ASA Review Q3 2023

ASA REVIEW EMERGING LEADERS TALK INDUSTRY BEST PRACTICES

Emerging Leaders best practices roundtable sessions at EMERGE2023 Photo by John Alexander/ASA

Inside This Issue:

Best Practices For Elevating Employee Recruitment Success Analytics That Quantify Value and Grow Profits How the Digitization of Contractors’ Businesses May Affect You

Q3 23

FROM THE CEO

Our Mission of Being the Unified Voice Continues To Challenge Us Building the voice and influence of our national trade association has been a long journey. From 15 years ago when many industry leaders openly said ASA would not survive to today’s robust and highly influential offerings, ASA has risen to such heights due in large part to the leadership and support of hundreds of visionary volunteers and generous companies.

While others may differ from what I am about to say, I believe ASA has arrived as the leading voice of our industry — a strong and influential association. Ten years ago, we launched our Women in Industry division that has risen to the point of setting an all-time attendance record this spring at its annual event. Today, ASA’s Women in Industry is unequaled as the voice for attracting and engaging women into the PHCP-PVF supply chain. No other event comes close to the value our WII group offers.

Our Emerging Leaders had another record turnout and continues to provide value to our industry’s next generation of leaders as they build their future networks. Several years ago, we launched PROJECT TALENT, our industry’s effort to build brand awareness about the exciting opportunities available to career seekers. Today, we are having tremendous success with it. Through a robust social media campaign, PROJECT TALENT is witnessed by millions of people being introduced to the great careers available in our great industry. ASA is the organization that the entire industry can rally around to build a stronger future.

Who is Counting on You to Secure the Future of Your Business?

Your business provides employees with a career, customers with quality services, and your family with financial security.

Protect your life’s work with the help of Federated’s network of independent estate planning attorneys.

Scan to learn more about BUSINESS SUCCESSION AND ESTATE PLANNING support.

Commercial Insurance Property & Casualty | Life & Disability Income Workers Compensation | Business Succession and Estate Planning | Bonding Federated Mutual Insurance Company and its subsidiaries** | federatedinsurance.com 23.04 Ed. 4/23 *View A.M. Best Rating Guide information at www.ambest.com. **Not licensed in all states. © 2022 Federated Mutual Insurance Company

ASA continues to offer best-in-class business intelligence offerings such as our annual Operating Performance Report and monthly economic forecasts, while ASA University for decades has been the industry juggernaut when it comes to training and educating your new and current employees. Members also benefit from the effective partnerships and alliances ASA has built that advance your interests, such as the Association Education Alliance, a group of 40 trade associations that delivers the highly impactful University of Innovative Distribution.

We are winning battles in state capitals, at the codes and standards level and in Washington.

We are fully engaged and effective in areas of great importance to our industry, and people are responding to our initiatives.

Through coalition partnerships that advance our advocacy efforts such as S-Corp, Family Business, High Performance Building, Water Quality, Opportunity America Workforce and LIFO, we will continue to grow and build the effectiveness of our national association to advance our industry’s interests.

ASA Review, our association’s quarterly publication that started as a program to keep members informed of all the great things we are doing, has morphed into a truly educational and informational tool that offers members tremendous insights into the new trends and best practices that help our members succeed. We are proud to offer another great issue of this exciting publication with thought-provoking articles that you’re not getting anywhere else.

We will continue to be driven by our mission of being the unified voice that drives the success of the industry and creating value that supports our members and their ability to win the future.

We hope you enjoy this issue. If there are topics that you would like us to share, feel free to reach out to Mike Miazga at mmiazga@asa.net.

Mike Adelizzi CEO

2

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

Want to receive a printed version of ASA Review? Contact ASA’s Mike Miazga at mmiazga@asa.net.

ASA UPDATE Due to ASA’s ongoing work with coalitions in Sacramento, our organization was able to join other industry associations such as the American Chemistry Council and the California Chamber of Commerce to oppose the bill. As a result, changes to the bill were made throughout the process (allowing for more exemptions such as OTC medicine bottles), but the restrictions on product packaging remained.

With the coalition redoubling its efforts, word was received late in the evening on May 31 that the author had pulled the bill for consideration and will not return this year.

Fuel choice

Consumer fuel choice has been another significant area of concern that ASA has been following closely at both the state and federal levels. So far, 24 states have passed fuel choice legislation, protecting consumer rights when it comes to using gas or electric appliances, including water heaters.

ASA plays key role in elimination of California packaging bill

By Steve Rossi, Vice President of Advocacy srossi@asa.net As ASA continues to monitor and act on California’s legislative and regulatory activities, at the end of May, a key bill that would have had a detrimental effect on members instate, as well as nationally, was removed from consideration.

AB 1290 was yet another packaging ban in California, introduced shortly after SB 54 was signed into law — which at the time was the most vigorous source reduction and recycling mandate in the entire world. While SB 54 had not yet gone into effect, AB 1290 assumed it would not succeed and instituted even more restrictive covenants on packaging, including but not limited to: Sales packaging or primary packaging intended to provide the user or consumer with the individual serving or unit of the product and most closely containing the product.

Grouped packaging or secondary packaging intended to bundle, sell in bulk, brand or display the product.

Transport packaging or tertiary packaging intended to protect the product during transport.

However, there are two key areas of particular interest.

Currently, there is a case moving through the courts where the California Restaurant Association sued the City of Berkeley, California in 2019, after the municipality banned gas hookups in new construction. After losing that case, the lower court’s decision was reversed by the United States Court of Appeals for the 9th Circuit, which ruled the fuel ban was in violation of federal law, specifically the Energy Policy and Conservation Act. Recently, the Biden administration filed a friend of the court brief siding with Berkeley. As this legal action continues to move forward, the results of this case will have reverberations across the country.

With the debt ceiling clash in Washington, D.C., solved until after the next election, the agreement has touched off some potential pitfalls in the short-term. The basis for the House Republican argument was to cut federal spending to FY2022 levels to lower overall spending, with an eye on debt reduction (currently at $32 trillion at this writing).

Federal spending

While the House GOP didn’t get everything it wanted when it came to spending, there were reduced levels compared to what the Biden administration was looking for. However, as spending bills are being marked up for the FY2024 budget, the Speaker has authorized the chairs of appropriations subcommittees to revert to FY2022 spending levels — below what was agreed to in the debt limit deal. This allows House republicans to hit the spending targets they originally sought.

At the same time, it runs the risk of failing in the Senate, which could touch off a potential government shutdown in the fall. Both the final drafts of the spending bills and negotiations taking place over the next few months will be critical.

Have you signed the ASA Political Action Committee authorization form?

Visit www.asa.net/Advocacy/ASA-PAC to make sure you are getting ASA’s political updates.

ASA REVIEW

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

3

EMPLOYEE RECRUITMENT

Best Practices for Elevating Employee Recruitment Success

By Steve Edwards, Director of Recruitment Marketing

sedwards@asa.net

Indeed is the leading online recruiting tool and it continues to gain traction among jobseekers. Recently, Indeed reported an increase in the number of people who visit their site every month from 250 million to 300 million.

It is regarded as the No. 1 source of external hiring for more than 3 million businesses and widely considered to be more than just a job board.

Given the difficulty in finding quality talent in the PHCP and PVF industries as reported by ASA members, taking full advantage of every available resource is necessary to achieve recruiting success.

More Than Just a Job Board

More people find jobs on Indeed than anywhere else. Their strategy is to put jobseekers first by giving them free access to not only search for jobs but to post resumes and research companies. In fact, there are nearly 1 billion company reviews on Indeed.

At its most basic level, Indeed is a giant search engine. Like Google, it has a lot of artificial intelligence built into it to deliver the best experience for the jobseeker. This means that following some simple best practices can improve the odds of candidates seeing job postings, positive company reviews and increasing the likelihood of applications.

4

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

Employer Brand and Candidate Experience

Before expecting improved results from Indeed postings, it’s important to ensure the company’s recruiting house is in order. This means reviewing the company’s employer brand with a critical eye and making it clear and evident on its website where candidates typically research opportunities.

In traditional corporate branding, an organization’s brand is the essence of the value it provides customers. Employer branding is the same concept, but the objective is to convey and influence a company’s reputation as an employer and its value to current and potential employees. The goal of employer branding is to position a company as a great place to work with existing and prospective employees. An employer brand can help attract the type of candidates a company desires and ideally positions it ahead of the competition.

As with customers, we live in an age where current and prospective employees can share their opinions so easily and broadly.

To ensure an employer brand is easy to understand and wellknown, a company’s website must be easy to find, include information promoting its culture, provide a good candidate experience and is mobile-ready.

ASA REVIEW

Change Your Thinking From ‘Job Descriptions’ to ‘Job Ads’

In today’s fight for talent, traditional job descriptions may not be enough to attract jobseekers. In addition to a basic rundown of job duties, there must be a component of selling a firm or an opportunity to increase the odds of attracting talent. This may include a compelling and concise opening that illustrates what’s great about working for the company and language that explains what makes a company unique, and why someone would want to work there. Also, consider providing details on training or learning opportunities, advancement paths, compensation, perks and benefits.

Indeed reports that job postings with descriptions between 700 and 2,000 characters get up to 30% more applicants than other postings.

ASA’s Support of Members’ Local Recruiting Efforts

To help its members put their best foot forward with their recruiting, ASA recently held a live webinar to discuss the power of Indeed and more as part of its PROJECT TALENT initiative. In addition to branding the industry, ASA aims to provide members with tools and resources to assist with their local recruiting efforts. Many of these tools and resources can be found in the online Recruiter Toolbox, including a recording of the recent webinar covering Indeed best practices. To access the Recruiter Toolbox members can visit asa.canto.com and click on “Access Request.”

Project Talent is a component of ASA’s Employee Recruitment and Education goal, one of four mega goals included in the association’s strategic plan. This goal includes the objective of developing and implementing a program to attract and grow the number of talented workers taking advantage of fulfilling career opportunities in the PHCP/PVF industry.

Remember Your Audience

Understanding that Indeed is built for the career seeker first and foremost will help to ensure postings get the most visibility. The best place to start when considering this is to review the job titles used. Using job titles that resonate with candidates is important and will minimize the chance of a posting falling lower in a job seeker’s search results.

The length of a job title is also something that Indeed considers. 35 characters or less is optimal for mobile display which is how roughly 80% of opportunities are viewed. A maximum of 60 characters is suggested for desktop viewing.

Also, avoiding internal language in a job title or sign-on bonus information helps keep a posting higher in results.

The Importance of the Job Ad Format

The format of a job ad is also important to increase its visibility. Proper length, avoiding jargon and having balance all improve the chances of a job ad being seen by as many candidates as possible.

Indeed reports that job postings with descriptions between 700 and 2,000 characters get up to 30% more applicants than other postings. Generally speaking, a job seeker on a mobile device will have to view a separate screen for every thousand characters, which underscores the importance of brevity. If the candidate has to scroll through multiple screens, they will quickly lose interest.

It’s also important to make sure a job ad doesn’t include internal jargon or acronyms that may only be known to existing employees and mean nothing to a candidate.

ASA REVIEW

Check out all the tools available to support your recruitment efforts.

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

5

OPERATIONAL EXCELLENCE

Analytics That Quantify Value and Grow Profits Get control of your results.

By Randy MacLean, President, WayPoint Analytics Managers at or near the top of every company have certainly experienced failures in attempts to control the financial measures that please the owners and stakeholders.

Traditional financial metrics (such as ROI, GMROI, EBITDA, inventory and receivables turns) seem to have a pernicious immunity to our intentions and actions.

The reason for this is their trailing averages, two steps behind the productivity metrics that truly control them. As averages, they’re also nearly useless for actual activity management because they only accurately describe a tiny sliver of the real activity that’s actually near the average. Those averages do not accurately describe the rest of what’s going on, and decisions based on them can be flat wrong for the bulk of the activity in question.

It’s important to realize there’s a natural cascade of effects in the things that can be measured. At the beginning are productivity metrics that directly monitor the effectiveness of resource utilization. These directly affect the efficiency of operations which, in turn, influence the financial averages of intense interest to investors and the banks.

In other words, you gain control of final results by increasing efficiency, by implementing and managing productivity metrics. There’s simply no other way to change financial performance, and this basic principle puts real control in your hands.

6

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

Productivity metrics affect Efficiency metrics which affect Results metrics.

Cutting Costs Will Increase Profits, No?

Well, certainly, but where and how do you cut costs to produce the biggest impact while minimizing unintended consequences?

The question is a good one, because the cost-to-serve (CTS) is the true determinant of profitability. Measuring, understanding and managing expenditures in individual sales and customer accounts is really the whole game in controlling profit.

To fully comprehend the subject matter, let me introduce LineItem Profit Analytics (LIPA). LIPA is what we do at WayPoint, where our clients use our online system to see the actual costs and profits for every invoice line, product, customer, sales territory or other identifiable element of their businesses.

With this information, clients can see why a 22% margin is a gold mine in one account (where costs are 8.7%) and complete catastrophe in another (where costs are 28%).

LIPA has opened an entire new field of analysis, with its own vernacular to describe the dynamics that confer direct control of cash-flow and profits.

ASA REVIEW

Before LIPA, all you could do is use rule-of-thumb concepts (increase inventory turns) or blunt actions (cut headcount by 8%) and hope you got positive results (or any results at all).

Unfortunately for many, rule-of-thumb cost-cutting has driven some of the dumbest decisions in business. Remember “New Coke?” Or IBM putting itself out of the computer business?

LIPA shows where cuts are going to be productive or be predicably catastrophic for an important account. You make better decisions, and your initiatives tend to produce greater and more positive results.

The Conversion Chain

The lynchpin for understanding the financial function of a company is recognition that the company’s very purpose is to convert revenue derived from products and services into profit.

Although this seems obvious, people forget all about it while being focused on moving more product and trying to raise margins.

Efficiency Metrics

Efficiency metrics are the quantification of the effectiveness of activities in your logistics chain. Increasing operational efficiency directly impacts the efficiency in all your customer conversion chains. (If you move more product value for less cost, a larger proportion of your customer relationships will be profitable.)

This magnifies the effectiveness of the sales team, because you’re doing your part to increase customer value, rather than relying on them to negotiate higher prices to fund operational inefficiencies.

OpCash ratios are the first important type of efficiency metrics because they quantify profit opportunity. That is, they divide OpCash value (the ceiling for potential profit) by expenditures in each step of the logistics chain. Increasing OpCash ratios increases the likelihood of profit being produced by the activity in any particular area.

Insert Equation An example is using OpCash Ratio to evaluate how well money is spent in the distribution centers. One DC has an OpCash Ratio of 13.7:1, meaning it moves $13.70 in product value for each dollar it spends on space and personnel, while another DC’s metric is 15.1:1 – clearly better.

Where OpCash ratios indicate opportunity, ROX (return on expenses) quantifies the actual results. For instance, Warehouse ROX is the result of dividing NBC (the LIPA term for operating profit) by the warehouse expenses. It indicates the profit return produced by the expenditures made to support the warehouse.

Conversion chains, showing how much of original revenue remains at each step (black), and what portion of remaining value is diverted to pay company costs at each stage (red).

Insert Equation

The company’s overall conversion chain is the sum of individual conversion chains in all customer relationships.

What a customer buys, and at what price, determines the OpCash (operating cash or our term for Gross Profit), which is the ceiling for profit opportunity. The way the customer buys determines the expenses incurred in serving the account (CTS), and these two factors determine the profit (or loss) of the relationship.

ROX metrics are the best way to compare the relative effectiveness of various operations (and their managers) between each other. They’re also the best way to quantify improvements made over time.

Insert Equation

Incentives for operational areas tied to ROX will keep managers focused on resource utilization and cost control at the local level so you don’t have to do it all yourself.

Promoting managers based on ROX comparisons will put those with the best track records into positions to mentor others, leveraging their talent in positively influencing company results.

Margin is nearly irrelevant — it’s only a minor contributor to OpCash. (This is heresy, I know.) The core reason for the failure of most profit-improvement initiatives is that they’re almost exclusively focused on margin, so they are unresponsive to the critical factor predictive of profit — costto-serve. You cannot effectively influence financial results if you do little or nothing that effectively manages the efficiency driven by the costs of the relationship

ASA REVIEW

For instance, a delivery territory that produces a ROX of 2.21 is more valuable and a better profit contributor, than one where ROX is only 1.45. (The first produces $2.21 for every dollar spent, where the latter returns only $1.45.)

These are great measures to see how important things are being managed and improved, but they’re still not directly manageable. So, how do you get results?

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

7

Productivity Metrics Quantifying the activity-related processes that drive efficiency are the productivity metrics. These marry value to resource utilization, where you get direct control of the entire results chain.

Good productivity measures will divide profit opportunity (OpCash value) into something you can count: such as hours, headcount, deliveries, warehouse picks, square footage, etc.

They’re used throughout operations to evaluate the contribution (or the change in contribution) in each area of the company.

Department heads can be evaluated and incentivized using productivity measures. Since one of the purposes of a management role is to improve performance, productivity measures are the best way of ensuring that improvements are occurring.

For example, you may have one warehouse manager that has delivered a 9.2% increase in OpCash/manhour, as compared to another where the value is unchanged. It’s clear which is more likely to make the company’s profit performance better if promoted to head of operations, where the skill is leveraged in mentoring other managers.

At the end, you get control of financial results by widely implementing and managing upstream productivity metrics, then cutting provably unproductive activities and resources.

You’ll deemphasize products and services that serve no strategic purpose and cannot possibly make money. You then either shed costs or repurpose resources to where they increase profit.

This is where sustained management action controls eventual profits and cash-flow. The need for ongoing control and continuous improvement means that managers of operational areas need to be trained on the nature and use of productivity measures, so they can invent and monitor metrics that help them see the impact of good and bad practices, then act to make and measure new improvements on their own.

What’s the Takeaway?

The direct path to control and improvement of company results is managing the conversion chain from revenue to profits. The conversion chains for all customers, and for the company as a whole, are directly impacted by operational efficiency, which is controlled by productivity.

Ditch margin programs (except for pricing, where they matter), and implement efficiency measures throughout your logistics chain. Develop productivity metrics and train your people on their importance and use. Add targeted incentives so people become relentless in improving productivity and, therefore, efficiency. Your financial results will improve automatically.

Very importantly, customer experience and customer loyalty are directly impacted by efficiency – customers are more likely to get the right stuff, at the right time, through a more efficient operation. This drives customer loyalty and, therefore, market-share.

Shutterstock Photos

Productivity and efficiency metrics are the direct (and prettymuch, only) path to increased cash-flow and market position, and it improves customer experience and customer success.

Productivity measures are mostly used to compare productive performances of individuals, groups of people, infrastructure, delivery vehicles, etc.

For instance,

Insert Equation

8

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

Start using these techniques and measures to get in control of your results now. This month’s financials can be better, and so will those of future periods.

Randy MacLean is the founder of WayPoint Analytics.

Reach him at 480-426-9955 or via email at info@waypointanalytics.com. This article is adapted from a section of Randy’s book Profit-Driven Analysis & Practices: The CEO’s Guide to Record Profits (available on Amazon).

ASA REVIEW

WORLD PLUMBING DAY

ASA World Plumbing Day Poster Contest Highlights Member Childrens’ Creativity

By Jim Kendzel, Codes and Standards Director jkendzel@asa.net Earlier this year, ASA, in partnership with the International Water, Sanitation and Hygiene Foundation, celebrated World Plumbing Day by holding a World Plumbing Day poster contest for children in the first through sixth grades.

ASA holds the contest for all ASA member company employees’ children and children of ASA member company customers. All posters submitted to ASA are also forwarded on to IWSH for participation in the international competition.

The ASA Poster Contest is sponsored by the ASA Plumbing Division Advisory Group and managed through the volunteer help of the World Plumbing Day Task Group.

Leo Parker (Northeastern Supply) is the winner of the first-through-third-grade division in the ASA World Plumbing Day poster contest. Parker is shown presenting a check to his teacher Mrs. Loskarn (left) and principal Mrs. Warner (right) at Westminster Elementary School.

This is the second year ASA has offered the poster competition. This year’s contest received more than 50 posters from across the country representing a broad spectrum of ASA member companies and age groups.

World Plumbing Day is an opportunity to recognize all ASA members and all those employed in the plumbing supply chain. This recognition is centered on the theme that all involved in the manufacturing, distribution and installation of plumbing products play a valuable and critical role in the protection of public health and safety while also having a huge and positive impact on the economy through workforce development and economic growth.

Jason Owen (third place in 4-6 grade category) and his mom, Rebecca, present a check to Mr. Francis, principal at Newtown Elementary School in Newton, Pennsylvania.

Parker Leo (Northeastern Supply) took first place in the firstthrough-third-grade category, while Carson Hubbard (PACE Supply) took second and Harrison Viviani (First Supply) was third in that category.

In the fourth-through-sixth-grade category, Charlie Sterling (First Supply) was the winner, while Andy Hyma (Bradford White) took second and Jason Owens (Bradford White) was third. Sterling also earned second place in the IWSH International WPD poster contest.

All submitted posters will be on display at NETWORK2023 Nov. 8-10 in Orlando, Florida.

Want more information on how your company can participate in the next World Plumbing Day ASA Poster Contest?

Contact Jim Kendzel at jkendzel@asa.net.

ASA REVIEW

ASA President Katie Poehling Seymour (First Supply) receives a big thank you from the fifth-grade class at Kromrey Middle School. Kromrey student Charlie Sperling won the fourth-through-sixth-grade division and took second in the international contest, which resulted in Kromrey receiving total awards of $1,000.

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

9

INNOVATION

Field service management software saw increasing use during the pandemic.

How the Digitization of Contractors’ Businesses May Affect You

By Beth Ladd, Vice President of Innovation bladd@asa.net The COVID-19 pandemic drove many changes in the way businesses operate. In addition to government lockdowns and restrictions on physical interaction, these changes were also driven by consumer expectations.

When lockdowns forced everyone home, many businesses digitized their processes, making five-years-worth of changes in merely six months. Although physical distancing is no longer necessary, consumers have gotten a taste of what a well-executed digital experience feels like, and they are not going to relinquish those benefits.

In order to address these newly solidified needs, contractors began adopting digital tools to provide the functionality end consumers demanded — and found advantages for themselves as well.

10

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

One tool that saw increasing use during the pandemic was a class of software called field service management (FSM) software, which allows contractors to extensively digitize many business functions. FSM software began as administrative software, to give managers one platform through which they can schedule appointments, track jobs and monitor ongoing maintenance. In order to facilitate this, tools were created to allow contractors to access information resources, create digital estimates and document jobs.

Customers have gotten a taste of what a well-executed digital experience feels like, and they are not going to relinquish those benefits.

With the contractors’ business functions being digitized, when the pandemic hit, the creation of a digital experience for the end consumer was significantly eased. FSM software unified customer business interactions, allowing scheduling, documentation, invoices, billing and payment to be centralized on one platform.

ASA REVIEW

So, we understand what the software does; now, what experience does it create? For the end consumer, it is frictionless, where every interaction with the contracting company is conducted through one digital platform.

The software centralizes information, minimizes delays and provides a clear picture of the current state of their projects. For contracting company owners and managers, they can complete their day-to-day work quickly and efficiently, allowing them to focus more time on higher-value interactions. For service technicians, every aspect of their job feels streamlined and unified. From the assignment of a task all the way through its resolution, there is one portal through which everything is done. Much like the experience provided to end consumers, friction points have been minimized and the process smoothed.

It’s Happening Now

Contractors aren’t actively looking for new suppliers — they’ve already found them. In light of these findings, how will you fulfill the growing contractor need for a digital, integrated, frictionless experience? Your ability to provide functional and practical digitized interactions will act as a key differentiator, both from your local competition and from the behemoths that threaten all private distributors.

Have you considered what functionality contractors need or how you will build the capabilities they want? Have you thought about how you will start the digitization and integration of your business functions?

Are you thinking about the experience you want to craft for your contractors, and what obstacles are preventing its creation? Will you be prepared to fulfill these expectations when they go from being a luxury to a necessity?

Contractors began adopting digital tools to provide the functionality end consumers demanded — and found advantages for themselves as well.

Contractors and owners are aware of the possibilities presented by this class of software, and the kinds of services it can provide. This degree of unification has gone from being a fantasy to a luxury — something which not everyone has, but something everyone wants.

Regardless of distributors’ actions, this kind of digital experience will inevitably become a necessity. In many B2B fields, this has already happened. According to a recent study conducted by McKinsey & Co, 80% of B2B buyers will begin actively looking for new suppliers if their current partners are unable to provide real-time inventory, transparent online pricing and a consistent experience between all channels of communication.

Now, we should be clear that this does not mean that 80% of PHCP contractors are actively looking for new suppliers — yet. This is partially because the PHCP industry has historically been slow to adopt technology (on both sides of the counter), and partially because they don’t have to look far before finding big-box stores.

ASA REVIEW

FSM software unifies customer business interactions, allowing scheduling, documentation, invoices, billing and payment to be centralized on one platform.

Shutterstock Photos.

A recent McKinsey & Co. study shows 80% of B2B buyers will begin actively looking for new suppliers if current partners are unable to provide real-time inventory, transparent online pricing and a consistent experience between all channels of communication.

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

11

BUSINESS INTELLIGENCE

How does your company measure up against other wholesalers?

ASA’s Operating Performance Report provides benchmarking metrics in more than 70 financial categories.

By Mike Miazga, Vice President Sales-Operations mmiazga@asa.net

Sometimes no change is a good thing.

Such is the case with the results of the 2023 ASA Operating Performance Report, now in its fourth decade of publication and widely regarded as the gold standard for wholesaler benchmarking in the PHCP-PVF industry.

“In a nutshell, 2022 was very similar to 2021 — only slightly slowing from the 2021 pace of growth,” said Greg Manns, senior vice president at Ohio-based Industry Insights, ASA’s business intelligence partner that has produced the OPR since its inception more than 40 years ago.

“For many, 2022 was either a record year or a year that was only surpassed by a record year in 2021. The last two years are the strongest-performing years in the 40-year history of this study.”

Manns noted most respondents to the survey likely achieved record performance in one of those two years.

“Double-digit sales growth for two consecutive years is very significant even if a large portion is attributable to the inflationary environment in which we are operating,” he added. “The only other time we saw sales growth of double digits was in the inflationary period of the early 1980s and in the run-up of the housing boom in 2004-2007.”

Each year, ASA’s OPR provides PHCP-PVF wholesalers with vital financial and operating performance benchmarks for gauging company strengths, weaknesses and improvement opportunities.

Such information is nowhere else available.

To illustrate the significance of the last two years, Manns explained while overall profits (net profits before taxes as a percentage of net sales) declined slightly in 2022, it remained over 8% for the second consecutive year. Historically, he noted, profits have averaged between 3.5% to 4.5%.

“The decline can mainly be attributed to net profits in 2021 being supplemented with COVID-relief PPP loan forgiveness funds,” Manns said.

12

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

If you did not participate in the 2023 ASA Operating Performance Report and would like to purchase a copy of this benchmarking gold standard, contact ASA Data and Market Intelligence Manager Bri Baresel at bbaresel@asa.net.

Manns added when you exclude COVID-relief funding and nonoperating income/expenses, operating profits as a percent of net sales actually increased from 7.6% in 2021 to 8.2% in 2022.

Manns cautioned in an inflationary environment, it is more important than ever to use ratio analysis to “normalize” the performance measures. For example, he added, while payroll and fringe benefits expenses increased by nearly 8% in dollar terms, they actually declined slightly as a percentage of total revenue.

The 2023 study shows payroll, including fringe benefits, per employee is up to $87,000 from $81,000. Payroll, including fringe benefits as a percentage of net sales declined to 14.1% from 14.7%.

“This is an indication that the increase in sales dollars is outpacing the increases in payroll dollars,” Manns said. “While this is encouraging, there will be significant pressure over the next few years to continue to at least maintain sales levels and/or improve productivity in order to support a larger payroll base and other operating expense increases.”

The Value of OPR

In addition to receiving the nearly 100-page industry-wide report that tracks more than 70 critical financial metrics, an in-depth customized report shows a firm’s confidential performance ratios alongside the aggregated results of comparable groups to industry peers. The industry-wide report also contains analysis, historical trends, ratio definitions and all the data aggregations.

ASA REVIEW

“The annual ASA OPR has been a staple in benchmarking our company’s results for many years,” Reeves-Wiedeman Co. President and CEO Kurt Wiedeman said. “There are so many metrices and ratios in the data that help us easily recognize areas of improvement and validation that we are on the right track.

The extensive historical information gives a view of trends and direction of our own company and the industry.”

Gary Haskamp, of Indianapolis, Indiana-based Barry Co., adds: “We value the OPR because it allows us to benchmark ourselves against industry peers and allows us to track our historical results using a consistent model. We also use the report to challenge ourselves to meet the results our peers have reported, and we would like to emulate.”

Falk Supply CEO Ira Kleinman zeroed in on two areas of the report for the Arkansas-based wholesaler.

“After reviewing the report, I summarized the report to my team with the following metrics: We determined Falk Supply is weak in showroom sales per person and gross margins on direct ships,” he said. “We will work on improving these metrics with our team.

We took pleasure in understanding how our profit compares to our peers, and we took solace in knowing that the typical distributor is suffering from inventory turns just like we are.”

Inside the 2023 Numbers

Similar to the industry’s profitability metrics, all four segments achieved higher than usual sales growth levels for the second consecutive year, Industry Insights noted.

Plumbing supply firms reported a 15.3% sales increase in 2022 vs. an 18.2% sales gain a year earlier.

PVF firms showed a 29.9% increase in 2022, vs. an increase of 17.8% in 2021.

Plumbing supply and PVF firms reported a 15.3% sales gain in 2022 vs. a 22.0% sales increase in 2021.

HVAC and other firms also experienced a 15.8% increase in sales in 2022 vs. a 22.0% gain in 2021.

“The OPR helps us benchmark against the industry,” Porter Pipe & Supply CFO Rick Schweinberg said.

“We like to compare overall rations,” Atlas Supply Partner Leigh Suffian said.

Jack Bell, president and CEO of Louisville-based Masters’ Supply, also is a big fan of the comparative capabilities of the report.

“The most important takeaway Masters’ gets from the OPR is the data given to compare ourselves against our peers on all levels whether it is a large, small or a high-profit company,” he said.

“We use the report to compare and strategize how we can be leaner and more efficient. The data collected helps us in all facets of our business.”

The OPR has been prepared in strictest confidence for more than four decades by Industry Insights. The only thing ASA does is pay for this service — it never sees a single company’s results — ever.

All a wholesaler has to do is fill out the confidential OPR survey form and submit the information in confidence to industry insights.

SOME KEY 2023 ASA OPR MEASURES

ASA REVIEW

RETURN ON ASSETS

Product of profit margin and asset turnover.

PROFIT RETURNMARGIN ON ASSETS

Net profitofbefore tax divided Product profit margin and by net sales (good measure of margin management). asset turnover.

ASSET TURNOVER RETURN ON ASSETS

Net salesofdivided by totaland assets (good Product profit margin measure of asset productivity). asset turnover.

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

13

Why Your OPR Participation is a Must

MEASURE YOUR SUCCESS

You may be asking yourself: I am not a financial expert and I simply do not have the time to pour through countless performance ratios, trying to understand what they mean.

You do not need to worry. The OPR study is designed so you do not have to be a financial expert and you do not need to spend much time in order to learn invaluable insights about your business that are not otherwise possible. Rather than writing a 20-page dissertation about the benefits of participating, here are some short reasons for doing so each year:

OPERATING PERFORMANCE REPORT (OPR) 2023 The PHCP-PVF Industry’s Benchmarking Gold Standard for More Than 40 Years.

Your own company’s ratios are already calculated for you and shown alongside the most relevant peer group comparatives. Once you participate, you never have to make any calculations.

In addition to the comparative performance ratios, you are also provided with an objective report card showing your own company’s potential strengths and weaknesses, and improvement suggestions.

asa.net

The report provides vital information pertaining to profitability, productivity, sales performance, liquidity, operating expense control, cash management, inventory management, receivables management and other important data.

The report is an invaluable tool for dealing with bankers and obtaining the most favorable loan terms.

“The annual ASA OPR has been a staple in benchmarking our company’s results for many years. There are so many metrices and ratios in the data that help us easily recognize areas of improvement and validation that we are on the right track.”

—Kurt Wiedeman, Reeves Wiedeman Co.

The report provides invaluable information to help value how much your business is worth, Plus, OPR survey participants can utilize ASA’s Business Valuation Appraisal service at a greatly reduced cost.

The yearly OPR participation fee is insignificant relative to the improvement potential for your business.

“This report is something management looks forward to reviewing every year,” one OPR participant wrote.

“When I received the email that this year’s report was available, it was like Christmas morning,” another OPR participant added.

Can you really afford not to participate? The OPR is designed to serve as an easy-to-understand, actionable tool for industry firms to evaluate their own company’s operating results, in order to pinpoint strengths, weaknesses and improvement opportunities.

Retired Industry Insights Principal Tom Noon and ASA’s Bri Baresel contributed to this report. Shutterstock Photos.

14

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

ASA REVIEW

Thank you to these partners for helping to advance the mission of the American Supply Association and building our association’s brand!

SUPPLIER PARTNER

Interested in Becoming an ASA Supplier or Sustaining Supplier Partner?

For more information on ASA’s Supplier Partner Program, email partners@asa.net.

ASA REVIEW

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

15

EDUCATION

New Essentials Course Will be Core to the Development of Members’ Next Generation Leaders ASA University’s Master of Distribution program reimagined.

ESSENTIALS SERIES

ESSENTIALS OF PRACTICAL LEADERSHIP IN WHOLESALE-DISTRIBUTION

By Taylor Kenney, Vice President of Education and Training tkenney@asa.net As members grapple with attracting talented workers to their businesses, the ongoing need to develop professional, insightful and effective leaders is even more pronounced. As new talent enters the workforce, crucial skills transfer and training must occur to develop our future leaders.

ASA University’s premiere leadership program, the Master of Distribution Management (MDM) program, was launched to facilitate the development of future leaders. But the need to complete this work at an accelerated pace and deeper dive was needed.

This fall, ASA University is excited to announce the next evolution of the MDM program. Using feedback from members and MDM students, ASA University unveils a newly configured MDM program that offers peer-to-peer interaction and idea sharing surrounded by a core new Essentials book, authored by industry experts in the field: Essentials of Practical Leadership in Wholesale-Distribution. In addition, students will be able to traverse the newly enhance MDM program in less than a year for under $1,000. Speed of completion, and a stronger targeted approach around a one-of-a-kind coarse will provide every distributor member the opportunity to participate and benefit as they position their emerging leaders to thrive through their careers.

16

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

asa.net

Re-envisioning Leadership in Our Industry

The MDM Task Group, comprised of ASA volunteers, worked with the ASA team to see this project come to life. With their steady guidance and support, a newly enhanced MDM program is launched. Rebecca Falish (InSinkErator), chairperson of ASA’s Workforce Development Council, a volunteer-led strategic committee that oversees the MDM Task Group, has been watching the development of the new program with excitement.

“This program will take the leadership capabilities of our members to new heights,” she said. “The new peer-to-peer touchpoints will be a stellar addition to an already-strong leadership program, and the insightful commentary included in the newly developed Essentials book for this program will make it stand out above competitors.”

A special thanks goes out to MDM Task Group Chair Dwight Newton (Zoeller Pump); Brian Tuohey of The Collins Companies; Meridith McArthur of Mid-State Supply; Gail See of Dakota Supply Group; and Cheryl Harris of Reece for shepherding the enhanced program!

ASA REVIEW

Essentials of Practical Leadership in Wholesale-Distribution

One exciting addition and core to the program is the addition of a new Essentials of Practical Leadership in Wholesale Distribution that will lead students through the tenets of leadership skills. This impactful offering has been authored by industry experts of all stripes — and touches on all the key areas of need for leadership training.

“Over the next 10 years, with the retirement of our baby boomer generation, our country, and more specifically our industry, will see the greatest leadership drought that we have ever experienced in our history,” Tuohey said. “With that in mind, we have gone to a cadre of the finest minds in our industry to capture their expertise and advice on how they have handled the myriad issues that a manager or leader will face in running a branch, or for that matter, an entire business. This program has been redesigned to give our future leaders, both male and female, a ‘practical, real world’ educational experience on what they will need to know to be a great manager/leader. Anyone who aspires to be that person, should take this course.”

Offering Flexibility for Members

The new MDM program also offers expanded flexibility for learners to customize their experience by self-electing supplemental training. In previous iterations of the program, hours of additional study followed a set curriculum, dictated by ASA. While it was comprehensive and aligned with the program goals, it didn’t allow for members to insert their own training important to their day-to-day business. The new MDM program will allow members to work with their mentors to identify supplemental training that works for them — whether it’s internal training on company culture or core values, or specific sales or process methodologies unique to the member’s business.

MDM student mentors, too, will benefit from the new approach to the MDM program. While mentor support has always been part of the core MDM program, new resources have been developed for mentors to enable them to succeed in their role.

A mentor orientation has been added to the program, including revised resources to enable mentors to be more effective in how they guide their students to success.

By tapping into the knowledge of our industry titans, ASA University was able to capture lessons, stories and expertise from those who have walked the leadership path in our industry themselves. This practical advice will form the central backbone of the new program. Packed full of actionable advice, additional resources for study, and self-reflection and discussion questions for mentorship discussions, Essentials of Practical Leadership in Wholesale-Distribution is truly unique ASA.

Bringing Peers Together

Feedback from members also indicated the desire to connect future leaders with peers to help navigate the complexities of leadership in our industry. In the past, each MDM student went through the program on their own time and schedule. While this allowed for flexibility for scheduling, it did not provide avenues for peer-to-peer interaction and lacked a sense of community. Moving forward, the new MDM program will be based on a cohort model, with groups of individuals completing the program together as peers.

Beyond this, the newly revised MDM program will offer ASAfacilitated peer-to-peer touchpoints that rally around each of the core chapters in the Essentials offering. On a monthly basis, each group of students will gather virtually to talk through each chapter’s discussion questions, trade ideas and advice, and even get to chat with authors themselves to dive deeper into their expertise.

A Capstone Project will follow the student through their MDM experience. As with previous iterations of the program, students will culminate their MDM experience with a presentation to the MDM Graduate Review Committee, presenting a real-life business problem or challenge that they tackled by applying the skills learned in the MDM program.

The program has also been refined to afford completion in a 12-month timeframe rather than 18 months; feedback from members gathered prior to the program revamp indicated that an 18-month commitment was a heavy lift — not only for students themselves, but also for their mentors at their organization. Several other programs, such as AD’s Leadership Institute, require a heavy time commitment that spans years of study (and with a hefty price-tag!), the MDM program is nimble, lightweight and imminently achievable in the span of a single year.

Our goal was to make this program approachable for both students and their businesses — including their budgets! The MDM program fee structure (now $995) has been modified to better align with members’ budgets and has been significantly reduced, while simultaneously offering an enriched experience: win/win for members!

Ready to Develop Your Leaders?

The newly revised MDM program will kick off this fall, with our first group of students entering the program for their leadership journey. To learn more, contact Taylor Kenney at tkenney@asa.net.

ASA REVIEW

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

17

BUILDING ONE FUTURE

ASA Recruitment Marketing Director Steve Edwards updates NETWORK2022 attendees on the progress of the association’s PROJECT TALENT careers recruitment efforts.

Photo by Steve Woltmann/ASA.

ASA Future Fund Initiatives Pave Way for Long-Term Industry Growth

By Mike Adelizzi, CEO madelizzi@asa.net ASA has grown in its influence and effectiveness well beyond the ability of our membership dues to support all the programs that ASA delivers.

In fact, our membership dues only cover about a third of our operating budget. We have been blessed to have the generous support and dedication from our ASA Supplier Partners who year in and year out answer the call to support the 300+ leading distributor members of ASA. And even with the generous support from these nearly 60 supplier partners and more than 50 sustaining manufacturers’ representative partners, our ability to launch mega initiatives such as PROJECT TALENT, Distribution Next (DNEXT) and the VITALITY assessment tool would not have been possible without the support from dedicated members going above and beyond to help us by investing additional financial support to launch these programs that today every member enjoys.

We should all thank these few members that answered the call to impact the future of the industry and our association by contributing when others chose not to. Without them answering the call, we could not have launched the aggressive effort to attract the next generation of labor so badly needed in this industry (PROJECT TALENT) or identify future threats to our industry (DNEXT). We owe them and, in fact, the industry owes them a debt of gratitude for creating a brighter future for everyone.

18

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

PROJECT TALENT

As the voice of the industry, ASA is uniquely positioned to attract those career seekers needed to replace the thousands of professionals leaving our industry to retirement every month.

ASA is investing hundreds of thousands of dollars each year to build our brand and grow awareness of our industry as a viable, fulfilling, and prosperous place to create and grow a career.

ASA is doing this through social media and email marketing reaching millions of people and driving them to supplyindustrycareers.com, a website highlighting the PHCPPVF industry and the opportunities that exist. Targeted marketing with specific messaging aims to attract women, students, mid-career professionals and transitioning military seeking private sector opportunities, and ultimately leading them to ASA members’ websites where we hope you’ll close the link and hire the employees our industry so desperately needs.

This investment is also being used to create tools and resources to help ASA members with their recruitment efforts. Today’s fight for talent requires different tactics than have ever been used before. Social media, employer branding and website experience are all critical to effective recruiting. All members have access to an online toolbox with thousands of assets such as images, social media templates, job descriptions and more to bolster their local recruiting. Additionally, webinars and regular communications to help distributors, manufacturers and independent manufacturers’ representatives learn about and implement recruiting best practices are available to all ASA members.

ASA REVIEW

DNEXT

In the summer of 2020, in the midst of a global pandemic, the ASA’s D.NEXT innovation lab opened in Research Park at the University of Illinois, Champaign-Urbana and today is an integral portion of the ASA’s strategic plan and the Building One Future initiative.

Focused on rapidly evolving customer expectations, business models and technology embedded in products and processes throughout the PHCP-PVF industry, the lab has created valuable, pragmatic, and thought-provoking content to propel ASA member success, catalyze growth and meaningfully contribute to the body of knowledge and renewal of our industry. The goal is to move the needle for distributors using human-centered design research, rapid ideation and prototyping to develop ideas, infuse insights and uncover opportunities to support your success.

Our initial project at the lab focused on developing an understanding of the expectations that distributors have of their customers and conversely, the expectations contractors have of their suppliers. Next, our learnings centered on customers’ ordering and receiving behaviors and evolving expectations as a result of the pandemic. Subsequently, the 23 elements of a value pyramid described facets of interactions with customers that differentiate private distributors from big-box and national retailers.

Further research projects focused on technology: utilizing texting technology to expand customer communications, contractors’ growing use of field service software and contractors evolving digital expectations for e-commerce.

Texas Plumbing Supply’s Glenn Fuller (left) and Dellon Sales’ David Dellon chat during a recent ASA Strategic Planning Retreat where ASA’s Future Fund was discussed.

Photo by Mike Miazga/ASA.

ASA Vice President of Innovation Beth Ladd has expanded her focus toward leading efforts to gather manufacturer PIM contact information to build a directory for ASA members and is currently facilitating product data roundtable discussions with distributors and manufacturers to discover potential for creating data sharing standards. Moreover, Beth is guiding one of our strategic councils, Embracing the Future, which is tasked with supporting our members’ ability to succeed in the future by providing data, insights and best practices to address disruption and innovation.

VITALITY

While larger distributors have the ability to strategically plan and align their companies to successfully compete in the future, Future Fund support created a self-assessment survey for growing distributors not having on-staff support to make strategic decisions for their companies. One of the goals of the VITALITY platform is to help those members looking to strengthen or expand their position and ability to more effectively compete in the future. While every distributor could benefit from having their key teams provide the insight to their companies that the VITALITY assessment would provide, it’s the mid-level and smaller distributors that could benefit the most.

ASA thanks the following members for their support in helping to launch these critical projects for our entire industry.

A. O. Smith / State Industries

Milford Supply Co.

Associated Marketing

Moen

Basco Co.

Northeastern Supply

Carrhill Co.

Northwest Pipe Fittings

Coburn Supply Co.

Oatey Supply Chain Services

Consumers Pipe & Supply Co.

Pace Supply Corp.

Cooper New England Sales

Pacific Plumbing Supply Co.

Dakota Supply Group

Penco Corp.

Eastern Industrial Supplies

ProLine BK

First Supply

Sloan Valve Co.

Galloup

Texas Plumbing Supply

Hajoca Corp.

The Collins Companies

Hirsch Pipe & Supply Co.

The Granite Group

Intuilize

Thomas J. Higgins Co.

Kohler Co.

Tim Morales & Associates

Lewis-Smith Corp.

Torrco

Major Lozuaway & Associates

Unified Purchasing Group

McGuire Manufacturing Co.

Viega Winsupply

ASA REVIEW

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

19

EMERGING LEADERS

ASA’s Emerging Leaders group set an all-time attendance record in Savannah, Georgia earlier this year where a key highlight was the popular best practices roundtable session that featured extensive discussions on the state of the labor force.

Emerging Leaders Share Insights and Best Practices on State of Labor

By Vincenzo Dal Pozzo, Director of Membership vdalpozzo@asa.net Nearly 200 industry emerging leaders that attended ASA EMERGE2023 in Savannah, Georgia shared their insights on industry labor trends, including the prospects for a future labor shortage, plus trends in how firms are recruiting and retaining employees.

Manufacturers reported recruiting avenues being high schools, tech schools and community colleges. An agreed upon takeaway from doing these events is to start branding yourself in the market so you are seen as a potential career option.

COVID exacerbated expectations and most applicants seem to be primarily money driven. That led them to talk about the importance of company culture. The need to hire people that fit the culture makes money a lesser driving factor. When interviewing people, it was advised to ask questions that help (you, the interviewer) understand if they are a good cultural fit for your company. “Shadow interviews” have been suggested for the second interview — where the candidate shadows someone currently doing a job as a second interview to see if it’s a good fit.

Some distributors and manufacturers have even gone to the extent of working with high school counselors, speaking at career days in high schools, and even offering an onsite job fair at the factory, providing participants with food and a tour. If there’s a chance to automate a job, manufacturers are considering making the transition sooner than later, eliminating positions they can’t fill.

When asking for the distributors’ take on the labor shortage, recruiting and retaining employees, a resounding sigh and eye rolls were the initial responses. They reported concerns mostly related to the effects of inflation on expected wages. Wage expectations are becoming unrealistic, especially for people with little or no experience, roundtable participants noted.

20

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

ASA REVIEW

Employees that have worked out the best and stayed with their respective companies have been personally referred by current employees. One distributor shared a referral incentive plan they have, which rewards $500 at 90 days and another $500 at the one-year mark to the individual who made the referral, given the suggested employee still works there. Depending on the position, at the end of three years, you can see a finder’s fee of up to $6,000.

Some members reported radio ads working once upon a time, but not so much now. Throughout the roundtables, there was conflicting feedback on whether temp agencies were useful or not, some said only for drivers.

The consensus of the roundtables was that retaining employees required becoming more personal with employees and making company culture an ongoing point of interest. Younger generations seem to need more recognition, so years of service awards were reported as being a helpful way to address it.

Managers are giving (5) “on the spot” bonuses a month, including $5 gift cards to establishments such as McDonald’s, Starbucks, etc., executives are hand-signing a birthday card and mailing them to their employees, and having higher management welcome new employees on their first day with a handwritten letter. Spotlighting employees through newsletters, YouTube videos, and internal social media to help connect and engage employees across the company are also shared best practices. Even Top Golf nights or a monthly lunch cookout have been successful team-building events.

Labor talk during the roundtable session included topics such as compensation, recruitment and retention successes, as well as incentivization and the use of interns. Photos by John Alexander/ASA.

PREVENTING ERRORS On the flip side, preventing errors is also a factor when dealing with determining the retention of employees. How are distributors preventing errors? Quizzing employees with flash cards for simple processes and giving them cheat sheets. Not making transfers longer than 30 lines, taking a minimum of three pictures on each delivery, and if applicable, double-checking pipe after being loaded by the driver. One distributor shared the incentive they use to promote transfer accuracy: if it is 95% accurate or higher for a month, everyone receives a $50 gift card.

Additional recruiting tools being used? Sign-on bonuses, more time off offered, raising starting pay, and referral bonuses, as mentioned earlier.

Companies are leaning on ESOP and 401k retirement plans to get applicants through the door. Using internships for recruiting and retention didn’t turn out well for most, citing short-term employees were hard to manage and train.

Often, interns used it as a steppingstone and never stayed long-term. A few tables pointed out they shouldn’t only be targeting college grads and youth, but middle-aged individuals as well. Some new hires have left the same day they start or within days of starting. With a quality person being hard to find, utilizing both in-house and out-of-house staffing teams are needed.

Larger manufacturers are continuing to take the actions necessary to have their respective companies operate smoothly, even if it means bringing engineers from different countries for certain periods of time.

A promising note ASA received from the roundtable session: Some feel the glamour of being in the trades is slowly making a comeback.

Manufacturers are noticing a shift coming, but it may be a couple more years before a noticeable impact is made.

ASA REVIEW

Sioux Chief’s Jake Ismert makes a point during the best practices roundtable session at EMERGE2023.

Customer Loyalty.

Distributor Success.

Understand your customers to the fullest and their loyalty will follow. ITA Group’s engagement experts drive distributor success with uniquely designed and managed customer loyalty programs that generate valuable customer insights, increase customer retention and boost sales.

Visit itagroup.com to request a customer loyalty platform demo.

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

21

PVF UPDATE

PVF distributors continue to report strong returns

By Mike Miazga, Vice President Sales-Operations mmiazga@asa.net The news was mainly positive for industrial and mechanical PVF distributor members that participated in the recent ASA Quarterly Market Survey.

This survey zeroed in on the industrial and mechanical PVF industry. ASA asked its PVF distributor members what questions they would like to pose to their PVF distributor peers.

In terms of business conditions thus far in 2023, 59.1% of survey respondents said sales have increased through the first seven months of the year, while 31.8% said sales decreased and 13.6% said sales were flat.

“We had the best year in company history in 2022,” one distributor wrote. “So, while we’re having a good year, it’s not as good as 2022.”

“Sales have increased by single digits, while gross profit dollars have fallen due to declines in product costs,” another noted.

When asked what factors might impact the PVF industry’s growth or profitability in the near-term and what gamechanging trends might significantly impact the industry, a familiar refrain resonated with survey respondents: interest rates.

“Increasing interest rates are slowing capital investments,” one distributor wrote.

“Inflation,” was the response of another distributor. “Have customers over-ordered and are now sitting on inventory that will suppress sales next year?”

Another distributor said it is seeing the cost of money affecting customer spends, “more so all the time. Privately funded projects, of which our state has many, move along. Projects utilizing borrowed funds have slowed, been scaled back or stopped for now. Basic economics.”

Other responses to those questions included Mother Nature shutting down resin factories again, lead times on equipment from manufacturers and lack of labor for the contracting market and the subject of reshoring.

“We are watching the reshoring movement closely,” one respondent stated. “Those efforts alone with spur growth.”

“We see continued strength in construction, but no significant changes in the near-term,” another distributor wrote.

22

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

Commodities: One distributor talked about the materials on ships waiting at ports that finally came in. “The pipeline remained robust even though deliveries were getting to warehouses,” the distributor said. “Business flattened a bit, leaving suppliers with a lot of surplus. Prices have trended down so far in 2023, with some commodities dropping more than others. If interest rates ever begin to fall, business will spike.”

Labor: On the subject of the current labor force, 57.1% of respondents say project delays due to labor, available products, etc., are still a factor just like they have been in recent years.

“Not like 2020 or 2021, but labor is still a problem in the industry,” a distributor explained. “We find that some of our big customers slow one project down as labor is moved to another job. Meanwhile, customers are constantly looking for help, as well as pilfering workers from other companies.”

Product/Materials Shortages: The good news here is 63.6% of distributor respondents said they are not seeing shortages of products and materials. Of those that answered yes, categories include commercial HVAC and waterworks products, seamless pipe, aluminum, brass service fittings, electronics and specialty valve trim and valves in general, while one respondent noted they are hearing contractor feedback of persistent long lead times on equipment of up to a year in many cases.

Project Backlogs: This question also had a positive response with 59.1% of respondents noting their backlogs and pipeline for future projects remains good, while 31.8% said they have seen a change downward, and 9.1% said their backlog/ pipeline has increased.

“Plenty of commercial bid opportunities have helped our pipeline,” one distributor wrote.

“We have had a job or two slow down, and some of it has to do with available labor, and some has to do with interest rates,” another distributor added.

ASA REVIEW

Inventory Levels: On the topic of inventory, responses were mixed with 40.9% of respondents noting their inventory levels have stayed the same compared to a year ago, while 36.4% said inventory levels went up and 22.7% said levels went down.

“Lots of inventory, don’t want to be caught without it,” a distributor noted.

Forty-five percent of respondents say they are not adjusting inventory levels due to the cost of money and stabilization of the supply chain.

“We are trying to get back to three months usage vs. 5-6 months as vendors catch up,” one distributor noted on this topic.

Days Sales Outstanding: No big change here, with 63.2% of distributor respondents saying they have not noticed a trend for requests for extended paydays with customers.

“Mostly, I see more customers asking for extended terms, i.e., net 60 days,” a distributor explained. “Our regular terms are net 30 days. However, we’ve structured terms to suit our customers from time to time. It must make sense, and if I am asked by one of my outside salesmen, I simply tell them any additional term incentives (2% 10th, prox., or 2% 60, etc.) must be made up in profit margin. There are no free lunches.”

When it comes contractors paying by credit card, 55% of respondents say they are seeing more contractors using a charge card for payment. “Yes, and when it’s a big customer, it stinks,” one distributor said. “I welcome it for a lot of over-thecounter sales, simply because we get our money immediately, and we generally make more profit over the counter, anyway.”

Surplus Inventory: An interesting question posed by an ASA member. Some responses: “Very slowly, if ever,” when asked how are you disposing of surplus inventory. “The suggestion of establishing some sort of inventory clearinghouse or sharing process has been circulating more within our buying group lately, but not enough traction yet.”

“We are trying to return some and sell off others as an incentive program to salespeople,” another distributor wrote.

“This is a continuous evil ballgame that leaves no winners,” another added.

Looking Ahead

The majority of distributor respondents to the survey like what they see in the short-term in 2023 and into the first part of 2024.

“We’ll see an increase in revenue in Q3 and Q4,” one distributor noted.

“Steady, lots of booked business waiting to happen.”

“Favorable. We have some projects that will stretch into 2024 and more are coming,” another distributor wrote. “Again, not as strong as 2022, but still solid sales.”

“We are optimistic for the remainder of 2023 based on customer backlogs and the need for continued labor additions through 2024 Q1 and Q2.”

How Can I Get a Copy?

If you would like a copy of this PVF market survey sent to you, contact ASA’s Bri Baresel at bbaresel@asa.net.

The topic of interest rates continues to be a concern among industrial and mechanical PVF distributors. Shutterstock Photos.

ASA REVIEW

KEEPING MEMBERS INFORMED, ENGAGED AND LEADING

23

STILL TIME TO REGISTER!

www.asa.net