Forecasting is a tough business. Whether it's picking the winner in the weekly office football pool, evaluating the future prospects of an IPO in the stock market or divining your company's business prospects for the following year, the best you can do is make an educated guess, stand by it and hope for the best.
The forecasting season is upon us. Last month, the F.W. Dodge Outlook 2002 forecast, the construction industry's most-respected forecast, hit the streets with a warning that several key segments of the construction market will slow down from the rapid pace they kept for most of the 1990s.
As you know, Electrical Wholesaling takes a crack at forecasting, too. In this month's issue, as in every November issue for over 20 years, Electrical Wholesaling magazine helps its readers learn a little more about their future with its 23rd annual Market Planning Guide and Regional Factbook.
There's another interesting forecast in the distribution industry that comes out every few years, but it deals more with business trends in the wholesale distribution industry than market forecast. Over the past 20 years, the “Facing the Forces of Change” series of studies published by the National Association of Wholesale-Distributors (NAW) has helped distributors get a fix on their futures.
In the recently published “Future Scenarios for Wholesale Distribution,” Adam Fein, president, Pembroke Consulting, Philadelphia, led a research team to evaluate how the concept of “scenario planning” can help distributors prepare for it. The article on page 19 of this issue offers some insight into these scenarios.
The study's scenarios paint a picture of what the wholesale-distribution industry will look like in 2006. When you think of all the changes that have happened over the past five years in this business, it sure seems like five years is a long time.
To be sure, there are constants. The NAW study's survey respondents said slimmer gross margins; the need to hire, train, keep and motivate employees; and industry consolidation were among the issues that keep distributors up at night. These concerns cut across all distribution industries, whether they distribute sparkplugs, eyeglasses, propane gas or pipe and wire.
But think back a few years about all the changes that we have seen. In 1996, the electrical wholesaling industry had not yet reached today's era of international distribution, where global giants like Hagemeyer, Rexel and Sonepar compete with stateside electrical distributors for new acquisitions in their efforts to build regional and national distribution networks in the United States.
The Internet was just coming on the scene in 1996. After following the Web through its well-documented rise, crash and ongoing metamorphosis, the NAW study's respondents pegged the Internet as the most “over-hyped” issue in the distribution industry by a wide margin over globalization and disintermediation.
Forecasts of any kind are great planning tools to help companies map their strategies for the future. The following analogy that Seth Goudin, author of “The Big Red Fez,” a book about Web marketing, used during the F.W. Dodge Conference in comparing forecasts to maps illustrates this point.
More than 400 years ago, Portugal became one of the most powerful countries in Europe because its mariners had made the best maps in the world to chart new trade routes to the West Indies. Accurate maps were extraordinarily difficult to come by in those days, and Portugal's maps were a significant competitive advantage that it had over other countries that wanted to develop nautical trade routes. The Dutch government realized this and developed a successful plot to steal some of these maps. With these maps in hand, the Dutch created an international trading empire that lasted for several hundred years.
I encourage you to get a copy of the NAW study and use it to map a course for your company over the next few years. Copies of the “Facing the Force of Change” study are available through the NAW Web site at www.nawpubs.org.