked me about last week when we were talking and you know, we just were saying, well, let's just say There was a 10% tariff across the board and maybe some, you know, a few with some buffers on it was, you know, what, what happens with that? And Paul, I'd love your take on this. You know, what I, what I told Tom, I said is probably if it's less than 20%, that manufacturer is going to take a pretty significant chunk of that distributor is going to take. You know, maybe it's not a third, a third, a third, but it's, it might be, you know, first 20%, maybe you get 7% that a factory takes, you know, distributor takes 5% on something and you know, the customer is going to have to eat the difference, but it's, it's going to be a balancing act of all parties. Is that, is that a reasonable take in your mind or.

No, I think that, frankly, I think.

It'Ll be passed on okay, fully across the board. 20% from a manufacturer is going to go straight through.

Well, the manufacturer will try and offset, you know, offset some of that through. Some of it will be reduced margin, some of it will be, hey, what, you know, what can we change in our manufacturing process from a component perspective or, you know, how can we do something to reduce the cost? But they're gonna have to pass some of that on and the rest of the rest of the supply chain is just gonna pass it along.

Yeah.

What I told Tom is that there's, you know, depending on the customer. Right. So a manufacturer will do exactly what you described, right. Try and find efficiencies, reduce margin so they don't have to pass the whole amount on. And then there might be, you know, depending on the customer type, a distributor might eat a small bite of that. But then the customer, the customer is going to get an increase. It's just, where does it come from?

The other thing that was interesting this week, particularly as we're talking about China, the number of manufacturers that said, hey, we moved out of China four or five years ago because the relationship was just, and maybe it was during the first Trump administration, you know, where the tea leaves were starting to change. So they, you know, they were, they started changing their supply chain. And the, frankly, the larger concern is with Mexico and Canada today from a, from a tariff perspective.

Well, I've talked to a number of folks, mostly in the industrial, industrial safety space because that's where I come from, where they had done a really nice job of over the last three to five years, have been moving a lot of their manufacturing out of China and using vendors in southeast, other parts of Southeast Asia. And they, you know, one in particular I was talking to, you know, felt fairly comfortable and I was texting with him actually on the Liberation Day. In fact, it was quite interesting because the news conference, I think it was started at about, I want to say like 4:30 Eastern time on, I think it was a Wednesday. Well, that was the same week as the Industrial Supply Association's national meeting and spring event. So I was there and I think it was just before lunchtime was Brian Wild from naw, who's their legislative analyst and sharp guy who's in the weeds on all of this. And he's on Capitol Hill pretty much every day working on these things. And, and he was literally, Brian said it was funny. I was talking to Eric Copland about this from NAW last week at the shift conference from mdm. Same thing was Brian's comment was, I'm really glad I'm giving this talk. It was a fireside chat thing. He said, I'm really glad we're having this talk before this afternoon because, you know, he would try, need to try and figure it all out. But I think what happened was when the tariffs were so broad stroke across, you know, the world that it really hit some people hard that had been working to move manufacturing out of China into other parts of Southeast Asia. And probably some of them didn't even realize maybe some of their new factories were just new names or backstopped by Chinese manufacturers that are now in Laos or Vietnam or somewhere. But I thought it was kind of interesting that we saw that. But I do agree with you on the impact, and I'll throw this out to you just from a discussion standpoint, is this is just one, one guy's take on this. But I think while there's certainly huge ramifications with lumber and energy and things like that from Canada, I think there's a bigger geopolitical issue tied to Mexico. And, you know, I've been saying this for a year, that at least on this show and in conversation is that we've historically looked at NAFTA as, you know, almost US or Canada and Mexico just are two strong trading partners at our borders, kind of looked at them the same. And no offense to any of my close dear Canadian friends, but I think the implications could be a lot stronger of what could happen in Mexico related to steel and other imports. And then, you know, it'd be a whole lot easier and a whole lot more could be accomplished by Mexico cozying up to China than it could be probably with Canada.

Yeah, I don't know what percentage of our steel comes. I mean, a fair amount of our steel number comes from Canada. And hey, I live in Minnesota.

And some of our energy, yeah, our.

Power comes from Canada. But back to tariffs, just another thing as we, as we talk about the impact, Tom, to your question, you know, the pull ahead that we saw in April and May of people anticipating our customers anticipating that, you know, prices were going up. So they pulled ahead business. We saw our backlog grow pretty substantially and we have now seen that rate of change in growth of our backlog, you know, normalize. And I think June is going to be a really telling month relative to, hey, are we seeing demand destruction and is that pull ahead kind of flow through the system, or do we have a new norm and we're going to continue to be bullish pushing forward?

Well, I think one of the articles, I think it's at the end, Kevin, is the all of a sudden freight has picked up again from China again as soon as the pause occurred. So now there was this backlog. So are we going to have that Same sort of pull ahead scenario, you know, kind of roller coastering through the.

Yeah, we haven't, we have an article in the newsletter about that. Trans Pacific Gridlock Looms, Tariff Truce Triggers Freight Frenzy. And you know, it's, it's funny. I, I watched this, this came from. It's in our second look. It's at the end of the newsletter. Things we've talked about previously. We, if there's some follow up, that's where we put that in the newsletter. And the. Paul, I don't know if you've seen this before. There's a, and you're a, a former Navy guy. So this might be an interesting newsletter for you to get. It's from the organizations called G Captain. Just the letter G and the word Captain and it's all about shipping and international freight and so forth. So we use their content quite regularly. Me being a sailor and a yacht racer and loving the ocean, I, I get wrapped up in it sometimes just reading some of the articles. But Tom and I have a childhood friend that we grew up with who's a, a harbor pilot in the port of Long beach and he actually posted this article on his Facebook page because, you know, we went from, you know, the, the. And Paul, I'm sure you've been out and seen the ports of LA and Long beach there side by side. It's. They're separated by a man made spit of land is all it is. It's just, but it's one big port. If you were to look at it from the air. But I don't know where it is now, but forever it's been combined it's the third largest port in the world and busiest. Well, they, the CEO of the port of la, prior to the Chinese American meeting on tariffs said they were expecting at least a 30% reduction if not more. And because ships were just stalled. Right. I have. You might, I don't know if you guys do any direct importing, but a lot of people that do just hit pause on all of that. I have a lot of friends in those businesses that have done that. And now Bob, our buddy posted this article and this is saying boy just won the backlog of ships waiting. And because everybody left port, right, you had some ships loaded that hadn't even left. And I talked to a friend the other day and you know, he's a broker of low voltage electrical products and works with a lot of large distributors and he had three or four containers sitting and clicked, you know, hit the button to release those right away and those same Customers came back, and I wanted four or five additional containers if he could get them out in time. So we're seeing kind of a lot of that. So I don't want to say it's time to be encouraged yet, but I think this just, it almost, I mentioned this earlier. It almost feels like though, that that U.S. china meeting in Switzerland last weekend allowed a lot of people to take a deep breath.

Right.

And maybe have a little bit less of a freakout mode.

Yeah, let's, let's, let's hope so. And, you know, basically, and I don't know this, and maybe your buddy knows this. What's, you know, what's the lag? So if, if tariffs dropped two weeks ago, you know, when are we going to, when are we going to see kind of that, you know, that burden on the shipping channels and trucking that Tom was talking about? Is that, is it two months, two and a half months?

And, and what happens next with it? All right, I think that right now is that, hey, we've got 90 days. Let's get whatever we can done in that time frame.

Right.

You know, so that, that's good, Tom, you want to move ahead.

So that means everything. That means Christmas is shipping right now, right?

Right.

Yeah, right.

Probably.

And, and, and maybe if we have, maybe if we have some, we'll have fewer empty shelves, as the doom and gloomers have been saying, or if, if so it'll be for a far less period of time. So.

All right, so we're what for do our first article and we're a half hour in. So, so Paul, I hope you have, you know, eight or nine hours.

Yeah, we'll be here. We'll be here till dinner time.

So I think we covered it. We covered a lot of.

It's important. It's important that we did. Although I will say we. James with perimeter made a comment earlier, and James is a, is a great customer and a good friend, but I just signed an executive order for a price increase for our Atlanta customers because anybody that thinks Tom did a good job on housekeeping, I don't know. So, James, the executive order has been signed. The invoices are being updated. So James is a great buddy. So what's Marty have to say here? What comes to mind is the difference between the tension and friction. Tension challenges party to work and to be better. Tension can be healthy for growth. Not so much on the friction side. That's an interesting take.

I think it is. I think I'd like to dig into that more when we get to that Go grow or go article because I think that fits into that. Yeah, that well. But agreed is like, you know, hey, it kicks up your game, right? Forces your game to, to kick up. Let's talk a little bit about the inflation part here and, and maybe the, the budget as well. You know, this article from CFO Dive Inflation expected to surge 7.3 in a year fueled by territory. This was surveys they did to, you know, based on what companies thought inflation is going to be predominantly with tariff. We kind of touched a little bit on this before the show. But Paul would love your take on this as well. Is my thought on this is inflation. The risk of inflation in my opinion could be higher with this new budget that is I think just passed the House last night or yesterday. It should just be rubber stamped through the Senate because it just needs a Senate majority. And we're certainly not cutting expenses. We're not reducing the deficit. We're not doing any of the things that Doge and all the other sort of things where we're doing. And I think there's some great things in there. You look at it from the consumer perspective, from a tax perspective and all of that, but from a budget perspective, we're not balancing the budget and bond rates have gone up and the market has been a little skittish from it. I don't know. What's your thought, Paul and Kevin, what's your take on do you think that we're going to is inflation going to be driven off of tariff. Is it going to be driven off of our, our lack of fiscal responsibility or all of the above?

Yes. D. All the above. I think you're right and I think, you know, I think what we're seeing in the bond markets is kind of a reflection of that.

Right.

And you know, the lack of confidence. There is no, you know, the, the budget bill. There's some great things in there for manufacturing investment and accelerated depreciation and, and some things like that. But it's going to add 2.3 or $3.3 trillion to the deficit in the next 10 years. And you know, we're already $35 trillion in so you know, that doesn't bode well for, you know, for the future and for, and if you can't have fiscal restraint there, it's, you know, so I think it's a combination of things and it's interesting. I was just thinking about some of the, you know, the outputs of that budget bill with, you know, trying to drive domestic manufacturing and things like that, which are a little bit offset or countered by some of the tariffs as domestic companies are trying to reshore or bring manufacturing or start up new manufacturing, they need equipment that's maybe made in Europe or somewhere else that's subject to tariffs. So you kind of have this dichotomy of we want to invest in domestic manufacturing, but we're going to tax it.

Kevin, you're on mute now. That's the way we like him. Hey, you're bringing this on yourself, right?

So that's true. Had Internet problems and Cooper was trying to join the conversation from the other room because, sure, Mrs. Brown's Amazon package was being delivered or something like that. But, you know, I think it, I couldn't agree with more with either one of you are saying, I think that we are in such a pivotal moment, I think, in the American economy right now. And you know, Paul, I've been saying now for the last few weeks that this administration could be what will probably be one of the most pivotal administrations of recent, recent history, recent record. And it's either going to be a hero or zero moment, right? It's, it's either some really good things are going to come out of that because you can talk all day about, you know, lowering the deficit, which is important in getting that done, lowering taxes for middle Americans and all of those things, and bringing, you know, doing the onshoring and so forth, but it's when you really start digging into the nuances of what that is. And we were talking even about it before the show about, you know, manufacturers that, you know, you had mentioned about trying to open new factories. But there's tariffs on the equipment. They've got to come. So it's not as simple as saying I bought a piece of land in Kansas and I'm going to throw up another building and there seems to be a reasonable workforce nearby. There's so many factors that go with that. And yeah, the idea of, you know, financial benefits and tax decreases and so forth that go with that. But one, it's not a slam dunk and it's not going to happen right away. And digging, you know, devil is in the detail, so to speak, as they always say on these things. So I think there's a lot that's going to go with that. I did want to throw something back out there, too, and I haven't researched this too closely, but Treasury Secretary Bessant has been proposing, I think he calls it the 3, 3, 3. So it's a 3% drop in the, in the deficit and 3%. I think it's actually tying to an increase in what the inflation number could be as well. So Tom, have you read anything about that yet? I just, I heard about it on the all in podcast.

Yes. No, I have heard about it. I don't remember what the exact numbers are.

Yeah, somebody wants to research a little bit more. There's a lot of things thrown back at that. But it's also interesting too. Right. Because now we've got, you know, we've got risks of some inflationary pieces happening now which what's that going to do to interest rates and so forth. And I've, I've been, you know, concerned that maybe that 2% rate for inflation is not a reasonable number anymore, specifically when you think about how they came up with that and how long it's been around. So that will be something we need to kind of watch a little closer.

You know, the, you know, as I just think about the inflation impact and Tom, to your point, I think it's, it's fiscal policy and its tariffs. I think the combination of those, I think are going to drive inflation to a rate that's higher, whether it's 7.3%.

Or, and I think Mark brought up right here, it's the disruption that caused from the, from the tariffs as well.

Right.

Not just the tariffs, but the disruptions. But. Yeah. Sorry. Go ahead, Paul.

No, so I, I think you're absolutely right on, on that accord. But the, and I completely lost my, my thought there.

That's okay.

It was no, we were, you know, talking about the, you know, the impact and I think it is both and are they both going to settle out at the same pace or you know, is, I, I have more hope that we'll, we'll bring some consistency and some, some focus to tariffs long before I will because I think the fiscal policy has been going on for a long time and it's going to continue on because there doesn't seem to be any intestinal fortitude to make it any different than it is.

Well, and the 333 number is achieving 3% GDP growth, reducing the federal budget deficit to 3% of GDP, which right now it's about six and a half percent. So that's a major reduction and increased domestic oil production to 3 million barrels a day. The things that are there, the 333 strategy that he outlined there. But that, but that, that budget, again, it's a thousand pages and I don't know all the ins and outs of it. I don't see that on the road to decreasing that. The deficit to 3% of GDP.

But yeah, and I'd have to wrap my head around a 3 million barrels of oil. I mean, oil's at what, about $60 a barrel right now, which is about, you know, production cost in the shale plays and, and OPEC's, you know, about to open the floodgates again. So I think there's plenty of production globally that's satisfying the demand.

Yep.

All right, Kevin, where do you want to go next?

Let's, let's get into our manufacturing distribution segment. Well, you know what, just real quick, we didn't talk about, I apologize for that. We wanted to stop. There's two articles we had previously about really I wanted to kind of talk about the article there from Reuters about copper's U.S. tariff premium crushed by a wave of imports. But I think it's, there's a broader discussion about precious minerals because we had another article about that as well. And in copper in general, Paul, are you seeing anything different with, with your commodities that are tied to, I mean, obviously you guys sell a lot of wire and things like that that are full of copper besides, you know, all of the other copper components that you sell. How are you seeing that tying in with this? Is there pretty much the same across the board with, with those precious commodities like that, or is it a little bit different?

Well, with copper and again, as you can imagine with the electrification of everything, the demand on copper and aluminum from a conductor wire conductor perspective, I was amazed as I was reading that article, the amount of, and frankly, that was just a pull forward, right? I mean, the amount of copper that was physically moved into the US to bypass, you know, these tariffs, it was amazing to me. And I don't quite, I'm not an economist, but I did stay at a Holiday Inn Express last night to understand that the, you know, the London Metals Exchange and the COMEX and how those two, you know, interact and are, you know, what the interdependencies are. But I just got to believe that that much physical copper moving, you know, that pull forward is disrupting kind of the global supply chain for copper. One, when we've seen copper, you know, it rode up, it kind of leveled out, it came down and it's been relatively stable. I think aluminum is, is where we're really seeing. I was talking to a wire manufacturer earlier this week and getting, you know, the, the playing field leveled in the US with aluminum import. Will, will, will help with, with wire manufacturing. Aluminum wire manufacturing in the U.S. yep. The rest of the precious metals, it's, you know, I Think we have a global problem where there's a concentration of precious metals that are inputs to a lot of important things that are concentrated in countries that aren't necessarily friendly with the US and are a little bit of a economic cudgel for us or not for us, against us. So that's not a good place to be in. So either coming up with replacement rare earth minerals to do what we want to do. So I think innovation is going to help with that.

Yeah, that's absolutely the case. Yep. We talked about that briefly last week. There's a Silicon Valley company right now that says that they can't remember what the percentages were, but as a very small fraction of the rare earth minerals that they need for their EV batteries. And, and so I think to your point, innovation and, you know, finding a way to do things better and more efficiently and I don't know that you're going to find a different way of getting, getting electricity to go across the different wire rather than copper anytime soon. But, but if we can be more efficient in the, than the use and the needs, then that might be a big benefit to us as well. So. Very good, Tom. Why don't we jump ahead now? I just didn't want to miss those two in talking about those, those pieces. So we got a kind of a cool article in here as we go into our manufacturing and distribution segment from industrial distribution, grow or go. What distributors must do now to outperform the cycle. And I think we've got the right guest on the show today to, to talk about this type of thing. I think that Paul, you would not be looked at as being timid when it comes to growing.

No, I, if I had to pick, and I didn't know I was picking buffalo or sheep, but we would be more on the buffalo. We are, we are bullish. We are optimistic. We are continuing to bet on ourselves as DSG and our 1000 employee owners across our footprint. So we continue to invest and invest in new branches, bolt on acquisitions where it makes sense. Expanding our offering. We're pretty diversified but we don't do everything everywhere. So expanding that offering into other locations and then just organic growth. Organic growth is the least expensive growth that, that we can fund. Leveraging our existing footprint and you know, our existing infrastructure investment and you, you know, doing that with technology, it's not necessarily just hiring more people. It's, you know, how do we, how do we address and how do we get smarter? This is going to sound like a commercial for Lead Smart, but thank you. How do we get smarter about what our customer needs are and know where we are with our customers and where the, the opportunities exist at the customer level where we can have, you know, deeper relationships. Because organic growth with existing customers is if, if you had the continuum, right. That's, that's the best and least expensive growth, you know, to fund.

So, Tom, I'll be sending you a check later for backing up my organic growth thing. Thank you.

That was actually Tom, you're buying him dinner in a couple weeks, so.

I am. Okay, good. All right.

It might end up on my expense report, but.

Yes, but I wanted to. That article. Right, the grow or go article. The premise of the article is especially in tumultuous or if you want to call it turbulent times. The initial reaction with a lot of companies is to pull back, right. Hey, cut expenses, weather the storm. And what this article was saying, maybe now more than ever is that that is a recipe for disaster. And to the point where you, you know, they went so far as to say, you know, you, it's a going out of business strategy or a strategy for, for. And, and the opposite of that is really leaning into growth, organic and inorganic growth along the way, now more than ever is the right strategy. Paul, what was your, what is your take on that? Just sort of their opinion on that. Do you think this is a grow or go moment in everything else we've been talking about and it kind of ties into Marty's right comment earlier about tension and.

Tension and friction.

That's right. Right. Yeah.

So I absolutely do. You know, hey, you have to be well capitalized and you have to have a strong balance sheet to be able to. So, you know, the, the time to prepare for today was last year or two years ago. Right. So always thinking about or being growth minded and making sure you're in a position to take advantage of opportunities. One, we are absolutely seeing others pull back in the market. Whether it's, you know, reductions in force, whether it's closing locations and those are the opportunities that we take advantage of, you know, sometimes and you know, there's all sorts of capital structures out there, public, private, esop. We happen to be an esop and we can have a little bit of a longer term view on, you know, I don't have to report to the market next quarter. And so I think a lot of times there are some companies that make shorter term decisions because they have to. And you know, we can be the beneficiary of that if we're positioned right and leaning into those opportunities. But you know, it's, you know, being strategic about inventory and understanding this tariff environment and what that might mean and understanding from a pricing environment, you know, what flexibility you have that may be different than someone else if you're more growth minded.

Yeah, well, I think I love those points. Right. And you know, the comment was made earlier, he has cash is key king, which is somewhat true, I think, but there's another component to that as well is the smart king. Right. So cash is important, but there's lots of other positions on your balance sheet that you can leverage in these types of situations. So I think when you've got a well developed infrastructure and I don't think you need to, I don't think you need to be in a place where you need to be billion dollar company or even half a billion dollar company to do these things. Right. There are small organizations that are extremely well run that understand their business very well run and they're anchored solidly with, to Marty's point here about value and differentiation. Their customers understand why they do business with them that are able to do some things here. I think the companies that don't know how to leverage their balance sheet or maybe have leveraged it already in, in a not sophisticated way, maybe they're already a little bit overextended, are going to be the ones that are a little bit different, different spot right now.

And I think the, you know, the, the ability, you know, not only investing, because I think technology can be an enabler of growth and, and having the courage to, you know, invest in technology to help augment that growth is, is really important, which also allows you to grow more efficiently.

Right.

As you, as you implement technology solutions.

It helps you visualize, right. Where your opportunities are and where your risks are. Right. You know, we do that with our technology as well. And, and I think it even speaks to, we mentioned this earlier, right. We mentioned Stefan Philip, that he's your Chief Digital officer. Just having someone in that role. Right. Is, and we're starting to see a little bit more of that. Right. But the forward thinking and it's, you know, hats off to you and your leadership team and your board feel for kind of looking at that and being forward thinking on understanding the data that goes within your business because, you know, the worst place you want to be in times like this is not understanding your position fully.

Right.

If you don't understand your financial position perfectly right now. I mean, Tom and I run a software company and there are very specific metrics that we need to meet for the future of our company. And we look at those metrics day in and day out. Well, some people are just trying to grow at all costs and all means and they're not following that real closely and they're not digitizing their business and they're not to this article's point, making growth a priority, not a hope is what they say. And I think the folks that are doing that are going to be in a really good spot, which obviously, you know, you just open another branch, so there's great things going on at your company. So.

But I think also going back to the organic growth conversation and I, you know, Paul, as you've heard, I'm not a lifelong part. I haven't been in this industry my whole career, so I'm relatively a newbie in this industry and every day I see so much low hanging fruit. Working with our customers on organic growth just, I just call it revenue leakage. Right? There's a lot of leakage and a lot of things that are just right in front of you that can really improve your organic growth. I think we had a customer, Kevin, one of our large customers that came out and presented at one of their shows, I think they had said it increased sales 22%. Am I right on that? 28 based, 8% based around just kind of cleaning up some of this revenue leakage and things like that that we're sitting out.

You're being modest. I'll, I'll say what they, what the point was is the people that were using Lead Smart Channel Cloud consistently within their organization to identify those because we have a tool called Revenue Expander that shows what we're selling in each one of the categories, right. And then it sends them alerts that says, hey, you know, and Paul, you've probably seen this over your career. And I, I'm, I'm a guy who lived it and told the story right early in my career was hey, you know, I'm talking to the sales leader, in my case when I was a manufacturer's rep, the manufacturer and like, hey, you know, we're up 10% at the end of the first quarter over last year. Everything looks great. And the response back is yeah, but you're only selling two out of 12 categories. You know, if we sold, what if we had a goal of selling six categories out of the 12 to start with, you know, that's, that's where the organic growth lies. And I've said this forever, is that, you know, and I've, one of the most valuable things to me in my career is, you know, having worked for a large distributor, then being a manufacturer's rep and then being on the manufacturing side, I've been to just about every kind of. Whether it's a slaughterhouse or a nuclear plant or a carrot farm. You know, I've been there and, and seen those facilities. And the majority of the time, if you were out in the field with a sales guy, this doesn't mean they're bad salespeople. It means they're overwhelmed and don't have data. They walk by far more business than they have. Right. So we want to talk about organic growth is when we can identify what business we're walking by and we'll work to get that. Life can change.

It can. And I think, you know, distributors and salespeople and all of us sometimes suffer from this concept of incrementalism. If I'm incrementally better than I was last year, then I'm good. So I like the thought of leapfrogging incrementalism and, you know, finding ways and again, leveraging through technology. Why shouldn't we all expect the. To see the 28 results or whatever as opposed to, hey, the market's up 3 and I'm up 4. I crushed it.

And it's not as sexy, right, as buying a new branch and all those, you know, kind of things there. It's not always sexy, but, boy, and they talk about shoring up the balance sheet. It's a way to really shore up the balance sheet, increase your margins. I mean, there's just a lot of positive side effects that were. That I see from the organic growth.

That's sexy, Tom.

Okay. Throwing up the balance sheet and, you.

Know, it all flows through right to the P. L. Right?

Well, it does. And I think, to Paul, to your point, I think is really, really wise in that, is that that incremental thing is right. And we laugh about this, you know, all the time, is, you know, and I'm sure this would never happen at dsg, but there are a lot of organizations that are still doing forecasting and budgeting with their salespeople with a spreadsheet that says, here's how much they bought last year. And somebody takes a swag, you know, grabs a number out of the sky and says, well, I think my sales leader will be okay if I say 7% growth with this company and 11% with that, and I'll go figure out how. And literally, and I was guilty of this early in my career, it's like, well, I see where my bottom line number growth needs to be, how I Got there. I'll just throw something on a page, we'll agree to it. And as long as I hit that bottom number, I'm good. Well, now we have the ability to look at the real metrics that go with that and the real data that shows where those opportunities actually are. And if I can take advantage of that now, I can show my sales leader. I'm going to get it from this new category that I'm not selling enough of. And I think, Paul, your comment about, you know, leapfrogging the incremental is that's tied to understanding the potential versus how am I doing? Right. Yes, very good. Well, let's, let's before we jump ahead, Tom, let's just hit this is, you know, once in a while we hit an article that I think really is just really well done and I want to kind of give a shout out the gentleman that wrote this. This is an industrialdistribution.com or inD-S-T.com it's from May 16th. It's written by a gentleman, Mark Allen. I think I might just go connect with Mark on LinkedIn. But this was again this, we talked about this grow or go what distributors must do now to outperform the cycle. As Paul mentioned, it was talking about do you want to be a buffalo or a sheep? He talked about one, making growth a priority and not a hope. Two, reallocate capital like a portfolio manager. Love that. Right. It's like where am I using cash in my business and what's my return on investment and managing cash? Like I was a financial portfolio manager and I've got, you know, whether it's shareholders or in, you know, Paul, I'm sure was the employee owned company. You do a lot of that in the, in the business as well. So I thought that was powerful. Two, launch new offerings like a startup. Right. And I think when you, we read about this once in a while that we have mature companies that are that, you know, might be 100 years old but they still have at least portions of their company, still have a startup mentality of what they want to go do. Talked about update your talent stack, especially in commercial and digital roles. And it gave some action steps with that. Build a cultural culture that can move fast even if you build a product slowly and then 6 know when to exit the old and make room for the new. New markets, new product categories, understanding those. So anyways that's, I, I just enjoyed this one. So we can jump ahead. Tom, I see your screen.

It's a good article and it Also ties Back to the McKinsey article, which is in there as well. So both of those were good.

Good. All right, let's jump ahead into our E Commerce and marketing segment. You know, this is, we have a couple articles in here that I thought were good. This is the from marketingprofs.com fear of missing out psychology, how marketers can create can't miss moments. I don't think we'll spend a lot of time going into that just because of time today we've talked about important things, but if you're working in marketing or with a marketing team, great article there. And then Supply House Times did a nice article about how to market without a marketing department. And one of the things that in fact I just started working on a presentation to have available to the trade associations and buying groups and companies customers that we work with is a presentation about something that's been important to me for many, many years is the idea of really having a revenue department versus sales and marketing. Now we need those job functions in each organization, but we've got some customers that are using our platform to bring data from an ERP system in that now becomes much easier to work with and much more visible to have marketing and sales working together. So marketing is using that data from our platform to identify the promotions that they're going to do and then through that, identifying which are the right targeted customers through our platform and then dropping the task and the opportunity of what they can go do to the sales team. And now we've got sales and marketing completely aligned in the same focus of what they want to accomplish versus the old, you know, sales says marketing sucks because the leads are bad. Marketing says sales sucks because, because sales guys don't close the leads. And we just are in this vicious circle so we can bring those two together. And I like this because a lot this article because a lot of wholesale distributors have very large sales groups and a very small marketing team. So there's some nice, nice points in there about how they can do that. So I'm going to use some of these in the presentation I'm working on. So go ahead.

Just real quick before we go, I'm seeing and Paul Winnington, your take, especially with your work in the associations and so forth. I'm seeing more and more though distributors making an effort to invest in marketing more. Are you seeing that as kind of a, a theme or a trend? And, and if so, what, what do you think is driving that?

Yes, I, I do. And we are doing that. We hired a new director of marketing not too long ago who just leveled up our game pretty, pretty significantly. So Tom, I think part of it's that I think the other piece of it is, you know, technology is enabling marketing and sales to approach, you know, their customers and the markets differently. And with that visibility with data, you know, data integration, I think that we can be, marketing can be much more specific in the leads that Kevin was referring to in bringing the biggest opportunities forward while also driving a holistic brand message. I think that resonates with the customer.

And to your point, right. It allows the sales and marketing teams to be more in lock step. So that one plus one is three and guess what, that's all. Organic growth. Yet another channel for organic growth.

Before we move on, how do you feel? I mean, what are your thoughts on organic growth? I'm not.

You seem a little, you know, I think it's over. I think it's overstated and kind of a waste of a waste of effort. I think you're just much better off going out and buying stuff.

So Tom, you wrote a nice article about that that's on our website about organic growth last a month or so ago. So it's true, right? It's, it's that low hanging fruit. Right. It doesn't, it doesn't cost anymore to go get organic growth. Right. We don't have to add salespeople to sell more to the same customer. We don't have to add salespeople to make sure that we're following up on all of our open quotes.

Or it's lower risk, right? It's lower risk. I mean going and buying a new branch, Paul, as you could probably, it's capital intensive. It's risky. It's, you know, buying business.

You've got flight risk of employees who really are the business. Right?

Right. Yeah.

And if it doesn't pan out the way you think from a P and L perspective, all of a sudden that growth actually sets you backwards because it may have set you forward revenue wise, but it's actually taking you backwards from a profitability perspective. Yes.

Back to other article about being a portfolio manager. Right. Really understanding where you're going to make your bets and where the best return is.

I thought that was such a great point. I'm glad you brought that up again because that's really kind of an interesting take on that is make that comparison. Right. Because it's very easy to say, well I sell lumber or I sell pipe valves and fittings or electrical equipment or whatever it is. But when you start taking that really deep analytical View and thinking about it almost from the standpoint is, hey, you know what? My company is tasking me to do a job and that's just like a portfolio manager having a high net worth client. Right. I've got to use this data to perform well. So, Tom, let's kind of jump into the technology and cyber security segment there. There's kind of two articles that were there. The, the, the first one there, the sec, I should say the second article there from HR Dive talked about why a former Alexa developer from Amazon says HR should treat AI like a baby tiger. Tom, you want to maybe take a look at that? We'll kick us off on that. Did you get a look at that?

Well, yeah, I mean it's, look, it's, it's, I guess what's the right way to frame it is as AI gets more powerful and this week there has been a ton of new releases that have come out and you're seeing the power, I think, of AI rapidly and the power behind some of the capabilities of AI rapidly increase. Right. And I think it's very easy for people to underestimate what is occurring with that power. Right. So the power is kind of getting, I guess it's kind of like trying to drive your Tesla 140 miles down the freeway. You're kind of realizing you're getting speed wobbles and you're not really prepared to drive, even though the car will go that, that fast. And I think we're seeing a lot of that as we go forward. And that's kind of what they're saying, is that HR needs to maybe keep a tighter eye on this and how it's actually being used and how it's incorporated. It's, I think now more than ever easier to violate potentially privacy and sensitivity issues with your confidential data. All of those types of things. Trademarks, copyrights. Right, all of those things. So I think we're really seeing an era of, of the, of the power increasing now and over the next few months. But are we ready to harness that power? I think is really what the message is there.

That's good.

Yeah, it's. Ally on your team sent me kind of a snippet of all the, the articles and it was an AI generated, you know, summation of each of the articles and. But she put a caveat at the top. It's, this was AI generated, so it may not all be true.

And it's funny, I did find some hallucinations in that, in that today when I was going through it. Yeah, I was like where did it come up with this? Yeah, that's a great point.

No, Lily's done a nice, nice job with that, putting that together. And, and it, it, for me, it helps me kind of trigger on some of the things I want to talk about. So, yeah, that, that's a good piece. So that's back to this article, right? It talks about baby tigers and the point is that baby tigers become big tigers and big tigers kill people. Right? That's, that's the comment related to why they said that treating like baby tigers. And, and I think there's, I like one of the comments that made here, it says was they're talking about HR's involvement within AI strategies. It's talking about having increasing cooperation between the technology and the HR tools because sometimes I think we think about, you know, even how we're going to introduce things. Right. And Paul, you run a large organization and I think sometimes messaging is everything about, you know, how are we sharing things with people. So let's talk about increasing cooperation between IT or tech and the HR teams, which I think sometimes from an IT standpoint we just might think about, hey, I'm doing this and we're going to implement that and not necessarily the potential ramifications that go with that. So I thought that's important. She's the article comment about how helpful can this be, how harmful can it be and how dishonest could it be? So really addressing those factors. And, and I think part of this is just, you know, we're at this place right now and I've talked to some distributors in the last six months or so who, you know, have literally just done things like, you know, bought, you know, licenses for their, their, a big part of their company or whole, their whole company with ChatGPT. But some have done a nice job of putting some guardrails around using that and how they're going to do it. And others have just been, hey, go get a feel for this and see how it works. And you know, next thing you know, people are loading contracts into IT to get some info and that's, you know, they forgot to click a couple of buttons to keep that inside of an organization because they haven't been trained on it.

Right.

So I thought this was a nice article to kind of just keep our mind around having a plan, having something organized and then understanding the, the opportunity and the risk and how it might impact people. Yeah.

As we think about cyber risk, and, you know, this isn't really cyber risk as we know it, but from a, you know, from A customer data perspective, I mean, just all sorts of risks and concerns. If you don't, you know, put some guardrails around it and really understand it and how you're going to effectively use it, you know, within your company.

That's good. Tom, let's why don't we roll down to the next article, which is kind of interesting. And you know, we included this one from Reuters Chat. Again, we're in our technology, AI and cybersecurity segment of the newsletter. In fact, I will just reiterate the fact that what we're talking about here is the articles that come from the newsletter that we publish each week. It's called around the Horn and Wholesale Distribution. If you're listening with us on the podcast, right, where you don't see these three handsome faces that are with us today in the newsletter that's in front of us, you wouldn't be able to notice that. So if you'd like to get that newsletter, three simple ways to do it, send us an email@helloadsmartech.com on LinkedIn. You can just search around the Horn and Wholesale distribution and you'll pop up to the Lead Smart Technologies page with that. And you can sign up for the newsletter there. Or we have a website for the podcast which is www.aroundthehornpod.com and that way you can get this each week as well. Hopefully we do that. We're out to well over 10,000 people now each week. But I included this article this week because ChatGPT yesterday or earlier in the week announced they had paid 6.5 I think it was billion for a company that most people have never even heard of, which is a company that was started by the gentleman who designed the Apple watch and the majority of the iPhone. And so Jony I've is now working directly as his company is now part of the OpenAI family, which is the people behind ChatGPT. And why is this important to wholesale distributors? Because about I guess it was just the following day Sam Altman, the founder of one of the founders of OpenAI started floating the idea. And this was a Wall Street Journal report as a couple other technology publications are reported of what they call the wasn't device. But it was the third leg of a stool, so to speak, of our technology. And the idea behind this was moving forward that we'll have a, you know, all of us run around with laptops, we all have a mobile phone and that's our two but the next will be a pocket sized AI device that will literally be aware of exactly where it's at in the world, what's going on around it and everything it needs to know about you and what you're doing and is going to be your partner in everything you do. So we talk constantly about digital twins on this show. We talk regularly about agents and I think. And it's really interesting. I'm sorry to soapbox this for a moment, but I think we're just at such a cool, almost inflection point now with technology in the world. And you know, in all frankness, Paul, you know, your organization is pretty advanced with what you're doing with technology and continuing to grow with that. But I was on the phone yesterday with some executives, technology executives, and I was sharing with them that, you know, at Lead Smart, our company, probably 70% of our customers and these are, you know, very large organizations, you know, 40, 50, 60 plus branches, hundreds if not thousands of employees are behind the curve on technology. And they're, I mean just, you know, with our AI enabled smart CRM solution that we've developed and some customer intelligence, majority of our customers have never had anything remotely close to that in their business. But we're getting to this place soon where we're going to have more data than we've ever imagined at our fingertips. And I get frustrated in my car because there's nothing worse than Siri in my book. I want to be able to talk to multiple large language models. You know, Tom, I use Perplexity for a lot of my web search. Now you use ChatGPT. I'd like to be able to just have a device that knows what the best resource is to use to get what my needs are. And it really looks like this device could be that.

Kevin, do you think it'll replace a device or integrate with an existing technology.

Or the way that, you know, this is just, you know, there's been no announcements about this. It's just, hey, this is what it looks like. But one, why would you pay $6.5 billion for a hardware company that comes from the world? Maybe the, at least in this generation, probably the most successful or well respected designer of hardware. It's going to be another piece of hardware. But it's probably, I mean my, my assumption is it's going to be, you know, something like, you know, like this or smaller that can fit in our pocket. My guess is it will actually look like something that just clicks to the back of our phone, but it'll be our AI device. How they go to market with it, who knows? I don't know, Tom, you might have some.

Yeah, I. So I think short term you're up. It will be a look Apple can't seem to get out of their way own way as it relates to getting their act together on AI and I think I just heard this week is that Siri, they, they've kind of scrapped the latest project and they're kind of starting over on some of the Siri stuff. Kelly brought up a question here. Do you think Google will be that device? I actually think Google is doing. If you listen to their IO keynote conference I think they're moving ahead and taking. So I would, I would even give Google a front runner over Apple right now if they were gonna. But neither one of them are right there. They have to be a little bit. Neither one of them is 100 focused on that AI device and there were some early ones that came out I don't remember a year ago. There's one called Rabbit that came out. It had a very short term. It basically crashed and burned before it got started. But too early, too early, too early. I think it's a risky move though for OpenAI. Hardware is a very different animal. Right. And other than Apple, very few companies have been able to be good at hardware and software and technology. I think it's a very, it's a bold move and maybe they will come up with something that's you know, early on. But is that a. As a long term play? I'm not, I'm not convinced that's the right, right move. But you know I think they need to move fast and I think they saw an opportunity to move fast. Apple's moving slow. Maybe we can jump on it and, and get traction. So we'll see.

I'll just to have a little bit different take on that and I don't know what the strategy is because strategy could be twofold. Strategy could be. And I struggle with this because of what one, what they paid and two, to who. Right. But I think first off if you're ever going to do something like this and you're serious about it, go get the guy that's been the most successful at it and leading not only.

I agree with that.

Yeah. You know, so they, there's no question that they get went to the right source. You know I, I think Paul, from the last time we were together, I think you're an iPhone guy, aren't you?

Yep.

Yep. So all three of us have drank the Kool Aid of this guy's design already. And so I think you've got the right person there the question will be what do they do when they get that technology figured out? Because in theory, right, you should be able to put that technology into a phone.

Right.

My assumption is they're going to come out with some type of a wearable and then the technology that could also be licensed by other companies to put it in there if it wasn't Jony, I've doing this, I would suggest that they're just going to do the technology with the idea that the big play is licensing. But when you spend one, I mean six and a half billion dollars and his company has not even put out a product before, it's just a design firm that's been doing, I believe, consulting work on some things and it's fairly early with that. So I guess my excitement about it and why it's worth talking about is, you know, Paul, I don't know how much you use, you know, how you're doing search now, but I'll just use Tom and I as an example how we do search today. Both of us, we use different tools but it is completely different than just going to Google now. I mean for me, we talked about this, I think last week. I'm really a fan of Perplexity for web searches. So for me, when I know I'm going to dsg.com to check inventory on a product I might need, I would just type in dsg.com if I'm going to search for Copper.

That will take you to Dick's Sporting Goods, by the way.

Oh, that's right. I'm sorry. Thank you. So correct me on that.

So, yes, he's gonna be disappointed with his order, I guess.

But yeah, well you know what, maybe not. I'm gonna have a lot more fun with it. Right. So the, but my, I remember ordering these golf clubs. But yeah, well yeah, the, the challenge with that is golf. I'm going to need a lot more help when than just what they can do. So I, I correct myself to say DSG Supply when I need to go do that. I will go directly to the URL when I need to search. I now search through the mobile app or on my desktop widget on Perplexity because what Perplexity does is it gives me as does Gemini. If you're using Gemini and ChatGPT that Tom's doing Paul, you might be. You're nodding your head so I assume you're doing some of the same now.

I'm using Gemini just because it's easy.

Yeah.

Kind of quasi integrated into my right environment.

But now we're getting an AI result with lots of links and it gives us so much more data. So our search has just become so much smarter with this. And to Kelly's point, early, you know, I think, you know, Google has the opportunity to really take the lead in this. But my point with this is, you know, I, for a long time I just didn't continue the subscription because I'm going to change cars here shortly. But I had Alexa integrated into my car and that was a phenomenal conversational experience far greater than Siri. And so what my mind is, I should be able to, wherever I'm at in the world, have a discussion with a digital twin of mine, so to speak, that knows everything about me, everything about my schedule, has access to every email, has access to the data lake at Lead Smart Technologies, everything within Lead Smart channel cloud that I use day in and day out. And I can just ask questions and give instructions and have it do things for me. And that is going to have to come through a piece of hardware. Right. So where is that piece of hardware? It looks like it's going to start maybe with something looks like a credit card.

Well, we will see.

Yep. So Kelly just called me a techie dude.

Wow, I hope you're impressed.

I mean I'm actually going to ask John to make a snippet out of that for that for YouTube. So anyways, we're kind of running short.

Yeah, we're running a little late on time. So what do we want to do to wrap up here?

Do you want to just stop one of the. Before you go, just go backwards, Paul. Tom's fingers on this mouse with these. Scrolling through his article he just goes fast. You know, we've been including. I almost want to change the title of this segment and include robotics because there is so much happening on robotics right now. You know, we had the debate a while back about the having a humanoid robot cleaning my house and weeding my yard. So I've promised that for my wife as soon as that's available. But this was just an article in its title tier. We titled it a little differently than the article from Impo Mag says. Robots quickly becoming more than just cool videos of what might be next. And now this just the article talks about dhl the shipper signing an MOU with a robotics company, Boston Dynamics, which is one of the forefront of humanoid robots besides manufacturing robots for a thousand of their packaging related robots. Right. So you know, I think Paul, we're getting very near the place where you know, your warehouses and yards could be monitored by a humanoid robot that when they're done packing boxes, takes a walk around the perimeter with their co sniffer and their fire detector and can, you know, take images of pallet stacks and give you updated inventories. And we're getting closer and closer to that. And I love just this example of DHL saying, you know what, we're going to buy a thousand of these, what they call them stretch units that have arms for reaching for packaging. So exciting time. Nothing from either of you guys on robots, huh?

Well, robot, I mean, I think that if, you know, we talked about technology enabling sales and marketing earlier and bringing insights. I think, think, you know, robots are going to be that for supply chain.

Right.

You know, that's the technology. I think there's a technology piece around, you know, inventory management and all that. But I think robots are going to be the automation tool for supply chain.

Yep, yep. The, you know, it's interesting. Just as a side note, I think I've listened to portions of three different podcasts this week that were from technology leaders talking and all three of them were talking about the concerns about AI and robotics and so forth, replacing jobs and everybody being out of work. And all three of those were talking about doing more with less, not replacing people.

Right.

And you know, you're Paul, you run an employee owned company. So very important to people. They've made a commitment to your organization. They do a hard job every day and they get to be employee owners for that. I look at an organization just like yours and there's countless others out there that, you know, maybe the headcount doesn't grow while in line with your revenues the way they have historically. But we're probably net neutral. I mean, a wonderful place to be would be, you know, what if you could, what if you could grow revenues by 50% and stay net neutral on headcount?

That's Tom's turbocharged organic growth.

That's right.

That delivers turbo dollars.

Right. I like that. I like that. I may steal that one. Okay, thank you.

Yep. But I mean, think, think about, think about. And I have no idea what the timelines are, but I'm sure when you go to open a new branch, a significant component of that is finding the people to work in the branch. Right.

And it's one of the biggest inhibitors of being able to open new branches. Right.

Yeah. So what if, you know, we think about, I'll just say, you know, the Tom and I use the phrase the concrete versus the carpet side of the business, but what if on the concrete side, in the Warehouse. Right. What if we needed half of the number of people to open a new branch and because of AI and other technology tools on the carpet side of the business and operations and purchasing and sales and marketing and support. What if we needed half of the people there? Now what you could do, what could you do with your franchise footprint?

Right. And the half, you know, on the carpet side enabled by technology don't need 30 years of experience to add value on day one.

That's right.

Great point, great point. Yeah, I couldn't agree more. By the way, that carpet versus concrete side, that comes from Ron Paulson. I don't know if you know Ron, he's a longtime Granger executive and. Yep. So he, he's the guy that coined that, that I use it for the first time. So Tom, let's roll into our sales and M A segment as we kind of start to wind down a little bit. Good article here from Industrial Distribution about getting compensation. Right. And aligning sales rep behavior with business goals. Any takeaways from either one of you on that? I'm sure, Paul, your team, you know, Joe Soulheide and his guys probably wrestle with that every day.

It's important and it's, it's, you know, aligning those two is really, you know, what you're going to get the behavior that you compensate. So if that behavior is not, you know, or your compensation plan is in align with what you're trying to drive, it's a problem with your compensation program. It's not a comp, it's not a problem with your sales team.

That's great.

I think the company we mentioned earlier that it experienced a 28% growth. Part of what they did was align some of their compensation to some key focus accounts and their ability to upsell and cross sell within those organizations and expand on those. So they were again, I guess not heavily, but weighting some of the compensation that came from the accounts and the actions that they took in the accounts. So it wasn't, you know, it actually then motivated the salesperson to not just go and bring donuts to their favorite customer, but actually invest their time in some of those things. So I think that compensation strategy can align to everything else we've talked about as far as how do you push that tailwind to the, to that turbo organic growth.

Right.

That's great, Tom.

Tom, this organic growth thing seems to be a theme.

I, I, It's a theme. It's a theme. I think it's the, the next 12 months is all about organic growth. Is it?

I I think the future is organic growth. I mean we joke about that but you know, Paul's identified that it's an important piece too is. Listen, everything we've been talking about in the last section was about, you know, efficiencies that come from technology. And we're just living in a different world, right. And we can, we can find a way when doing it correctly to do more with less. And part of that is that organic growth component. So next article there we're going to kind of jump past this and move into people and leadership in just a moment. But talks about, that's from sales and marketing management.com and talks about AI transform sales enablement and skills development and we're in a really great, great place in history where again as I said a few moments ago, we can do more with less. And Paul, we did a call with a few of your leaders a couple of weeks ago about sales enablement and using technology to do some really cool stuff. And we're just at a time now where we've got so much more data available to us and so much more insight into our existing data, which is probably the key. And so the way we can able salespeople. We've talked about that in many different fashion for facets today already. So good article there. But Tom, let's jump into that goes.

By to what just Paul was saying about you don't need to hire somebody who has 30 years experience.

Right, exactly. Right. Yeah. Well, I mean Paul, we were, Tom and I were in a, we were meeting with a large, large distributor a while back and Tom was showing them some tools of using AI to literally look at a project and let the AI come out and identify what's needed for that project. And we did it, you know, rudimentary, looking at a, at a small trench with some PVC in it and, and using the AI to spit out what are all of the items that would be needed. And we did that by tying into the company's data. So took a picture of a job and it said here's, here's the, here's the list of items that are needed. And Tom said that. Tom, I'm not going to quote you, you tell us what you said. What did you say about your ability to go be a field sales guy?

Well, no, what I said by using what we had put together in a week, I would be willing to go out on a sales call and I wouldn't be embarrassed. That was my, my thing is I could go out and actually feel like I was again reasonably competent in being able to go in their business. And I know very little about pipe valves and fittings. Right.

The acceleration of onboarding and you know, ramping somebody's knowledge base up is just exponential.

Right.

So the, the response from that was that your VP of sales and marketing, Joe Solheit offered to take Tom in North Dakota in the middle of winter and out take him and let him make some calls. So.

We'Re getting that queued up for next year.

Yeah, pretty, pretty good. Good, good, good. Now Will Quinn does say here he comments in our, in our live comments here. Never underestimate the power of donuts.

Yeah, he's right about that. He's right about that.

I, I will digress though for something. My youngest son is in living in Colorado Springs now with his wife and they're getting ready any day now to have their first child. And he sent me a text message last night because he drove by in a shopping center, a donut shop that was called her Hurts H U R T S Donut. Remember the old joke about, you know, and then punch the guy in the arm and say hurts donut. So he remembers me doing that when he was a kid and he's like, hey, I get to teach my daughter that. So it's pretty funny. We'll talking about donuts made me think about that. So he'll, there's going to be, I'm going to be a grandfather here in the next week or so.

Congratulations.

Yeah, scary, scary. So, all right, well, Tom, what should we look at next year?

Well, I, I, we have a couple more sections, but we really need to wrap up. So what's your, what's your thought?

Well, let's just look then we're in our People in Leadership segment. I, I think the one thing that's there this week that I would have people go look at if you've got the newsletter, is 5 Strategies to Avoid Getting Overextended and Over Exhausted. And you know, I don't know about you, Paul, Paul, but you've had a crazy month to travel and all the places you've been and I tend to be on the road a lot and working crazy amounts. And this one was a good one for me. We have actually our last article today in our Goodreads segment goes a little bit along with that as well about humility that goes with that and talks about leadership skills that change everything. And I think sometimes we need to be humble enough to realize we got to take a deep breath. We once in a while. My wife constantly reminds me and she's like, you know, you're doing some really great things in your career and your business and you're helping companies, you know, with your software you're developing. But are you killing yourself along the way? So I think we need to remember that once in a while.

Yep. It was a good article.

Good. Yep. So let's flow through. Tom, just hit that industry scuttlebutt section. There's really one really important there article about DSG celebrating the new Fargo facility. Paul, before we jump off today, we will hit a couple things real quick, but you want to give us a little update on the new Fargo facility and any hints about other ones coming.

Yeah. So Fargo, just. That's where it all started 127 years ago. Where we were founded was in Fargo, North Dakota. And that is an organic growth story. That new facility is enabling organic growth. We bought a company a couple of years ago in western North Dakota that introduced plumbing and H Vac into North Dakota. We didn't have enough capacity in our eastern North Dakota locations to grow into organically grow into plumbing and H Vac. So we had to. They had been in the old building there for 50 years just doing electrical. So this is really going to enable us to expand into plumbing and H Vac along with our electrical business in eastern North Dakota. And so really excited about that. And again, it's where we started. We have a big population of employee owners up there and was supported by a lot of great community folks.

So was.

Was happy and proud to be up there to help get that going.

Good. What's the branch count now?

62.

Wow.

I. I was. Okay. How many of you opened in the last year or so?

A handful. I'm gonna, I'm gonna say four or five.

I was, I thought I was. If you would have asked me, I would have said I thought that was 58. So. Okay. Congratulations.

That's great.

That's great. Well then the next one, and this will probably wrap up on this today is Affiliated Distributors named a number one top workplace in the Philadelphia region. Congratulations to Bill and his team over there. And you're part of that leadership team as a volunteer leader with Affiliated Distributors. And those of you that might not know, Affiliated Distributors is on the forefront as a, as a buying group tying independently owned distributors across the U.S. canada and Mexico together to bring more power in the marketplace. And they're typically the market leaders within their market. We're very appreciative of our partnership at, at Lead Smart with Affiliated Distributors. We work with a lot of their Top members by bringing our technology solutions to them. And I've got I think five AD events on the docket for the. Throughout the rest of the year. Of the. I think I've got 12 or 14 events left this year still to do. But a bunch of those are with AD and those are just great events.

Yeah. So they're a multi year winner of that, that award. And Bill Weisberg is CEO and Neil Cohen, who chief people officer leads the HR efforts, have done just a great job and the entire team has on driving the culture at ad.

Yep, good group of people. We are really appreciative of our partnership. We're doing more and more with them and not just the members, but more and more with ad. And I guess at two of those events, at least I'll get to see you. So we'll be PHCP and industrial or electrical, I should say. So that'll be, that'll be good. So I, we. Tom, last year at the electrical event there was. I had kind of had enough of the day in my booth and I think Paul had been in a thousand meetings. So we just went off on our own and had a beer and chatted for a little bit, which was nice to sneak away from the big crowds once in a while. So it was good. Yeah.

So Will's comment around donuts always work? My comment is beer always.

Yes, that's right. And if you combine beer and donuts, man, then you never know what you're.

You're living large.

That's right.

There we go. Very good. Well, I think that kind of will wrap things up for the day. Covered a lot of ground.

Paul, really amazing insights today. I'm going to go listen to this again myself today. I need to learn more about organic growth than some of the strategies, so I wanted to listen again.

Turbo dollars, Tom, just remember Turbo dollars.

Right.

Other than the housekeeping in the beginning, this was a great episode.

Right. Well, you know what's, what's, what makes me think about the. Yeah, the housekeeping sucked. But the. Just from looking at my screen, this is episode number 143. It still astounds me. And Paul, you were first time with us probably around number 40 or 50 or something like that. And then you got the, you got the aloha shirt for, for coming for our 100th episode. So we're appreciative of you being with us and, and you listen in regularly and comment regularly. So we're thankful for that with you and for you being with us. So maybe we'll get to 200, who knows? We have to figure out what we're going to do. Maybe, maybe 200 as we bring Paul and a few other select people to some tropical location and we do it all live.

Okay.

Wow.

Software Kevin.

Yeah. Well, that's. You just. I just. I said that just to watch Tom cringe. Right? That was just. I said that we'll do it in Fargo. Yeah, I just saw January. January, good. So anyways, we'll see you in, what, three weeks in Chicago. We'll look forward to that. Stefan will be there as well, and we'll look forward to that. We always enjoy seeing you guys. So, anyways, we're winding down. Paul, thank you again for being with us. We appreciate it. Tom, thanks for, for your organic growth insights for the day. It's super helpful. So I'm Kevin Brown speaking for Paul Kennedy and Tom Burton. We thank you for all being with us today. Again, we do this, try and do this every Friday, and we hope that you can join us. The one thing we would ask you to do, though, if you enjoyed the conversation today and on past episodes, the best thing that you can do to help us would be to, if you're listening on the podcast on Apple or Spotify or whatever it might be, don't just subscribe, but leave a review. And when there's a review there, it gets out to more people. Hits the algorithms that go with that. If you're listening on YouTube, I should say please hit the subscribe button there. You'll get the alerts of things coming out and that'll help us get out to more people. And then certainly if you're at LinkedIn, please follow the Lead Smart Technologies page where all of these will be available to you in that format. So we're appreciative of everybody that comes each week. And then of course, our sponsor, which is a company Tom and I work for, Lead Smart Technologies, we've developed a AI enabled smart CRM and customer intelligence tool solely developed for wholesale distributors. So if you're looking to accelerate growth in your business, understand your customers better, understand your sales team better, understand and truly get a deeper insight into the data you have in your overall business, we would love nothing more than to talk to you about how we might be able to help you understand the business better and accelerate growth, and you can reach out to us anytime. So long weekend, gentlemen. Paul, anything exciting going on?

No, but I'll just say let's remember why we have a Memorial Day.

There we go.

Absolutely.

Tom, anything happening?

Nope. Nope. Going to be loading some data, I think, this weekend, so.

Okay. I will be loading the pellets into the smoker on Sunday for a crowd coming over for some. Some ribs and some things like that. But Monday will be a quiet day, and like you, I will probably actually visit my laptop for a while to get a few things done, but there's probably some beach time included, so we'll go from there. All right, gentlemen, thank you again. Thanks, everybody, for being with us. Have a great weekend.

Thanks, everyone.