• Things a Wholesaler Must Do to Survive the '70s er 2008-10

    Aug. 1, 2008
    The time is late 1973 to mid-1975, more than 30 years ago. That is a long time by anyone's standards. For many in our industry, it was only yesterday;

    The time is late 1973 to mid-1975, more than 30 years ago. That is a long time by anyone's standards. For many in our industry, it was only yesterday; others were not born yet, and others were too young to care about much of anything beyond food, friends and getting to school on time. A lot was going on during that period. Hank Aaron broke Babe Ruth's record; Duke Ellington and Jack Benny passed away; the Watergate Scandal erupted and President Nixon resigned; the Fall of Saigon marked the end of the Vietnam War; Wheel of Fortune debuted; and Bill Gates founded Microsoft.

    While all that and much more were going on, the United States was in the midst of a major recession, not unlike what economists are predicting for late 2008 through early 2010. The 1970s recession was severe by many standards. From the third quarter of 1973 to the second quarter of 1975, the following occurred:

    • Gross Domestic Product dropped from $1,236 billion to $1,168 billion.
    • Unemployment rose from 4.9% to 8.3%.
    • The prime interest rate dropped from 10.2% to 5.8%.
    • Inflation rose from 7.4% to 12.2% (fourth quarter of 1974).

    During that period and many years beyond, Ron Foster of Management Foresight was teaching wholesale distributors how to be successful and profitable businesspeople. Through his educational seminars, he brought terrific insight and “tough talk” to many individuals who today still consider his teaching and advice as “gospel.”

    In a 1975 Ron Foster seminar sat a young Arthur Franklin of S. Franklin & Son absorbing every word and diligently taking notes. Arthur has graciously shared his notes from that time, which are as timely now as then and worth keeping close at hand as we move into another forecasted recessionary period.

    Advice from Ron Foster:

    Things a Wholesaler Must Do to Survive the '70s

    • Not go after sales for sales' sake.
    • Decide what business you want to be in, what to sell, who to sell to and where to sell.
    • Keep your prices UP to the level of value added by your service.
    • Don't build up unnecessary inventory.
    • Don't let your accounts receivable get out of hand.
    • Don't put too much money in fancy bricks or mortar (or any fixed assets).
    • Avoid sideshow businesses.
    • Keep cash on hand to pay bills when they become due.
    • Don't go overboard in short-term debt.
    • Pay suppliers promptly.
    • Get high output from your people.
    • Pay your people very well but only for high output.
    • Pay yourself well.

    Additionally,

    Ways to Reduce Inventory

    • Reduce the number of brands.
    • Convince yourself of the need to reduce inventory.
    • Nothing is a substitute for judgment.
    • Convince your own people of the need to reduce inventory, especially “B” and “C” items.
    • Find out what the customers need (or have used).
    • If you can't send it back, mark it down and move it out.
    • Be cautious of new lines.
    • Walk through your warehouse and physically mark the bad inventory down.
    • Get information on inventory to make decisions.
    • Set up standards of performance.
    • Set up levels of service availability.

    My thanks to Arthur Franklin and the many other HARDI members who openly and continuously share their knowledge and experiences for the benefit of their peers and the industry. This is truly the value proposition of an industry association.
    Don Frendberg, Executive vice president / COO