Our 100th Episode All-Star Celebration!

[00:00:00] Welcome to the 100th episode of The Around The Horn in Wholesale Distribution Live Stream and Podcast. Each week, our distinguished guest discuss the impact of the week's news on wholesale distribution and manufacturing.

[00:01:11] Join us as we go around the horn to gain unique insights about the economy, supply chain, M&A, e-commerce, AI, marketing, and technology. Want to join the conversation? Our discussions are based on our weekly newsletter, which you can find at around thehornpod.com

[00:01:28] or by emailing hello at leadsmarttech.com. And remember, if you enjoy the podcast, please leave us a five-star rating or review. It helps other people find the podcast and we sincerely appreciate your support. Around The Horn is sponsored each week by Leadsmart Technologies, a global technology

[00:01:47] leader providing purpose-built solutions to wholesale distributors and manufacturers. The flagship Leadsmart Channel Cloud is an AI enabled CRM and customer intelligence platform that helps users gain deep insights into their customers, teams and businesses, accelerating adoption ROI revenue and growth.

[00:02:09] And now your hosts for the hundredth episode of Around The Horn in Wholesale Distribution, Kevin Brown and Tom Burton. Hey. Thanks everybody. Oh, exciting. We're just so happy and appreciative to have everybody here with us today. It's we've only got three topics we're going to talk about.

[00:02:28] Usually we review our newsletter. We have 10, 15 topics we go through but we have been able to wrangle a who's who in the wholesale distribution and manufacturing world to get together today to enjoy our hundredth episode here. Super excited and appreciative of everybody that's come together.

[00:02:48] In fact, as we look at this screen, I'm going to just get started and with an intended pun say let's go around the horn and do some quick introduction. So Mr. Marx, Mike will you dive in, tell us for those people who have been in a cave

[00:03:04] for the last thirty, forty years who you are and where you're from and what you do. My name is Mike and Marx. I'm a consultant. Then a consultant says 87 came out of distribution and getting all these people together demonstrates the power of compromising photographs.

[00:03:24] So I just have a lot of things in the opinion some of which are true. Ian, want to try that and follow that? That's not fair of me to do to you but I will. Yeah, thanks. Thanks, Kevin. So I'm Ian Heller with Distribution Strategy Group.

[00:03:39] I spent most of my career working for publicly held distributors and now we are a media analytics and events company that covers the wholesale distribution industry and thanks for inviting me. I'm honored to be part of this illustrious group. That's great. Thanks Ian.

[00:03:57] Marty, how about you, your next in line? Sure. Thanks Kevin. Thanks Tom for inviting me into this group here. Hey, so Marty McLaughlin with Mosaic Partners. I've been as you might say, a consultant and a coach for a good long time.

[00:04:10] I really hope companies really find the true value if they bring to their customers and change the conversation from about their products to kind of why your customers buy and looking forward to just a great, great fun conversation today guys. So thanks. Super. Dirk, track stop, Dirk.

[00:04:25] I all again, time and Kevin congratulations. Super thrilled to be here. Founder of at least WD and Executive Producer of We Supply America. Currently day 61 of season four of We Supply America out champion in the noble calling of distribution and just to virtual speed here. Thanks Kevin.

[00:04:47] Are you going to have a special episode for day 100? You know what? Will you open? Can I get you all to say yes? Now that we're going to be there. I'll be there. All right, I see it as thumbs up.

[00:04:58] I'm pretty sure you could get this crowd to join you. If I could, you could. So, thank you. Very good. Mr. Hockett. Yeah, my cockett from Modern distribution management. I'm our executive editor so consider me our content guy whether it's our articles, our research, our podcast. News.

[00:05:17] It all goes channels through me at one point or another. So great to be back here on the programs surrounded by, you know, a lot of people that I look up to in this industry. So yeah, just thanks for inviting me back on the program.

[00:05:30] All right, Mr. Kennedy. Wow. I'm looking at this screen and I'm saying how did you guys? How did I end up on this screen with you guys? For the pot of the loose number 100 congrats Kevin and Tom. This is just really exciting outstanding.

[00:05:51] I'm all kind of the president CEO of DSG. We're a wholesale distributor. And many of us have been so at the public locations across the Upper Midwest. I have the privilege of leading our thousand employee owners.

[00:06:07] We're a hundred percent employee owned company out building futures in our communities. And we've got a lot of people who are in the public locations. So we've got a lot of people who are in the public locations.

[00:06:22] And we've got a lot of people who are in the public locations. And we've got a lot of people who are in the public locations. Yeah, sure. Thanks for that Kevin because sometimes I've got my day job that I've got my other day jobs.

[00:06:35] So I'm also currently serving as the chairman of the National Association of Electrical Distributors. On the ADLC board, as well as the AD Electrical Board. And I'm also an independent director for Boston Braun and National Distributor in Hickord and Tomego, Ohio.

[00:06:52] So you don't have a lot going on. No. All right. Dan joining us from Washington, D.C. Yes, we're going to be missing the Hawaiian shirt today. So I feel like a little bit of a fish out of water today.

[00:07:05] It's in the mail if you have a year. Well, I'll tell you what. I'm Dan Schubert. I help lead our executive team here in Washington with the National Association of Full Sailor Distributors, or the Trade Association that represents the entire US wholesale distribution industry. I come from industry.

[00:07:22] I served as a leader McMaster car for the last 15 years prior to coming to Washington and trying by hand that is helping them to bring the industry to the younger building, which means community of distribution car on the floor. And we're going to be working with you today.

[00:07:35] Kevin, I really enjoyed getting to know you and the team. I'm just excited to be part of this part of this line up today. Thanks. Appreciate you being with us. So I'm Kevin Brown, that's Tom Burton. If you've been here before, you've seen us.

[00:07:46] You need to hear a lot about us where the co-founders of lead smart technologies that John, our producer and host talked about earlier and we do this every single week. But we have never had a group like this before.

[00:07:57] So rather than talking too much more, let's dive in. We have three topics we're going to talk about today. A little bit about the economy. Kevin, before we do that, I wanted to just, you know, if you're online listening live, please jump in. Say hello.

[00:08:10] Say where you're from. Welcome. Will we have will-quin? The distribution guy? We have Darlene? We have Dan Judge from net plus alliance. So we've got some legends outside listening as well. But please jump in and say hello and ask questions along the way. Great point, Tom.

[00:08:25] Thanks for that. So we're going to talk about three topics. We're going to talk about the economy, but quite a few different subtopics in there. We're going to, in by the way, Dirk, thank you again when Dirk was with us last January,

[00:08:38] when we had an Ian and Mike with us as well. Dirk said, hey, you guys don't talk enough about people. And we added a section to our newsletter that we do every week. It's called People and Leadership.

[00:08:51] So we're going to talk a little bit about people, changing buyers, changing workers. What's the hiring sequence like out there right now? And then we're going to move into technology.

[00:09:01] And we'll talk quite a bit about digital transformation, AI, a little bit of e-com and so forth as well. So, Jen, let's kind of dive in here and get started and chat about the economy a little bit.

[00:09:12] I'm going to throw out just a general statement about the economy, what's going on both internationally here in the US. And then we'll kind of maybe talk a little bit about interest rates, inflation, Paul and Ian.

[00:09:26] You guys think of both talk when you've been on with us in the past about the risk of deflation. We can talk about that a little bit as well if we'd like, but let's kind of get rolling.

[00:09:35] And then we'll maybe round out this discussion on the economy, talking a little bit about M&A as well. Any initial thoughts on the economic news? Maybe then do you mind if I throw this to you with the global view that you have from NWW?

[00:09:49] Yeah, no, I appreciate that. And I think the economic story has been a pretty interesting one for the past handful of years. Right, you go from a period of a brief recession followed by an incredible period of deflation.

[00:10:02] Inventory and supply chain challenges have the only push to cost of goods and services up higher. Now, I think what you see across the industry, you take a look at what most distribution companies have been.

[00:10:12] After a few tough months and 2020, you've got companies pulling in record profits in most segments of the industry. Obviously some exceptions with hospitality and things of that nature.

[00:10:22] That has slowed, but it hasn't slowed back to the point where profits and orders and sales are lowered in the world in 2019. So, so bottom line is we've come through a pretty, I'll say bizarre and unprecedented period in American economic history.

[00:10:34] And we're all generally better off, but there's some uncertainty obviously on a policy front with what's coming next. Kevin, you mentioned interest rates. I think that's probably one of the most important indicators. That's where the economy's going to move in the next couple of years.

[00:10:47] You know, right now it seems like the Fed is signaling with almost certainty. We're going to start seeing some rate cuts hopefully by the end of 2024. But you know, that we have made some of those cuts into the earlier parts of 2024, not the second half of 2024.

[00:11:00] So some of the Fed's hesitancy to ease up monetary policy. Yeah, I think has had a little bit of a chilling effect on investment in a number of different segments. You know, we've heard about projects being delayed, capital investments being pushed to the next fiscal year.

[00:11:12] And so I think hopefully the Fed can signal and signal pretty quickly that they're going to start easing monetary policy

[00:11:18] and that hopefully it ends of spurring investment in plant equipment, people, technology, all the things that are really helping to keep our industry profitable in the world of very thin margins. So that's probably the biggest indicator that we've got a eye on here in Washington. Thanks, Dan.

[00:11:33] Too rate cuts this year is that what you're thinking? Yeah, too seem to be where the Fed consensus is and I guess we'll hold them pretty shortly. That sounds like a state dinner to me. Yeah, yeah, he's...

[00:11:45] I do have a question though, and maybe for Dan or for the group. And not trying to justify my one-rate cut prognosis, but you know, we obviously saw this week right that there was very good economic growth in the country. And interest rates are down.

[00:12:06] Is there a real incentive for them to cut interest rates when we still have the economic growth that we're seeing? Like why not hold them longer because things are working out okay. You know, what's your take on that? Well, you know, maybe I'll take that briefly.

[00:12:21] I think we go back to the conversation about two Americas right and I think, you know, depending on your, your populism view and your politics.

[00:12:28] You might have a different perspective on it but, you know, look, I think from a business climate perspective right now you're seeing robust people. I was seeing robust economic growth and number of different sectors.

[00:12:36] You're still seeing an average American's hammered by high interest rates on things like housing. And mortgage costs and the ability to purchase a home. And so I think the Fed obviously has to govern a country, not just cater to a business segment.

[00:12:48] One being a leading indicator there to be in the lagging indicator. So I think at the end of the day, there's pressure from a number of different segments, you know, to really continue. I think monetary policy easing.

[00:12:58] And so even if robust economic growth from a jobs perspective continues, you know, I think you're still seeing a lot of pain in the individual household budget perspective. I think that's going to react to that. Mike.

[00:13:09] Yeah, just to add, because Dan really nailed it and you got to remember three quarters of our GDP is all consumer and there are the pain he talked about, people are so feeling.

[00:13:20] And we talked about two different Americas. There's also two different Americas in terms of the consumer economy, which is three quarters in the B to B. B to B is still suffering from supply chain issues that still haven't sort of themselves down.

[00:13:33] It's pretty much over old news now. But I mean, there's still a fair amount of pressure and I'm very much aligned with Dan in terms there's probably going to be two. But then again, we're just making this up because we don't know.

[00:13:44] And one of the things that it's very good at is is leaving uncertainty in certainties of weapon. Mike, I'm violently in agreement with you. Is that right, term? That's what you say. Okay. Very good. Very good.

[00:14:00] All right, Marty, jerk, Mike, Ian, any other thoughts on kind of interest rates and where we're sitting right now?

[00:14:10] Yeah, but we just keep hearing from distributors that you know they're kind of waiting to see what the Fed does before they can make some of these big capital purchasing decisions.

[00:14:18] And if the if the Fed is kind of holding to what they've been saying the last six months or so that they just need more data. They need more time to digest what's happening on the inflation front.

[00:14:29] Hopefully this means that they have had enough time. They've seen enough, you know, level of leveling of the inflation field here that they feel confident to make a right cut here sooner than later.

[00:14:40] It just seems like yeah, you know, a year ago at this time we would have thought there had been several right cuts by this time, but it just kept pushing further and further out.

[00:14:49] But yeah, I think if inflation is the key gauge that they're watching to base their in right cut decisions on it seems like there's enough data enough just normalization there that it would encourage them to do that.

[00:15:03] So yeah, really interesting to see what their newest comments are going to be in this newest Fed meeting.

[00:15:09] So I'm going to throw a little bit of a munking ranch into this real quick and and I have been question I've questioned it on this show a couple times the time when I've chatted about it.

[00:15:19] But I've questioned are the metrics that the Fed is using still the appropriate metrics to be using in 2020. I've been in 2024.

[00:15:29] I, you know, we talk about this kind of stuff I'm far from an economist, but I kind of question is, you know, when we think about it and we don't know if you gentlemen are familiar with this, but we talked about it on the show a while back is, you know, the whole 2% number.

[00:15:45] You guys familiar with where that comes from?

[00:15:48] You know, it's a, a, a, a, a politician in New Zealand that threw it out in an interview one time. So that sounds like a good number and literally that's what it was I think 30 years ago is it's if you haven't looked up that story before just kind of Google where to the 2% come from and it's it's astounding when you look at the largest economy in the world.

[00:16:09] And the first thing that I'm going to do is facing their Fed decisions, their interest rate decisions. And the economic factors that we're seeing in the economy right now about a passing comment that a New Zealand politician made to a reporter.

[00:16:24] I have more of a question than I do that a comment on this one too and it probably is more direct towards Paul.

[00:16:30] It's just how does this view of interest rates start turning into projections around business over the next 12 to 24 months in terms of growth of their businesses too.

[00:16:36] And I know you know, I had some conversations, you know, few months back and there were still a pretty robust view even in the high interest rate environment around where business was going over the next 12 to 24.

[00:16:49] So just like get a sense from Paul in this time of uncertainty around interest rate cuts. How does this start playing into his hits thoughts around the robustness of his business going forward? Yeah, thanks. Thanks, Mori.

[00:17:02] I think about it. We are we are optimistic, you know, second half of 2024 looking into 2025 we are absolutely optimistic. I think the interest rate play kind of shows up in a couple of different spots one around residential reconstruction.

[00:17:19] You know, we still have a we still have a housing shortage in the US millions. You know, we're short millions of housing stock across the US that you know ultimately need to get built and I think interest rates.

[00:17:34] You know coming down and softening or going to help, you know, kind of restart some of that it's leveled out at a pretty good spot, but I think interest rate. And then some interest rate relief is going to, you know, kind of goose that a little bit.

[00:17:49] The other thing I think and I think Mike and Dan were talking about it is, you know, is the investment, you know, you think about all the reshoring and the investments that are needed for reshoring manufacturing and in plant investment in the US interest rates softening are going to.

[00:18:12] I think help spur some of some of that growth as well. And then you've got, you know, the infrastructure act and, you know, the chips act which is really driving about a government spending in the infrastructure investment in in water and sewer and broadband and power, power infrastructure, the electrical grid.

[00:18:34] You know, building out a charging network across the US so a lot of investment now we just need to supply chain particularly on electrical gear.

[00:18:42] Switch gear to catch up to, you know, to that demand that's being created by all of this, there's this government investment in electrification of the US.

[00:18:55] So hey Paul, I have to ask you have a fire hydrant on your desk. Is that for is that for take your dog to work day and how does that work?

[00:19:04] Nicely, playty and no, that's actually we work in this for the waterworks business and that that fire hydrant is a is a watchless fire hydrant is manufactured right down the road and sink palm in the so that.

[00:19:17] Cool. So I mean, I think, you know, wholesale sales went down last year like 1.6% for the first five months of the year, they're up 0.7% you know, the Wall Street Journal just interviewed or survey decotomists and only 28% of them are predicting a.

[00:19:33] 20, 24 recession down from 29% so that's roughly the same thing. I think we're here in we're even worse news from distributors than we're seeing in the data.

[00:19:43] There are some like Paul that are predicting a robust second half of the year but we do see a lot of them pulling their horns and I do think it comes down to what the Fed does I think of the Fed really does kind interest rates a couple of times they're going to pretty much finalize the soft landing we good for them I mean that's not been done much in the history of the US so.

[00:20:02] I think we're going to wait and see what it does to this under the budget doesn't feel like the second half is going to be dramatic either way to me.

[00:20:12] And do you think there is some real pent up demand that once those interest rates start coming down we're going to see kind of a spending spray both at the distribution and and.

[00:20:22] And you know, the good user level. Yeah, but I think it depends on the sector so the Paul's point the your main your factors need to catch up in order to fulfill that demand and the electrical sector.

[00:20:31] So the supply chain is going to regulate that to some degree as well. Interesting. Before we jump past that he jerk, I want to come to you real quick because you've been to how many different distributors so far this year.

[00:20:44] I've lived a 15. Yeah 15. So what what's the tone and the mood that you're feeling. Yeah, and that's a good way to say what I'm feeling.

[00:20:55] Yeah, you know the what 80% of our stops are always by Mercator are organically driven right people reach out to us and say hey, jerk would you stop in the CS.

[00:21:08] And so I think we're self selecting their self selecting those that are optimistic right those that are optimistic that they see the the strength that Paul just talked about. So Kevin, I would say overall the things that I'm hearing is cautious optimism.

[00:21:29] But but the data is I can't speak to the data as the others can, but there's a there's a cautious optimism that I'm hearing. Very good. That's helpful.

[00:21:43] Dirk is the optimism that you're hearing based around. Hey, we see you know interest rates coming down we see opportunity for more spending. Where do you see the optimism kind of emanating from?

[00:21:55] Yeah, the I my conversations don't get into the interest rates and the economy per se they're talking about the outlook from the customers and the demand from the customers back what I'm hearing. Okay.

[00:22:08] Good. So I want to add here on the economic front, even with the interest rate situation inflation and this overall industrial softness we've seen for the past year and a half or so it doesn't seem to be impacting the appetite for mergers and acquisitions activity.

[00:22:24] At least from the MDM perspective of what we've been covering 2023s and an activity in distribution far outpace that of 2022 and so far in 2024 the first half of the year it's on pace to out due 2023.

[00:22:39] So it makes us feel that there's a lot of these distributors out there that are kind of in the mode of if we can't gain market share during a down market cycle, we can still gain market share through mergers and acquisitions.

[00:22:51] It's just been interesting to see that even with interest rates challenged as they are it's not holding a lot of distributors back from pulling the trigger on some of these acquisition purchases. So we're going to keep watching that to see if that changes based on what happens with interest rates.

[00:23:07] So let's put a pin in M&A because we got a whole segment that we want to chat about that and I know there is a lot of knowledge of M&A activity going on with this group.

[00:23:18] So thank Mike appreciate you bringing that up. So we kind of talked about the interest rates, I think consensus is that Tom is going to owe me a stake because there will be two of this year.

[00:23:28] Everybody here is welcome to come out to Santa Barbara for that evening. I'll send you invites and it'll be on Tom and we may do a whole other show just for that but what is funny, and I think this is an absolute huge risk and Tom and we actually had a stake together last week in Santa Barbara and we were talking about this as it could very easily be one at the end of the year and one in January or whenever the first window is and then I'm stuck right.

[00:23:58] So we'll see with that. But we've tiptoed around a little bit, a couple comments, Paul made a good one about specifically an electrical market about supply chain issues, things getting caught up Mr. Marks said something similar.

[00:24:12] We started to see a little bit of data some areas are catching up in fact, but I want to throw two things out there and just kind of throw this into the pot. One is let's talk further about supply chain in general maybe what we saw.

[00:24:24] I think that's a very important part of the pandemic and post pandemic and where we are today but I want to kind of throw a couple of wrenches into that and talk about some geopolitical issues ago with that as well.

[00:24:34] I think Paul mentioned a few minutes ago about the on-shoring we talked off in times here on the show about near-shoring and on-shoring.

[00:24:42] I think it would be an interesting thing to talk about supply chain and then maybe some geopolitical issues related to China, Mexico, other parts of Latin America and the near-shoring idea there.

[00:24:53] So we kind of throw that out to the group see if anybody wants to start with that. Yeah Kevin I can chime in on that and all I'm glad you brought up the near-shoring approach.

[00:25:04] Maybe a couple of things that we hear a lot about from members and when we're talking about the health of the global supply chain. Number one is supplier diversification has been a top focus for many, many distributors across the industry.

[00:25:20] So I think depending on your business strategy, you might have been on one side of the pendulum or the other but you know the strategy of putting all your ranks in one basket negotiating a sweetheart deal on pricing.

[00:25:30] Only to have that supplier struck dead from a pretty critical supply chain shortage like what we saw on the last 10-thal years.

[00:25:38] I think has a lot of distributors rethinking their strategy and thinking about how they can be sourcing from multiple different partners and multiple different parts of the world to mitigate some of that risk.

[00:25:48] The second piece is and this is something that we've featured pretty prominently in our annual meetings in the last couple of years. We brought Secretary of State Mike Pompeo and most recently former defense secretary Bob Gates speak about it.

[00:26:00] You know the risk on China and really moving manufacturing and production and supply capacity out of China and toward Brazil toward back here in America, toward other parts of Southeast Asia. It is an accelerating and a high priority for many, many companies that have that level of exposure.

[00:26:17] More and more as the geopolitical temperature rises particularly with some of the conflicts happening in Europe that China's either involved with directly around a grip rate. Folks in America are recognizing that China is not a competitor, they're an adversary.

[00:26:32] But the more we can reduce our risk of exposure by reshoring is all set or by nearshoring. You know that that has become a strategic objective of a lot of companies that have had supply chains heavily dependent on China and the policy experts that no China will.

[00:26:46] The two individuals that I mentioned would say you probably can't move away fast enough, but just given the way our geopolitical environment is moving. Thanks, Dan.

[00:26:57] I'm appreciative of that comment that you're making there because I'm going to throw this out and I'm looking at things and my belief on this is that in the next few years Mexico may play a bigger factor than we've ever thought about Mexico playing in the US economy.

[00:27:16] Because of the influence already of China trying to get around steel tariffs by going through Mexico and many other things to go with that. So I'm going to kind of throw that out to the group any further thoughts anybody feeling that seeing that degree disagree what your thoughts.

[00:27:34] Mike marks have added. He's so polite. Raising his heart. Yeah, I didn't realize he was so polite. He was just like, Mark. What happened because of past history Kevin has an electrode implanted in various incidents. But I don't know if you'd like to.

[00:27:54] Now, I would expect you to be not so nice. I'm going to go like this. It's up 27 minutes. I don't have to start. Here's the deal with the reshore and this kind of leads into advising somebody on an acquisition.

[00:28:11] And the target was really going to benefit strongly from the reshore. With the problem, it's a PE firm. And if you go back to what Paul was saying in terms of the chip fact on this other stuff, people lose it perspective on manufacturing.

[00:28:29] Manufacturing back in the 60s or 50% of population is like 4%. But the manufacturing outputs at an all-time high were still world-class manufacturers. We're pulling this stuff back.

[00:28:39] But if you think about the war in Ukraine, think about all the problems with the defense contractors trying to manufacture munitions and everything else. There's a multiple year lead time to get that going. So my point to the PE firm is that yes, they will benefit.

[00:28:54] But by the time when people start to spend money, it's years before you get that scale back. And we still have fundamental problems. I mean, one of the things Paul and everybody else being electro-business delivered, those transformers you see up in the telephone poles.

[00:29:07] The lead time now is like 12 to 14 months and the manufacturers won't even review a price because of the copper content. And they only let you know when you're 60 days from shipping. So I mean, things are still broken in this reshore.

[00:29:20] And I think it's going to be the answer where people are looking at strategic things about their supplier orientation and the rest of it. I think it's going to be a large trend. But it's a direction of the tide trend, not a size of the wave trend.

[00:29:34] And so very good. Paul, any thoughts on that with what you're seeing out there? Yeah, so I think today's point, the rationalization of our offering, you know, the limit exposure. I think we all got exposed during the early parts of the pandemic.

[00:29:55] You know, for years, we had all rationalized our offering and became more important to a few were numbers. We were a few were number of suppliers and, you know, that bit us in some instances.

[00:30:10] So I think we've seen that, you know, that kind of diversifying our supplier base more both by manufacturer and by geography as damp pointed out. So that's an important part.

[00:30:25] And then you've had the whole, you know, de-stocking because, you know, everybody so much inventory got pumped into the system during the pandemic. That there was a glot.

[00:30:34] So you've seen that de-stocking which I think in some cases has helped alleviate some of the supply chain challenges that we saw. And frankly, you know, kind of flip the tide. You look at plastics.

[00:30:48] That's where we've seen de-flation just because, you know, this capacity was built up and so much inventory was flooded into the market. And now all this capacity is sitting there and not enough demand for it.

[00:31:02] So that's where you're starting to see, you know, some of that de-flation pushed through. And, you know, Mike Marx's comment around transformers and I think 12 to 14 months is being optimistic. We're seeing two plus years on transformers right now.

[00:31:20] And that demand is real and it's, you know, the copper. I mean, we saw like run up in copper earlier this year that it's settled back down a little bit. But that was all, that was all demand driven.

[00:31:35] Paul, let me ask you a question to kind of go with that a little bit. We were talking with a while back with Mike Mortensen from ARG and Alaska rubber group and their civic northwest distributor and hose and fittings and so forth.

[00:31:51] And Mike was talking about, you know, I hate to quote him exactly. And if Mike, if you're here, fix this, I think he was going to join us today in the comments.

[00:32:00] Mike was talking about, you know, historically might have had, you know, two or three times a year of doing some some vendor and supplier reviews.

[00:32:09] And then, you know, asking some generic questions, but now it's like weekly and monthly supplier meetings and reviews and asking very, very hard questions about their supply chain. Are you seeing an uptick with that?

[00:32:23] And anybody else, maybe Mike Marks is not in his head, Marty, as well. You've seen that from people you're talking with increasing their communication. Yes, we absolutely are and we're asking different questions today because you know, we're asking questions.

[00:32:38] We didn't know to ask three or four years ago and you know, it's become more important relative to country of origin.

[00:32:47] You know, with what was going on in the, you know, the red sea and that was a whole different set of, you know, what's coming from that part of the world and what do we need to know and understand about that.

[00:32:57] So, the other thing I will, I will tell you is, we are much more metric driven in having those conversations as well. In understanding performance of, you know, delivery performance on time and fall and, you know,

[00:33:16] and then also trying to gain, and there's actually a project underway with any D.E., we're trying to get the electrical manufacturers, the contractors, the reps and wholesale distribution, all of those associations to think about answering the question, where's my stuff?

[00:33:36] To, to drive project continuity and to be able to give visibility at the contractor level on, on when these complex products that were, you know, ordering and manufacturing and delivering are going to make their way through the system.

[00:33:52] So they can become much more productive and efficient in managing labor, which is in many cases there to are just, you know, obstacle. So, you know, bringing that visibility to the entire supply chain is going to continue to be really important.

[00:34:07] I just add to that. I think that's a fascinating application of data science that we've been pretty excited to take a look at as well. There's a number of spin-off companies from the Department of Defense that are developing some pretty sophisticated supply chain mapping models.

[00:34:21] And it was all in reaction to, you know, essentially the butterfly. And the story that I heard was an interesting one. You know, during the pandemic, the number of inspections that would take place in the nation factories, for example, went down right, they're not sending inspectors in.

[00:34:34] What happens when you don't have safety protocols, you start having fires and disruptions. So these these factories would shut down. They would contain, you know, a scope three, scope four, so five component of something that's going into a finished good.

[00:34:48] Maybe it's a screw year or another bowl year and all of a sudden, you know, that the delay of that finished good reaching market here in the United States.

[00:34:56] You know, it's five weeks and that company, the distributor didn't have an opportunity or the knowledge to start to source that product from another another supplier.

[00:35:04] And so, you know, some of these models are just fascinating where folks are getting alerts, you know, in real time when there's a potential disruption to that supply chain at the single product level.

[00:35:13] It allows the salespeople to start expediting or start to find an alternative solution into your point.

[00:35:18] It allows the distributor to reallocate labor to a different project or different opportunity with even Tori and says, I think it's just one of the many, many really interesting applications for a reasonably convenient size at this point.

[00:35:32] Great. Good. I want to bring up a question here. I think this is a really good interesting question from Debbie and maybe e and this would be a good one for for you to grab is, are you seen and talking to distributors a consolidation or a loyalty developing with their manufacturers and suppliers as a way to get, you know, and shorten those lead times and shorten those things or they just going, I just got to find a one place or another.

[00:35:59] I think right now there depends on again on the vertical year and because the supply chain problems are very uneven. I think a lot of them were just trying to find it wherever they can, so there's been sort of this decolidation of purchasing.

[00:36:14] I just do this as cyclical duty human behavior. I think people are going to go, man, I really got burned during COVID, so I'm not going to concentrate my purchases when supplier and then as they get kind of numb to that and it's like, well, doesn't seem to be any problems anymore. If I concentrate my purchases, I can get a better discount.

[00:36:30] And so they'll go right back to what they did before I just think human nature is they're going to respond to the most immediate problem, it changed their behavior for a little while and then go back to whatever is going to help me make this quarter plan.

[00:36:44] The best. Well, I mean, I think in nailed it and it's just fraught the anecdotes back and forth and it is this way long time ago be this way far in the future.

[00:36:57] The thing I find that's interesting about Debbie's comment is that when you look at people and I know we're going to have a digital transformation, the rest of it. In my experience what I'm seeing is the distributors are much further ahead on supply chain than the manufacturers.

[00:37:11] The distributors have actually done a lot of punchouts with their customers where the customer can enter it in their SAP or I2 kind of system. It'll actually print in the warehouse, loop, lights out over processing so it's seamless for the customer.

[00:37:25] The distributors are locking in their customers to make it very simple for them suppliers are absolutely reluctant to resist and to doing a punch out where the distributor can see their working process and their finished goods inventory and the rest of it.

[00:37:39] Because we keep getting different notices and I have used the term, Mignana is a Mexican word that means not later it means not now and not now can be forever and so the distributor still have problems getting quality data from the manufacturers because they're behind the manufacturers as a group or well behind they're still major manufacturers that are doing special price authorizations or me comes to whatever you want to call in different industries.

[00:38:06] And they're still sending them out to people on PDF files. I mean so it's the gap is getting to be sort of a pain in my least for the people we're working with.

[00:38:16] Yeah, I think I'm going to find good add to this conversation to transition between kind of an internal focus that has been consuming distributors for many years or the last two years either supply chain issues hiring people.

[00:38:29] You know, you'll be overall view of labor shortages and where to get product and pricing increases too to this view of I had a conversation with the distributor just two days ago.

[00:38:38] They kind of lost focus of their customer and understanding what their best customers are looking for what their best customers need and shifting over to is also what questions should I be engaging those customers in to understand them better to do innovation with them to create the the overall futures of growth together into the future.

[00:38:57] So this view of there's a position of power when you understand your customers better to be able to use them to replace and asking those questions not just what do you buy but why do you buy from us and what are you doing for us.

[00:39:10] What if you're growth projections over the next few years and where are new revenue streams when I come from where are you making the best been.

[00:39:17] You will have an opportunity to market so it's this view of shifting from the inside view because things still need to be fixed and not to be fixed tomorrow.

[00:39:26] But there is this conversation now how do I get to know my customers better and to them and innovate with them. I want to do. Awesome. Like that that's insightful thinking Marty.

[00:39:39] I think that's where people kind of miss it about that understanding really where the customer is going and what their plans are moving forward so that's that's powerful.

[00:39:48] Kevin, can I jump in please with with a different anecdotal perspective the conversation started with a discussion about near-shoring and on-shoring.

[00:40:00] It's really interesting to me that this summer this fourth season we supply America we have stopped at been invited into five manufacturers right so we're not just championing the number of calling of distribution manufacturers are saying hey just we're keep part of this supply in America as well.

[00:40:22] I've been fascinating to me and so we've had a chance to stop at Paul I think some of your partners at nipco delivery pump landcaster water group.

[00:40:32] Merit brass a master distributor an manufacturer and then right tools and first I'm fascinated walk through disputi says I'm fascinated walk through these manufacturers but my point is this. You know there's been a narrative for years right in terms of.

[00:40:52] We can't compete right with the labor with the cost of labor and so we had to send manufacturing overseas I'm telling you this summer you guys step in these five manufacturing facilities meeting the people on the floor.

[00:41:09] Seeing them forage this this metal if you will into the products that are on your shelves as distributors. A it's fascinating.

[00:41:19] B I'm here to tell you what I have seen is that world fast manufacturing is alive and well in this country and there's a labor force that loves what they do that is compelled by the work that they understand the bigger picture what they do.

[00:41:35] They're proud of their earnings and their wages and it's so. Bank world class manufacturing is alive and well and I would just encourage. The net effects that are listening and if you have to think about it find the way to bring it on shore. That's great good.

[00:41:55] So from that standpoint just so we move on we've got a lot to cover today thanks for all of those comments about the economy and so forth. Let's just spend a couple of minutes talking about M&A might get a hockey brought that up earlier.

[00:42:07] Give us some good stats for that I think we're all seeing quite a bit of that activity. I'm going to throw it out to the group here thoughts on what's going on with M&A but I'd like to add in to this.

[00:42:18] There's this group out there that we've not seen before that all of a sudden has this monster investment fund the QXO folks and we can kind of see what any of the thoughts are what we're seeing. That's industry folks versus traditional PE folks coming in.

[00:42:36] So just general we can chat about you know and I know you've got a ton of research to Mike you probably hockey you probably do as well but let's get it.

[00:42:44] Let's get some thoughts maybe and you might if I throw to you to start off in your thoughts on M&A activity year to date and then moving forward.

[00:42:51] I guess what Mike said earlier I mean last year was surprisingly robust this year seems to be just as busy maybe even gaining momentum. And I think you know as interest rates get cut it's going to pick up.

[00:43:04] I think QXO is really interesting you know bad Jacob says a long history of transforming industries and you know he's certainly aiming for this one now.

[00:43:15] And that's going to heat up the competition I believe but there are a lot of PE groups out there with dry powder that are willing to invest and so you know barring some black swan event that.

[00:43:26] And I think it's very important to be able to do a lot of things.

[00:43:29] I think that's very important for the contributors to take in an account support for buying groups and associations because there's seeing a lot of consolidation of a membership which reduces their overall income because if you get you know two companies who are paying ten thousand dollars in association fees and they.

[00:43:49] And you get something less than that and so I think there are implications across the industry and you need to plan for it whether you're a distributor who wants to be acquired who.

[00:43:58] Wanted to do acquisitions you're an association you're a main factors rep you're a manufacturer because people are going to have more purchasing power when they consolidate so I think to dynamics go go across the industry and so it's going to it's going to probably begin to accelerate.

[00:44:15] There you know I have it I haven't. Look at the QXO thing in a lot of detail but what based upon what you guys know and what would be an advantage of a distributor.

[00:44:28] You know doing something with say a QXO versus more of the traditional private equity what is their strategic advantage or value between those. Anyone have some thoughts on that.

[00:44:40] I mean part of it I think is just the funding backing that you would get with QXO you might it might be enticing to the notion that you're going to be able to do some bigger and cooler things that maybe you've never had the resources to do just on your own.

[00:44:53] But with QXO's backing now maybe you can pursue some of those things.

[00:44:58] But yet I think that's what everyone's watching right now is now that they QXO is funding is up to five billion it sounds like they might grow as much as 10 billion before they make their first splash acquisition of and it sounds like they're targeting large distributors when they do start doing this expansion plan so.

[00:45:16] I think that's the question of who's it going to be and I think at home depot's acquisition of best arrest distribution definitely is going to help or influence what that target is going to be as far as I'm sure they're already in talks with who that first target is.

[00:45:31] But yeah again that other than that home depot acquisition most of what we've been seeing across the distribution landscape is been these smaller bolt on acquisitions there haven't been many giant splash moves other than home depot and now what QXO is doing.

[00:45:48] And I think a lot of that as Ian alluded to is private equity is driving so much of this activity when I talked with several investment banks around mid 2022 they indicated that yeah given that nothing really happened during COVID.

[00:46:03] There was so much built up dry powder that was still being spent at that point but you kind of have in the feeling that that has to run out at some point.

[00:46:12] But based on what we've been seeing last year and so far this year that definitely is not the case so like I said, just still a lot of.

[00:46:20] And I think that's a very important thing to do is to have an appetite for at merger and acquisition expansion plans here. Quite a great stand. Quite a great stand.

[00:46:30] Well I mean, I'm just going to what my cockpit saying I mean pretty much now that we have over over I don't know the exact number I'm looking at recently but this well over trillion dollars of uninvested capital in PE funds and they and so you have all this money looking for home.

[00:46:47] Today is there aren't there's more money looking for companies to buy than there's companies worth buying and most a lot of these companies that are for sale and when Mike talked about you know if you're platforming new bulltons and a lot of times people are putting lipstick.

[00:47:01] She even lifts it in the pig to get it gone though we need to start coming back.

[00:47:06] And then by the way, Brad Jacob's bought me a motor yacht because of what he did at the United Rennings for me and I did very well on that and I know he's going to be successful but they're looking to buy platforms are looking to buy things scale.

[00:47:19] So and the part of the problem a lot of people misunderstand when a PE firm buys a company they're buying it to create shareholder value and sell it they're trying to get a return to their investors not the company.

[00:47:32] And so the culture clash and a lot of these has created a lot of problems which is part of the reason that the number of distributors remain constant even though there's all this consolidation because the BPS sales and BPS operations say I don't want to work for inter-vellactico let's go.

[00:47:48] I mean this is a pressurized system it is there over 20 PE firms of the 1400 plus that are registered in the US that have full time and partners dedicated to buying industrial service.

[00:48:06] So I mean it's it's it's it's pressurized but you're not going to see the multiples the multiples aren't going they have been really high after.

[00:48:15] Right right after the COVID deal you're getting people are paying those kind of multiples anymore if you're not going to be seeing these crazy things people talk about. So my question people get stuck in their bump in bellies.

[00:48:27] I think with with that I know like in the as an example in the technology world. Crazy valuations into the even into 2022, 2023 those fell off a cliff they're right they're not going to go back to you know 24 times forward looking sales.

[00:48:49] That they were we saw some deals like that but they are rising back up into the double digits and as well are we kind of seeing that likelihood of you know things fell off a cliff but.

[00:49:01] I think you can see the interest rates affecting a lot of things went on hold and I think he's.

[00:49:16] I mean it's just this is going to continue it's just it's going to be part of this generation and and it'll work until it doesn't work anymore but far the problem.

[00:49:25] When I learn how to do this a long time ago you can't be buying an distributor with a typical return on cap and what they get and 15 times even TA multiple.

[00:49:35] I think you're going to be a great idea. You just can't do it anymore. Now I just tell these guys to pass the joint when you're done.

[00:49:43] I want to talk about your saying back to where you're dark lived a lot to and and you mentioned the term culture clash so in these views of mergers happen.

[00:49:52] Where do they get that value at seller rent and and usually is at the cost of those things that make distributors different unique and special in the marketplace and that is their culture the core values purpose and their people.

[00:50:05] You know those things seem to get pushed aside for more locations better recommers and all those things so it's interesting to see kind of how they knew this a billion puts you companies together to get something better down the road.

[00:50:17] But maybe at the cost of what made that that overall acquisition special in the first place. They're not supposed to come sorry they're not supposed to make the company better for the city of the book sell off the ass.

[00:50:29] least everything back return the cashier investors with that as a typical to a distributor. Manufacturers have property plan equipment that all still there at night distributors all of our assets go on with five or six o'clock and you hope to suckers come back and I'm more than.

[00:50:46] you can't treat them as fungible assets and so that the playbook work really well but it's kind of like when people started by houses and picks up getchens.

[00:50:54] It works to the point so you have a real estate collapse and and I think this playbook is pretty much best the best by day and you can see some of the brighter firms on the.

[00:51:04] Midsize firms not the big ones so you're innovating find different ways to create.

[00:51:09] I love that so Marty thank you for for hitting on that people point things Peter made a nice comment here about the detrimental aspects of partnering selling to PE which you know Marty you started that segue we're going to take this and kind of segue into our section we're going to talk about people for a little bit in.

[00:51:26] Before we do that John wants to know when yeah, or cure announcing your upcoming Senate campaign. Hey, hey, John John I ran for Congress in 2010 I'm sitting in a freaking rest stop area in the middle of I.

[00:51:43] You know how my political campaign I make a political life with. Well, Dirk you you have you have the end attention if you can't. Another random. We're not going to direct you this rest area is pretty good. Yeah, and you contribute that Michael thank you. Yeah, very good.

[00:52:06] So as we as we kind of do that segue as we talk more about people and this I want to throw out three things that we can talk about it and again Marty thanks for helping us make that shift to the people and so forth.

[00:52:19] By the way, Brian Hopkins that works with Ian and distribution strategy group says jerk for president. So you didn't say president of what. President right. We're very clean. Dirk we think more highly of you than you do of yourself. That's for sure. Right.

[00:52:41] You are a steamed in all of our eyes so as we talk about people three three things. Changing buyers changing workers.

[00:52:50] What's going on with hiring and things getting better we've seen a few articles recently about maybe things are easy up a little bit about getting workers in the door. Dirk your travels would be great with this Paul what are you seeing with your teams.

[00:53:05] Let's throw that kick that off on talking about people for a little bit. Well. Sure, no I'll kick off so finding maybe start with finding workers.

[00:53:16] It is exponentially easier today than it was you know two years ago a year ago and I think you're starting to see that with the take up an unemployment. And kind of you know settling down into a little slower growth mode so.

[00:53:34] You know we you know we measure you know application you know number of applicants. Time to fill roles and things like that and you know our applicant pool is increasing or time to fill roles is shrinking so it is becoming a little bit easier we.

[00:53:53] You know we've spent a lot of time to Marty's point on our culture and you know being in attractive place having an attractive culture. And being an esoph we believe you know those are kind of extra extras that we have that maybe make us a little more appealing.

[00:54:11] Plays to come to work than maybe some others but we think that the hiring is hiring is getting better and you know we expect that to continue.

[00:54:24] And it is you know as productivity you know continues to improve with you know technology and and you know with with AI and introduction of AI into into some of the processes that we're seeing you know we can grow.

[00:54:42] You know we continue to grow and we don't need to grow our labor at the same. You know at the same rate as we historically had to. We thought so and that from your travels. I'm going to get on the stump speech though if you don't mind. Right.

[00:55:00] Right. So. This this topic of people as you all know is this what I've been drawing is right. Fourth season of least primary. Each season seems to have had a quintessential quite essential moment.

[00:55:19] Season one was an quarter pipe where we met 85 year old outside salesperson who broke down crying saying that the family here a quarter pipe is you know. The best decision the best thing of his life just crazy the second year Paul Kennedy.

[00:55:37] You know it was up in Plymouth, Minnesota with rich right. It's worked for you for 22 years at that time transfer manager in the warehouse he walks out looks at the camera and says you know if this is my world I own this place right.

[00:55:52] All you guys are doing something good man and and you can see that in the culture and the people last year was at Nelson Jamison I'd say and every place we've been has stories like this but Nelson Jamison Lee.

[00:56:04] I know that the owner or excuse me the president of the company my friend the I asked you know I threw out this idea of business distributors being a force for good and he just he just paused and he says you know what your right.

[00:56:16] And when we when we talk about and really help our people see the purpose that they have in the impact that they have why would people want to work anywhere else.

[00:56:27] And so we can look at the economic indicators but man you gotta look at the cultures right and why would anybody want to work somewhere else it's amazing this year.

[00:56:36] I still got 60 days or so in front of me but this year's quintessential moment might be when I was talking to an outside sales representative on the side of Washington DC Thomas summerville and when he said to me when I'm asking him about.

[00:56:50] The relationships and the partnerships with his customers. Here's what he said you guys he said, Dirk you need to understand. That we're living life together. Full stopping guys just think about that or think about people the human side of what it is we do.

[00:57:10] Living life together that's what your employees do every day they spend 50% of their working hours at work. It's not just work we're living life together and when you think about that you think deeper you gotta think about the life that everybody's living.

[00:57:30] I know I'm going to put up that Kevin that one slide of the GDP real quick and then I'll transition away from that all right.

[00:57:40] You guys look at this that you look at this data that I found from the book flourishing by Martin Siglin started the positive psychology movement.

[00:57:50] You take a look at this and what they tell us is that the GDP all this economic talk that we've been talking about is fantastic right.

[00:57:56] It's grown three times over the last 50 years what we don't talk about is the GDP rises when positive events happen we pick that can ship product but the GDP rises when negative things happen.

[00:58:09] When a more pharmaceutical are being consumed GDP goes up a car accident happens GDP goes up right and we don't think about that.

[00:58:18] So over those same 50 years the scientists will tell you that while the GDP has increased three times life satisfaction as at best remains stagnant and depression has increased 10 times.

[00:58:36] And you could put whatever you want on that red curve you can talk about loneliness you can talk about drug use talk about suicide news. And so this this graph to me is very, very important when we think about people.

[00:58:49] Your people spend 50% of their time with you their life and we're living life together and all that says to me as we have a growing responsibility and a growing opportunity to impact people's lives beyond the trans people.

[00:59:04] Beyond the transaction of a paycheck beyond the transaction of the paycheck to help them flourish and there's there's so we're doing a lot of great things man that's the stories we're telling we supply America great things are happening.

[00:59:18] At DSG Paul what you guys are doing doing something good is one of those stories. But we can be doing much more. Great. Turk has my boat for president. It's over. It's over. Yeah, it's over. Game over everybody else go home.

[00:59:37] Tom, would you highlight Wilkwin's comment there real quick? Turk is a national treasure there we go. My job news didn't got right. Well stop. All right. So this is great. Turk, thank you for that.

[00:59:50] So we know we're seeing out there I think the numbers I think it's 62% of B2B buyers or Millennials now. I talked to distributors about this every day because you know in our work at least more technologies we're working with distributors and manufacturers both.

[01:00:07] You know we're talking with you know quarter billion half a billion dollar your companies who are struggling through digital transformation. Maybe you've never had customer intelligence and CRM in their business.

[01:00:18] They go through this conversation in their mind about yeah, but my guys might not want to digitally transform. Right. But what we're seeing in these conversations is that the buyers changing has higher expectations right.

[01:00:32] But the incoming sales person right I've talked to a kid tell you how many distributors I've talked to recently who have had applicants asking what the text. At the distributor and can your text stack help me do my job correctly.

[01:00:48] So I'm going to throw that out to the group and see what are your thoughts on changing buyers changing workers and then we're going to dive right into our technology discussion. My go for it. My guide. Yeah. I just want to share one point.

[01:01:03] I get mentored once a month. My Gen Z we take our three top MBA students at Core DeTech. They come to my house once a month. They give me $100 bill. Congratulations. I have no money and they coach me.

[01:01:16] And when they get over the nice to me then they start tearing me up because I can advise to people on how to how to deal with Gen Zs and Gen Elfas in the rest of it.

[01:01:27] And looking at them and their values and what they're doing might only comment is I'm very optimistic. The things are going to go much better and that the chart that dirt you showed is pretty impactful. And I think people lose that. We don't we don't report on that.

[01:01:41] And I think once the I got to say it. They play the song for me celebrating the death of the last baby boomer and apparently when the last baby boomer dies, every unicorns all along the stop when baby boomer was born. And they all came up.

[01:01:56] We had rainbows. I was laughing my butt off. And I wanted to download it to share with some of my clients but YouTube took a down for inappropriate content. But I thought it was terrible.

[01:02:05] So the young this next generation is going to fix a lot of our screw ups. I really believe in very optimistic about that. Very good. I think history shows that every next generation has done that right.

[01:02:18] It's pushed you know that next generation forward and and I agree with all the comments. I think this this next generation what's the tech stack and your. You know that I'm going to be working on it is going to enable me to do my job absolutely.

[01:02:36] But they also bring new ideas and and you know we're all creatures with habits and have done things the same way for so long.

[01:02:44] So we've got to make sure that we we have them sitting at the table that provide us that feedback and point out things that we don't necessarily see. And then one other thing I will say. Is purpose and.

[01:03:01] This generation and you know the generations coming of you know want a greater purpose other than just. Delivering profit and profit is what drives a lot of the business growth but they want something beyond that.

[01:03:14] To bring meaning to their work to direct point about spending you know 50% of their waking hours. You know at work. What's you know what's the afforded by labor other than just providing a return and what purpose am I serving and what greater good in my creating. That's great.

[01:03:37] Very good. Dirk your muted. Thank you. Yeah thanks. Am I good there. So yeah. Well, the I will add to that. I find and talking to them to look for purpose. They're also looking for impact they need to know that what they're doing matters. And third. Potential.

[01:03:56] They want to grow. They demand the opportunity to grow into their full potential. And if you cannot show opportunities for growth and growth does not necessarily mean a management track. If you can't show that you're committed to their growth, they're going to go somewhere else.

[01:04:13] Yeah I think you're right about purpose. I put on Facebook one day. I don't know where Penny and I went wrong raising our kids. They grew up with such better values than we tried doing so in them. And this they're whole generation.

[01:04:27] I mean look at their friends and their engagement in the world and they're desired to do good things and help other people. Yeah, they want to make money. Want to make a living but they don't want a purposeless job that pays well.

[01:04:38] They want a meaningful job where they feel like they're helping the world. And I love what Derek is doing because you know, you are helping people reframe and and correct in many ways the perception of what distributors do.

[01:04:53] Because we just thought we just supply America and we do important work and we keep business running and I think that that is important. Not only because it's true but also because it helps.

[01:05:07] Distributors recruit the right kinds of people into their organization so you know, Derek it's your world while living in it. But I love the work that you're doing I think it's essential and timely.

[01:05:18] Yeah absolutely and Ian before we jump from that I've met Penny and and I think it's from her. There's no question yeah there's no question. Mary above your station and then make sure she never figures it out that's right. Yeah, she must be cute to a good marriage.

[01:05:33] Yeah my wife's logged into this so let's keep them. Let's also know what I mean to me to disclose the black. Yeah, it's right. I married way over my head.

[01:05:43] So great conversation about people we I love we could go on forever about this and and I'd like to but we need to kind of for time sake move ahead ahead.

[01:05:52] But I want to continue to this kind of conversation as we talk about people as we move into the technology discussion.

[01:05:59] Digital transformation is such a broad term right we hear it all the time it means different things to different people but I want to kind of throw out that. Where are we seeing that distribution of manufacturing is moving.

[01:06:14] I mean I talk to people in the technology world you know consistently and when we talk about the markets that that we work with closely at lead smart and they hear about you know large organizations that are on a.

[01:06:27] You know 20 year old ERP system and have never had a CRM in their business and are just tapping into.

[01:06:34] To e-commerce it it astounds some people but but that's where we're at today but it doesn't make anybody bad it just means that this transformation and shift is needing to happen. It seems like AI is kind of getting people's attention.

[01:06:48] You just hosted a wonderful event there's other events coming up as well related to that so let's kind of get the conversation started about what are we seeing from a digital transformation standpoint. We can throw AI and e-commerce whatever other topic we wanted it at but.

[01:07:02] Dan we haven't heard from you in a little bit so I mean if I can you he's put on the spot but like to start with you what are you seeing in your travels any W members and maybe even what any W is doing internally.

[01:07:14] And then we want to see that we just want to see if we want to see if we can do it or not. And then we want to see if we can actually do it as a kind of transformation. whether the chief information officers,

[01:07:30] chief technology officers from some of the larger companies in the country to really share best practices, benchmark against one another, talk about the ways in which they're experimenting. In their businesses, and I find that conversation fascinating because six months later, the conversations

[01:07:45] have shifted sometimes in pretty radical directions in terms of how far along people are implementing and experimenting with new technology. So it made a couple of things that come out of that. It's just in a high level. If you're not playing right now

[01:07:59] and you don't have sort of an entrepreneurial exploratory curious mindset within your technology division and your strategy division, you're probably starting to fall behind. So I think the name of the game is people aren't making long-term decisions about new technologies in the artificial intelligence realm

[01:08:16] but people are kicking the tires. They're experimenting with companies that are startups. They're experimenting with companies that have incorporated some form of machine learning into their technology stacks and platforms. And their kick in the tires with dedicated project teams across the United States.

[01:08:34] I think of Jeff Dice over at Wind Supply as one of the CEOs, that thinks a little bit more thoughtful on this. When we sit down with Jeff he'll tell you, here's the 12 projects that we're thinking about and that we're funding.

[01:08:45] You know what, 10 of them are going to go nowhere to them might be exciting. But we need to continue to challenge ourselves to learn and to experiment, to explore otherwise. We're simply going to fall behind our peers. There's probably three applications that I think most folks

[01:09:01] are doing some level of experimentation on in terms of the companies we speak with and they're really supposed to be the larger needle movers I think with some of these artificial intelligence applications specifically that the three that I like to talk about one is artificial intelligence applications

[01:09:16] that help eliminate low value added work. So think about things that you can only, you can only hope to not lose, but you can't win. So manual data entry orders, things of that nature. The technology is so much smarter than what we've seen in optical character recognition,

[01:09:33] which has been the prominent technology for the last two decades, where the machines can learn very, very quickly what customer master data looks like, what purchasters look like, what scribbles in the back of a napkin look like relative to our inventory.

[01:09:47] And then the system can really go a long way to manually, what automatically keying those orders in, not having individuals do that. They can focus on value added work for customer service. So I love the elimination of data entry across the industry

[01:10:00] and you imagine how many humans in the United States can be liberated, do more valuable work if we didn't have to key things into an ERP anymore. The second is inventory optimization, right? So much of our dollars are tied into inventory investment

[01:10:15] and just the amount of data that you can bring there to make optimized decisions, particularly as you expand or explore alternatives in your supply chain. So that's where distributors are putting up a lot of working capital. And then the third I think is an interesting one.

[01:10:28] Sales and ablement sales transformation really bringing to bear a lot of data to a transaction at the point of sale instead of having to have a representative hunting tech for information, source pricing, take a look at previous conversations, having a tool that really consolidates history

[01:10:45] and information to make a better sales conversation and more focused in effective sales conversation. That takes some of the calls that might take a half hour an hour brings it down to a much more convenient interaction and transaction for the customer.

[01:10:58] So I think everyone is experimenting with something. These tend to be the areas where they're seeing a lot of ROI and are really excited about what artificial intelligence bringing the table. So if you take nothing else out of this conversation, now is the time to play.

[01:11:13] You guys start making some decisions at that about what's going to be a long term strategy for your business. Great, thanks. Kevin, if I could decide to add to it with Dan said to the opportunity to speak to a few distributors

[01:11:24] a couple months ago and Paul was one of them. And when you started talking about the overall view of their digital transformation journey and these were some of the most advanced technical distributors that we spoke to, they were pretty humble

[01:11:38] in their perspective of where they were on that journey. If we say don't a scale when the five where are you on the grand recruiting somewhere like two, and these were really advanced kind of folks. So come back with Dan's first presentation.

[01:11:51] There was a lot of you of where this goes next. But Peter, we come in to comment section here of the almost the inverse relationship there at this between digital transformation and the connection with the customer. So I would Dan said this has to add

[01:12:05] to the overall customer experience. This whole transformation has to transform how we bring value to our customers. It needs to be a view of being more efficient in our communications with our suppliers and driving the internal efficiencies in cost savings around their inventory.

[01:12:19] So there are some key categories, but ultimately there's a long, long way to go for sure. But Marty, that's a great point. I talked to people regularly about the thought, you know, ties in with what you're saying with Dan was saying there, right?

[01:12:34] Is we should be thinking about what are we dealing with technology to help us understand the customer better? And when we take advantage of data about the customer because distributors manufacturers, anybody adopting new technology is concerned about are we going to return on investment?

[01:12:55] Is it going to be adopted in our organization? You know, I've heard you say something similar from the stage, Mike Mark screams it from the top of his lungs. The vast majority of data in your CRM should be from the company to the salesperson.

[01:13:08] It's the reverse of what 98% of companies do. Whether that Mike and I had lunch in Phoenix last year at an ISA event, we were chatting about it. It doesn't matter whether the number 80% or 60% or whatever it is that data that's going to the employee.

[01:13:26] And we really focus on that in our world is and I talked to people day in and day out about think about empowering your team with data about the customer that will make the customers experience better with your organization because of technology. If your customer experiences better

[01:13:47] because of how you're serving them, they will buy more from you. Your salesperson will make more money and they will be ecstatic about their use of that technology and as an executive, you're a return and an investment's going to go through the roof

[01:14:04] and you won't have that ask anybody to go log in and put a few notes in because 20% or 25% of the use of that technology is there. The rest of it is the company feeding them things that is going to make the customer gain value from the technology investment.

[01:14:21] And we're able to take that full circle, a distributor owner, manager, executive, will get more information and more value than they've ever imagined from a technology investment because the adoption goes up and ROI and the software goes through the roof because the customer had a better experience.

[01:14:41] I think it's been part of that, sorry. I think that is communication and as the leadership team you might know what the value of these new digital and AI tools are going to be but if your frontline people who are using hands on these

[01:14:56] technology tools don't understand that value that's where you're going to get pushed back and that's why change can be so hard as one communication doesn't back it up. So I think that's just, it's so important to have that communication element there, both to the customer.

[01:15:11] If you have a new tool that's going to make them pain, a different format or make them send different files than they're used to, you have to communicate what this is going to do for them in the long run or short run

[01:15:22] and same thing to your employees who are using these new technologies, they have to understand the why, what it's going to do to make their lives easier during the work day. So I just want to touch that communication as a huge component of this overall digital transformation.

[01:15:37] That's great, Mike, thank you. Mr. Martin, I'm going to talk. I just wanted to, you know, I talked to, I work with hands on distributors and manufacturers every day and they're not really, you know, we're the things that we do are putting a foundation in place

[01:15:54] for AI but it's not AI is not on the top of there as their priority, right? It's the foundation getting some of those things in place. There was an article actually in our newsletter, I think today from Gardner, about 34% or 35% of CEOs,

[01:16:09] they interviewed said AI was the number one priority going into the next year and you know, maybe E and this is a good one for you from your conference you just had. Are you still seeing, are we seeing, are you seeing people actually getting serious about AI

[01:16:25] or more, hey, let's poke around, play, do research, get a foundation in place and then let's, you know, let's, I'll follow along as we see more more actual practical use cases coming together. A lot of executives are getting a lot of pressure from their boards or PE owners

[01:16:43] or other stakeholders to figure out an AI strategy and a lot of what we think that's the wrong thing to do, you really need to figure out what the business problem is that you want to solve, find the best tool in many cases

[01:16:54] they're in new alternatives that incorporate AI that are the best tool. So, you know, AI is such a broad, AI is just a whole new form of technology that's gonna be a part of every type of application. So I think that they are beyond dabbling in many cases,

[01:17:12] so for example there are distributors who are making their own order to quote automation tools, right? That are all ML based. So I think the serious players are past dabbling in it but the serious players are also focused on solving business problems not doing AI

[01:17:27] for the sake of AI. Yeah. Well, that's, I think that's the great statement in the AI for the sake of AI. Now, I think we think kind of about the partner hype cycle with things, right? And as we're watching those things happen,

[01:17:42] I think an I was unfortunately stuck on crutches and didn't make it to your event and had planned to be there but I was at your event in October that D.S.G. hosted in phenomenal. The watch, the movement and the excitement of people, the speakers were amazing.

[01:18:00] I think what we're seeing now is a big push of there was that excitement. You mentioned it in fact, John, can you pop up that piece from another, that gardener, what CEOs are looking for? So might be a little hard for us to see

[01:18:14] but this is time at use of, this was a CEO related survey and says top A CEO's believe AI will impact revenue when it goes through and talks about a few different ways realizing that's pretty hard to see but I think to Ian's point, right?

[01:18:29] We've got whether it's a PE firm or a board or a CEO is pushing down in the organization is like okay let's go get, you know, at least understand what we should be thinking about and doing.

[01:18:40] And now we've kind of seen a little bit of that wave happen and now we have to see some real applications that actually happen in the workplace. So John, you could take that down if you would please think it's thought it would be a little easier

[01:18:51] to see that's a little bit harder. But that's kind of my take is, we've had a lot of calls into our company over the last say six months of all, I don't wanna say tire kickers but you could almost feel that it was a junior marketing person

[01:19:04] or a sales manager and he was asking questions that someone in his organization wanted to get a little feedback on but they weren't necessarily ready. So I'm kind of throw that out to the group are you seeing any of that as well? Yeah, I think from my perspective,

[01:19:22] I think Ian hit the nail on the head when you got to start with a business problem you're trying to solve and then go find a solution. We've never been short of finding solutions to problems we haven't yet defined.

[01:19:36] And the tech stack is littered with the gambles out but so I think really starting with the business problem you're trying to start a solve and then to Marty's point around starting with the customer because at the end of the day, it was not improving the customer experience

[01:19:55] or the employee experience. What's the value that you're creating? The couple of other just quick points I'll make one and I've heard this, I've heard Ian talk about this a lot. What are you measuring from ROI on your technology investments whether it's AI or anything else?

[01:20:17] If you're just measuring the amount of sales that are flowing through your e-commerce channel that's probably not gonna give you the answer you're looking for. So being able to measure and pay PI, the return that you're getting from a technology investment you're making

[01:20:35] because they're not necessarily going to show up where you might think they might show up on the P&L. And the last thing I'll mention that something Dan said and I love this word, he used word curious, but curiosity

[01:20:50] and having a curiosity about some of these new technology tools that are out there. And I think AI is the buzzword and but it's really, I think there's AI is being infused in other tools that we're using. So we are already kind of using AI

[01:21:09] and it's getting a deeper understanding of what the possibilities are and revisiting some things that maybe there wasn't the technology answer for three years ago that there is a technology answer for today because of AI. That's a great point.

[01:21:24] In Jeff here makes a great comment related to what Ian was talking about there. And you talked about AI being baked into existing technologies and I think we might be, I don't want to say tipping point, that's probably too dramatic.

[01:21:40] I think we're getting to a place here pretty soon where distributors are going to have to make a decision that says, I want to trust existing or new trusted and well-known partners that can help me on my AI journey because they have AI technology built into their existing

[01:22:01] technology or I need to go higher. A lot of people in bringing a bunch of consultants and go try and build it. It's kind of the builder by scenario but I think we're getting to that place where that's going to be the decision.

[01:22:14] It's funny, hey do I want to take this journey with a trust? It may be I'll build a few things on my own but with a trusted partner Jeff, I think is within for as a good example, baking things to me, I tools into ERP's,

[01:22:28] many are doing that, same thing in our world with CRM and customer intelligence. So any thoughts as we start to kind of wind down today a little bit on partnering versus building? What do you guys see out there? I'm going to throw a comment out

[01:22:44] that's aligned to that Kevin, but not exactly on point and this is again from conversations that it starts looking at how distributors define themselves too as the new tools come on place and how they engage differently and ultimately how they bring value to their customers.

[01:23:00] Some are defining themselves more like a software company than they are distributor products. So I think that would start, how you define yourself, would start impacting your view of make-purses by or build versus by too. That's great, thank you for that.

[01:23:16] All right, well, you know what I was going to mention two one of the just as a compliment that's very well deserved is Mr. Kennedy with your looking at your management team with both having a chief information off of or technology officer

[01:23:31] and a chief digital officer within your organization. Those are the steps that we're really seeing from people that are, they were putting somebody in place that's responsible and you know, Tom and I talk to folks every day and we have customers who, you know,

[01:23:46] their IT person might be a person that started in a completely unrelated role in the company, no real background, but they're doing the best that they can in, you know, bless them for that. And then there's other organizations who are seeing, I'm investing in people

[01:24:02] that have experience in background. So I think we're going to see a lot with that. There is a lot that goes with people as this happens. So I know, who's going to say, I know we have to wrap up here.

[01:24:16] I know there's some people that have to leave. I would love to wrap up maybe with a quick around the horn, right? Here kind of the way we started and get each of our, you know, each person's kind of quick take on what you think

[01:24:29] is, you know, just in 30 seconds, what you think the next six months are going to look like. If there's one thing to be thinking about in this world and as we go into next year, other than the fact that we know

[01:24:39] there's only going to be one more interest rate or one interest rate cut this year. But beyond that, what do we see in the next six months? So before time out, before anybody starts, you know, Mr. Marx, there's got to be a,

[01:24:51] you did too many drugs in high school comment or something like that for Tom with that silly comment about one interest rate height. So Mike, why don't you start your unmute? Mike, you're muted. Tom didn't really want to hear what I said.

[01:25:06] I was just going to share the, denial is more than a river in each of Tom. All right, very good. Well, let's, let's to Tom's point. I think let's go around the horn so to speak. Let's talk about what are your thoughts about the next six months

[01:25:22] and then we'll kind of wind this down because a few people have to go and the fact that we still have an audience listening is only because of this group here, but we appreciate everybody's comments. So Mr. Marx, let's start with you.

[01:25:33] What do you see in the next six months, any? I think it's going to be, well, I mean, we have a presidential election and there's so things you're going to be for off the encolored fool and I think since I'm starting Dan will be the wrap up

[01:25:46] and I'm really curious just to dance take on this just saying but well, he's closer to it. There's so much noise in the system and it's very hard to figure it out. But barring a shock of, you know, a global issue with like,

[01:26:02] China and Dating Thai want or something. I think it's going to pretty much be the same. I think I think we will see the pendulum coming back and it's just going to be people's just have to keep changing and using this time theoretically to be doing things.

[01:26:15] The one thing that we share with people, I follow Mark Dancer's blog, very closely. I know the NANDW folks and he recommended a book that shocked me to the core, which I just read called Proximity and if somebody's interested about how this technology

[01:26:31] is going to play out in distribution, I would highly recommend it's a pretty easy reading. So with that, I'll let it go. That's fantastic. Why don't we just go move across Mr. Heller? Yeah, I think you're going to see continue to get in an A activity.

[01:26:45] I think you're going to continue to focus on AI and I was surprised at how fast people had learned about AI from our October conference to our June conference. I think people are self-educating on this more so than they have other technologies.

[01:27:00] And I think we're going to see a pretty stable economy. Shrey, Marty. So I'm going to refer to an article that you shared. Marketing budgets have increased but how are they being spent from 2% to 5%. I think the elevation of marketing and CMOs as a key profession within distributors.

[01:27:22] As you said earlier, Kevin, there's a lot of positions that folks are just growing up in the organization and I think that will continue but there's going to be a view of a ring some outside folks in not consultants but I think real talent from other industries

[01:27:36] to help with all this stuff we talked about today in terms of transformation, customer experience. The view that Mike just said proximity and that proximity that marketers have to customers, competitors to partners, to really impact strategy with data insights that no one else has available to accept them.

[01:27:55] Right point. I will thank you, Marty. I'll be downloading that book this afternoon for we can listen and thanks for that Mike. Marty, I really appreciate your comment because we've talked quite a bit about people today. We've made the comment about some of the great things

[01:28:10] that Paul and his team were doing at DSG with bringing outside people that aren't necessarily from wholesale distribution but bring great depth of experience into our organization where we've so much so often seen that homegrown people with any organization which is wonderful, but sometimes bringing that mix

[01:28:32] into help raise the bar a little bit and that's going to the old saying about rising tide raises all boats. That's going to do the same thing with people too. I think that's a great statement. So Marty, thank you for that.

[01:28:45] Mr. Beverage, we're just kind of looping around here so we're going to come right to you. You're on mute, my friend. You almost look like you got hit like a tanker truck and it goes down. Hey, I did, go through. I will not practice the key.

[01:29:02] I am going to end with a call to action and Mike Marks, you just talked about all the noise that's out there. There is a ton of noise. And my call to action is, I'd love everybody to write down the terms, the futures, the future, is human.

[01:29:25] And in the end, if we don't double down, if we don't rethink, if we don't re-abmag it, the impact that we have and can have on people, our employees, our customers, employees, what the hell are we doing this for?

[01:29:44] I know the financials and everything we've been talking about is absolutely critical, but in the end, in the end. If we don't double down, unfocusing on the people around us, what the hell is it for? Probably should have come to Durk last. All right. Thank you, Durk.

[01:30:11] Mr. Hackett? Yeah, I'm the poor step that has to fall. Durk, but I'm kind of touching on what some of the people have said. I think we're going to see some rebound in industrial demand in the second half of the year. I think we're going to see

[01:30:25] full-sale distribution hiring continue to incrementally improve. We're certainly going to see more instructors, Dable and expand what they're doing in AI. And yeah, I just think there is definitely a lot of cautious optimism out there, even though everyone's going to be reporting their second quarter financials.

[01:30:43] I think we're going to see a lot of statements of flatness and softness continuing, but talking about a more momentum going in the second half. And yeah, just as James Plugford coming to MDM shift conference, there's going to be a lot of great thought leadership there

[01:30:59] where I think you're going to learn a lot more about what we've talked about in this hour today. So just a quick plug for that in September. Good, thank you for that. Mr. Kennedy? Yeah, real quick. Thanks, Ben and Honor, to be here with all of you.

[01:31:14] I am incredibly optimistic about the second half. And I think leading into an optimistic 2025 as well, kind of similar to my pockets comments there. And I think it'll be incremental over the next several months. But really we are optimistic about that. And we are curious about technology

[01:31:37] and continuing to improve that customer experience. And they're the future issue, man. And I think if that remains at the center, I think we're all going to do it pretty well. It's great, thank you for that. And Dan, you're going to take us home?

[01:31:53] Yeah, well first off, Sheriff Paul's optimism on the business output. I think between interest rates cuts increased demand that my pocket reference, I agree. And I think most distributors agree that the 24 and the remainder of 25 are going to be pretty positive.

[01:32:06] I think the question mark in Mike Marks, you said it up well, we've got a pretty consequential presidential election. And I know folks like to describe this election and many others in existential terms. But just to talk about brass tax, this election is going to determine the president

[01:32:23] and the Congress that's going to have an unprecedented opportunity to reshape for to continue some of the pro business policies that have been in place since 2017, specifically on the tax and regulatory front, which obviously impacts investment rate deal. For those keep in score at home,

[01:32:38] if you're a seqor, there's talk about raising the seqor for eight, although it was supposed to be permanent in 2017, backed up from 21% to somewhere in the 30s. If you're an S-coar, pass the family run business, well that $199 A tax deduction

[01:32:53] that the vehicle allows you to deduct 20% of your taxable income. Well, that's very much on the table for expiration unless the Congress acts. And so these are two examples of slew of tax and regulatory policies where the two parties have diametrically different views

[01:33:12] on how to tackle those issues. We believe there is a thoughtful, reasonable pro business majority to be had in the Congress and then we're out there working every day to make sure we have legislators understand that the wholesale distribution industry that 30,000 companies employ six million people

[01:33:28] and this one of the greatest engines of economic drive America has ever seen. And thank goodness we've got Brian Wilde, he's our chief government relations officer, the lead lobbyist for the distribution industry. In the saddle, he's the best in the business

[01:33:42] and one of the most effective lobbyists here in Washington. So we're out there making our case every day with members. But buckle up, I think the choices we make in November are gonna matter and I think it's gonna be the difference

[01:33:52] between throwing lighter fluid on some of the optimism that that all is describing on the economic front or throwing a cold blanket on what could be one of the best economic years in the United States. So stay tuned. Good, thanks for that, Dan.

[01:34:05] I met Mr. Wilde on an airplane of Wilde back. I was on my way to visit you from the ISA event across the aisle seat for me was Brian, so we had a nice chat there. So thanks for that. So as we wind down,

[01:34:21] I'm gonna go back to the term grateful getting this group of people together was just astounding. I don't know if there's been a platformer, an opportunity in the past to have this many people of this caliber together. So we've probably had more comments today

[01:34:40] than we've had in the past. I wanted to thank Kelly, Ron, John, Jeff, RPE, Debbie, Ron, Peter, tons and tons of great comments that came in today. We didn't get to very many of them, but Tom, before we go, any thoughts from you wrapping up?

[01:34:58] Yeah, well I'm gonna take this and take the transcript turn it into a chat bot. And this will be the, you know, de facto information related to wholesale distribution. Anyone wants to get the data that's gonna be here. This is, this is covered it. So stay tuned.

[01:35:13] Stay tuned. Yep, Paul, Mike, Mike, Dirk, Marty, Dan, Ian. You guys are awesome. Thanks so much for being part of things. We'll get, maybe get this script together again before we get to 200. How's that? Love it, I'm glad you're here. Thank you, everybody. Appreciate it. All the best.

[01:35:30] Have a great day, thanks everybody.