Some Things to Consider in Your Business Planning

In the heavy-duty distribution business, a long-term plan is about 18 months, according to a survey done in advance of Heavy Duty Aftermarket Week '09.
If that describes your operation, however, you might want to rethink your strategy.

"I don't disagree that anyone who says they can tell you what's going to happen two years from now is fooling themselves," said Bill Wade of Wade & Partners, opening up a panel discussion on business planning during HDAW earlier this year. Nevertheless, he said, it's still important to look out beyond the upcoming year.

"The best thing to come out of a business plan is the process - involving the people in your company to talk about the business and about the future."

In addition to the people in your company, Wade said, it's important to spend time looking at what customers need, what customers want, and how you can better give them what they need.

A panel consisting of one supplier representative and two distributors discussed various topics involved in planning: Dominic Grote, vice president of sales and marketing for Grote Industries: Paul Raymond, president of Parts for Trucks, Dartmouth, Nova Scotia; and John Minor, chief operating officer of Iowa-based Midwest Wheel.

Planning for Leadership

Grote noted that in a family business, the odds of a succession going successfully are a little less with each generation. Dominic is the fourth generation in his family.

"Having a plan, and making sure the stakeholders know there is a plan, really puts at ease a lot of their uncertainty," Grote said, whether it's employees, customers, or suppliers.

And beyond looking at the top leadership, it's important to grow leaders for other positions within the company.

"I think when you're hiring people, you've got to look beyond what you're hiring them for," said Minor. "And I think you do as much as you can to further their education, not only in your company, but also maybe some skills, some product training. We try to pick that right person and identify him and move him along."

Raymond noted that at his company, there are many managers who started as drivers or as delivery people or in the shop stripping brake shoes. "If you can find someone with the ambition to take it to the next step, we want to foster that development," he said.

Of course, to grow your people you need to invest in training.

"Between your people and your knowledge, that's probably one of the best sources of competitive advantage," Grote said. "The market, we're finding, is hungry for more knowledge. They want it specific, about your products, but also beyond the products - it gets to be about solving problems."

Technology has made training much more cost-effective, noted Minor and Raymond.

"With webinars and online training, people can do it on a Saturday morning in their pajamas if they want to," Raymond said.

Customer-based Planning

One of the things that came out of the survey, Wade said, was a lack of customer-specific planning.

"The planning process needs to include what you're going to sell, who your target markets are, and how you're going to beat the competition.," Grote said. "And it really starts with the customer."

"I think customers are product-driven, and I think we set our strategies on products and how to get them to the customer," Minor said. Midwest Wheel creates profiles on each customer to find out who they're buying products from, and go after the business.

"Certainly the product side is a big factor," agreed Raymond. But you also need to pay attention to geographical concerns, especially if you have multiple locations. One location may be seeing a lot of highway work; another might be in a town where a mill has closed. For his business, he said, spending a great deal of time drilling down customer by customer may not be an effective use of resources, as even the largest customer is at most 1.5 percent of sales.

New Opportunities

Part of planning should involve evaluating new opportunities for your business, whether that's expanding into light truck parts, adding service bays, adding new product lines, or adding locations.

For instance, the panel discussed selling safety-related items. Grote noted that they are finding some of the buying decisions are being made by safety managers rather than parts managers.

Minor said reaching out to safety managers, in fact, is part of his company's marketing plan. "When we know there's a safety product, we're going to include our normal contact and a safety director. In most cases, our sales people are conscious about the safety directors. They're held with a lot of respect in most fleets."

Raymond said that's part of a sales rep's job, to get to know the fleet, to know what pressures they're facing, whether it's safety or in other areas. "And price becomes less of an issue when it's a safety issue," he noted.

Margin Compression

When asked about what they have done to address smaller profit margins, the panelists talked about controlling costs as well as investing in new technology and ways to expand.

At Midwest Wheel, for instance, Minor said they are monitoring and measuring everything, such as the productivity and profitability of various truck routes, counter people's invoices and number of hours worked. "We're hoping that instead of hiring more people, we can shift customers into another route, or if a route's not paying off, adding some customers to it," he said. "We try to monitor our expenses in order to be competitive."

At Parts for Trucks, they've invested in information technology and training on software as a key to being more productive. "We've invested a lot in communications," he said. "Our senior managers all have Blackberries, our counter staff have wireless phones, we have high-speed Internet at all our computers."

In addition, he said, they have moved to a commission program for outside reps based on gross margin, and in-house staff are on an incentive program that uses gross margin targets as well.

"I don't think there are any short fixes for margin compression," said Grote. "It needs to be part of your plan as you determine what margin you want and how you're going to design your organization."

From the August/September 2009 issue of Heavy Duty Aftermarket Journal.