Customer Capital Expenditures Will Return for ENGINEERED SYSTEMS Distributors
Distributors and integrators of engineered systems foresee a better overall economy as the main reason for what they predict to be a 14.8% aggregate improvement in their businesses. New hires, training of existing staff and more Internet and traditional marketing will also play a role. All ES distributors anticipate sales increases.
The atmosphere of the last few years is summarized by Bob Weeks, president of FloStor Engineering (Hayward, CA), who says, “Nobody, particularly the small to medium-sized businesses that we deal with, is aggressive in wanting to do new systems. Larger companies can afford to invest in systems right now as they see business eventually coming back, but the smaller companies are still cautious.” It’s an admittedly challenging situation, but Weeks believes his company will see 20% growth as the economy improves. Weeks is also investing in website enhancement and Internet marketing to help achieve that goal.
McNichols Conveyor Company (Southfield, MI) has automated its quoting process, streamlined its data exchange with vendors and eliminated redundancies in other processes to enhance the company’s efficiency. Upgrades will continue as the company makes software improvements that will allow it to meet customer needs despite a smaller staff. President Robert Iwrey believes enhanced efficiency, coupled with renewed momentum in the economy should lead to 5% sales growth. “We saw an uptick among our customers in both industrial and consumer goods in 2010, which we expect to continue,” Iwrey says.
At VanLyn (Memphis, TN), President Richard Vandemark believes that the last few years have led customers to rely more on the Internet, which he sees as a double-edged sword. “The Internet is an important tool, but it’s allowed customers to get on there and price products from 20 different people and really drive our margins down,” he says. Vandemark also laments the change in payment schedules that impact cash flow, as customers extend payments to 60 or even 90 days, while his suppliers still expect payment in 30 days. Despite these challenges, Vandemark sees big companies starting to spend money again, and that leads him to forecast a 15-20% sales increase.
A similar rise is in the offing for McCombs-Wall (Orange, CA), where President Peter Lauder expects 20% growth as new conveyor and robotics lines take hold. “These offerings allow us to get further back into the manufacturing environment than we have been previously,” Lauder says. Along with the growth may come the addition of two engineers. Training of any new personnel will be the company’s most important investment. “We are not a stocking distributor. Our people and our expertise are our assets. We have to keep educating and exposing our people to new, sophisticated solutions so we can keep ahead of the technology curve and provide for our customers,” Lauder explains.
A different focus on technology is what leads Ron Ferrara Sr., president of Century Conveyor Service (Edison, NJ) to project a sales boost of 20%. New products, including warehouse management systems and simulation software, will be the centerpiece of that growth. Ferrara will subcontract work until he feels comfortable enough to hire full-time employees, though he does expect to add two sales engineers to meet customer demands. “Customers are relying on their suppliers for engineering and cost justification due to downsizing within their organizations,” he says.
|Storage & handling and engineered systems distributors are most likely to predict an increase, with 100% of these distributors forecasting growth in 2011. Storage & handling distributors will realize the biggest gains, at 19.8%.|
Gary Ashley, CEO of Conveyors & Drives (Atlanta, GA), sees similar customer behavior. “Our customers lost some key people and they are leaning on us to help close that knowledge gap they have right now,” he says. After two years of waiting to spend money, Ashley sees customers finally starting to loosen their purse strings a bit. “People are talking about spending money and budgeting for projects. There is a pent-up demand out there,” Ashley states. To capitalize on this, Ashley is investing in training to keep his workforce up to date with current products.
Conversations with customers lead Gary Wilder, president and general manager of Siggins Company (North Kansas City, MO), to forecast a sales increase of 5%. “Among our key customers, we know who is going to be buying next year and who’s not. If the economy shakes loose, we could do even better than we expect,” he says. He sees more electrical controls driving the systems as opposed to mechanical hardware.
The constant change in distribution requirements for end-users will lead to 5-10% sales growth for W&H Systems (Carlstadt, NJ). Marketing Coordinator John Niemeyer explains, “With all the buyouts and consolidations, our clients’ material handling systems need to be flexible enough to meet both current and future demands. When making changes to an existing system, we find ways to do that for them with minimal to no downtime to their current operations. If the client is building a new distribution center, we provide them with the design and on-time system implementation.” The company will focus on identifying new markets through market research, cold calling, trade shows and enhanced online networking presence.
|100% of distributors in the West predict a sales increase. Distributors in the West will also see the largest average increase, at 16.8%.|
Nelson Equipment Company (Shreveport, LA) rolled out a new marketing plan on January 1, complete with catalogs, telemarketing, e-mail, newsletters and social media. “This will be the first coordinated, structured, dedicated marketing effort we’ve ever done as a company,” says Mark Nelson, president, adding that several of the ideas came from discussions with his MHEDA-NET group. The marketing effort will help the company capitalize on a customer base that has put off capital expenditures for two-and-a-half years and will result in 5% growth for the company.
A “heavy emphasis” on marketing will also be a key for John Cosgrove, president of Atlantic Handling Systems (Fair Lawn, NJ), who plans to co-op with manufacturers to send more e-mail newsletters and product-specific blast messages to keep his company in the customer’s mind. Increased services such as permitting and drawing will also be a focus. According to Cosgrove, it will all result in a sales gain of 8-10% in 2011 with the best still to come. “I can’t wait until 2012. It’s been a tough haul for the last couple of years, but if we can all get to the other side of the river that’s 2011, real growth will be coming in 2012,” he says.
2011 Industry Forecast:
- Distributor Forecast Part 1: Industrial Trucks
- Distributor Forecast Part 2: Storage & Handling
- Distributor Forecast Part 3: Diverse Mix
- Distributor Forecast Part 4: Engineered Systems