By Jack Keough
If you mentioned the word “globalization” to a distributor a few years ago, you’d get a blank look. After all, it was argued, there was plenty of business in the U.S. and few distributors saw any need to get involved in international business
But a lot has happened since then. In some cases, customers moved or opened manufacturing plants overseas. These customers sometimes requested their distributors follow them and provide the same level of service they did in the U.S.
Other distributors, who decided not to establish a branch overseas, instead partnered with distributors in some of those countries or acquired distributorships outright.
Just recently, for example, Anixter International acquired all the outstanding shares of Jorvex, S.A. a Lima, Peru-based distributor of electrical wire and cable products.
Globalization was just one of the subjects covered in a panel discussion at an NAED meeting. The three panelists, Kathy Mazzarella, president/CEO of Graybar, Dominic Pileggi, CEO/ president of Thomas & Betts and Barry Boyer, president and CEO of Van Meter Inc., talked about globalization and its effect on distribution. The panel discussion was moderated by industry veteran Mike Marks of Indian River Consulting Group. (You can see video of the discussion on tedmag.com and it is, indeed, worth checking out).
Establishing a business operation overseas can be daunting. But when a customer moves, an existing distributor may try to accommodate them by adding a location.
Larry Goode, former president of RT Dygert, a Minnesota distributor of seals and other products, found himself in that situation in 2005 when a major customer said it was opening a new plant outside Shanghai, China. Goode talked to the customer about establishing a business to service the plant.
Goode said he made the move both as a “defensive and offensive measure.”
He believed this move would help him not only keep the customer’s business in the U.S., but grow additional sales with new customers in Shanghai. And that happened, he said, as he signed up four or five new customers. That proved especially beneficial because sales from that major customer did not meet original expectations. He also was fortunate that a fastener distributor, who had heard of Goode’s new venture, moved to Shanghai and shared operational and business costs.
Goode, whose company did slightly about $18 million a year in sales when he expanded (including an acquired master distributor), had his business located in a Free Trade Zone outside Shanghai.
Although there was a learning curve as to customs, Goode said a major problem was the tremendous amount of paperwork involved. “They (the Chinese government) loved paperwork,” he said.
It had taken about six months from the time Goode OK’d the plan to get the operation up and running. Much of that time was spent in site election and paperwork. Goode and his team steadily built up the operation and the future seemed bright as sales climbed.
Then the economy took a sharp dive in 2008.Goode sold his company in 2009 and the acquirer basically shut down the Shanghai business.
Those years had been challenging. It was a tremendous experience for Goode, a distribution industry veteran, who is now the owner of Goode Advisors in Minneapolis, a firm that provides strategic consulting for small businesses and their owners.
An international presence can be an important tool for manufacturers and distributors as they position themselves for growth in the years ahead. But is should be done with caution and an understanding of the problems you may encounter.
Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at firstname.lastname@example.org or email@example.comTagged with tED