Supply chain disruption, labor shortages and a looming recession are all top of mind for many distributors. To combat these fears, the National Association of Wholesaler-Distributors (NAW) is working to improve collaboration and provide the necessary resources and connections to help distributors pave a path forward.
After spending many years in national security, banking and financial services, Eric Hoplin, the CEO of NAW, recognized a need in distribution for someone who could bring businesses together, build actionable strategies and mobilize distributors to achieve their goals. In this interview, Hoplin shares his take on distributors’ key concerns and how NAW is working to support distributors in Washington D.C.
Distribution Strategy Group: Tell us a little about NAW’s mission, its place among associations serving the distribution industry and where you want to take it.
Hoplin: As you know, NAW is considered one of the premier trade associations in the nation. We have the honor of representing distribution companies across all lines of trade. Our members account, overall, for about one-third of the American economy. So, we play a really important role.
We do memberships in two ways. First, companies can be direct members of the organization. There are a number of trade associations focused on the various lines of trade throughout distribution, and they are our members, as well. As a result, we serve as an umbrella organization to be able to look at all things related to distribution.
Our goals are really simple. Our mission is to help distribution companies be the most innovative and forward-looking in the nation. We want to help them succeed. To do that, we do a number of things.
First, most of our companies don’t care about politics; they want to put their heads down, run their businesses and serve their customers. So we protect them in Washington. We help tell a story and hopefully guide rules, regulations and laws in a positive way so the industry can continue to thrive.
Beyond that, we also focus a lot on thought leadership. We provide ideas about where the industry is headed and how members can incorporate those ideas into their companies. We’ve got some fantastic events, great networking programs and a variety of working groups that dive into specific issues. We’re about to launch what we’re calling our “digital warehouse,” where members have access to the best information, data, research, videos and webinars – everything they need to tackle some of the primary challenges they’re facing as they run their business.
Another thing we’re doing that I think is special and unique among trade associations is that we have the ability to harness the power of our industry when it comes together. There are a number of ways we’re doing this. For instance, we’ve got several companies plagued by cybersecurity challenges. To solve this, we’re bringing together CIOs and others that are sharing threat intelligence and information.
Other companies are looking to share some of their operations capacity. For example, somebody may have extra warehouse space, and somebody else needs more. So, we’re bringing distributors together in a non-competitive way to help each other.
DSG: Roundtable sessions are a great place to sit with common-sized cohorts and share ideas. If you’re running a billion-dollar company in distribution, you can sit around the table with other CEOs and share experiences and insights. What is NAW doing to facilitate these connections?
Hoplin: Companies have different challenges at different sizes. We have programs where members can attend roundtable conversations and talk about what’s on their mind. I think back to one session during the pandemic when the economy was changing overnight, and employees were suddenly working from home. A lot of people were retreating from the sector altogether, and billion-dollar CEOs were trying to figure out how to staff these enormous enterprises.
So, we brought in experts who did a lot of studying across not only distribution but manufacturing and others to figure out the long-term implications on our workforce. Then, we brought our CEOs together with that data. They all shared their experiences of what they were doing to retain talent and what new technologies they were deploying to accommodate some of the workforce shortages.
We’re using the world-class experts we’ve got access to in order to help our members think through the best strategies to mitigate those challenges and ensure their company is positioned for success.
DSG: In our pre-call conversation, you pointed out that talent, the supply chain and inflation are interrelated issues. Can you sum up what NAW is doing to help distributors overcome challenges in those areas?
Hoplin: Sure. First, I’ll say that while there are many reasons leading to inflation and supply chain challenges, I think the workforce is at the core of it. For instance, if you visit some of our members, you might drive by two or three distribution companies, an Amazon warehouse and maybe a couple of manufacturers. What’s happening now is that as wages go up, that manufacturer across the street suddenly offers an extra dollar. Then, Amazon will top that, plus they’ll pay for your kids’ education. Then, you might have another distribution company with a sign-on bonus that will match all those benefits.
So there’s a cycle that’s happening in every sector of America. As a result, it’s good temporarily for the folks earning a higher wage, but the cost of everyone handling the material, the truck drivers and the like are now being baked into the prices of the goods they’re moving. So that’s one of the major contributors to inflation.
It’s a complex challenge, and NAW is trying to help in a number of ways. The first is through data. We just released a benchmarking study focused on compensation, so our members can have a real sense of what wages and benefits look like depending on the company’s size. That knowledge can give you a good understanding of how you’re positioned against your competitors to help you retain and acquire talent.
The second thing is that, as I mentioned, we have this idea of surplus capacity. Some people don’t have enough capacity, so through this operational pooling, members are now getting together to help each other. We’re also looking at sharing some freight capacity in the trucking space and container shipping. So that’s a real, tangible way that we’re helping members.
DSG: You’re doing some policy work and lobbying, as well. Can you tell us more about what NAW advocates for and with whom?
Hoplin: Sure. It’s really important to remember that from NAW’s perspective, we’re not a Republican or Democratic organization; we’re a pro-business organization. So, we’re out there advocating for our members’ interests.
As an example, many of our members sell their product on Amazon’s platform. One of the challenges we’ve seen over the last several years is that a distributor will have a product that’s selling well, but after a couple of months, a similar product made and produced by Amazon shows up. Then, Amazon’s product is often higher in the search results regardless of the price. So the distributor’s sales plummet, while Amazon’s sales go up.
We don’t think it’s fair to be able to take all of the data about our product that’s selling and then manufacture something to put on the marketplace. So Senator Amy Klobuchar, a Democrat from Minnesota, and Senator Chuck Grassley, a Republican in Iowa, have co-sponsored antitrust legislation that would put a dividing line between those two parts of Amazon’s business. If it goes through, Amazon couldn’t share that data back and forth. So it would make a more even playing field for members using that platform.
DSG: What are you seeing happening with the supply chain? Where is it going, and what do members need to do?
Hoplin: That’s a great question. We’re seeing several things. For example, early in the pandemic, when many of our members were sourcing things from China, the government suddenly stopped shipments. Then, with some of their severe COVID lockdowns, manufacturing and ports have been grinding to a halt at intermediate intervals. So a lot of our members have been working to rebalance their supply chains internally by moving some things to Vietnam or Malaysia and other places in Asia to be sourced.
So we’re seeing a movement and a shift to the extent possible of the supply chain. But unfortunately, often, those shifts come with expenses. That’s one of the factors that I think is likely contributing to inflation.
Ultimately, I think one of the best ways I’m seeing members manage supply chain issues is through technology like artificial intelligence and predictive analytics. That’s giving them a great understanding of where the product is, how quickly it’s moving, and, more importantly – what’s happening on the demand side.
DSG: We had a supply chain professor on a previous Wholesale Change episode who mentioned there is a lot of artificial demand in the system because people are placing multiple orders. There’s a potential cashflow issue if all of these orders get fulfilled in a short period. What are your thoughts on this?
Hoplin: To that point, I think a lot of it comes down to how well you know your customers. Throughout the pandemic, one of the big challenges was not only serving the customers you’ve had for a long time but working with new people who suddenly popped up needing supply. Those customers were probably ordering from multiple places and are maybe still doing that practice. By using advanced analytics, you can kind of spot some of those trends.
DSG: What have you found surprising or unexpected as you’ve visited NAW members?
Hoplin: One thing is technology. I’m not a technology expert, but I love walking into warehouses and seeing the cool things happening. For instance, I was in a distribution center just a couple of weeks ago and heard this buzzing sound. When I looked up, there were drones taking inventory – they were going up and down and sideways, giving real-time updates of what was in and out of stock.
There are so many fun technologies that we’re seeing companies employ, not just at the billion-dollar level but at the $150 million level, as well. I think companies are taking steps to automate and advance as many processes as possible to ensure they’re competitive going into the future.
So, technology is one thing that we’re trying to help with. But, when you take a step back and recognize that distribution accounts for a third of the American economy, it’s really shocking how little innovation and investment is going into the future of distribution. So that’s one of the things that, as I mentioned, NAW likes to bring companies together to do as an industry.