> ERA Quick Connections – October 2023, Vol. 2
October 2023, Volume 2
MONTHLY POS REPORTS
Our base point of January 2021 saw the COVID-19 pandemic beginning to lose steam, resulting in a significant rebound in POS activity. Due to strong growth in 2022, there is the good probability that we will see a slowdown of POS activity in 2023. Outside influences will also affect 2023, including supply chain issues and inflation.
August 2023 bounced back nicely from low July POS activity. March and June are the only months with higher POS than August. However, when comparing this month with August 2022, this year is about 9 percent down from last year. Year-over-year POS indicates a 2.5 percent decrease this year versus last year. In general, POS is generally showing decent activity because 2022 was such a record year. Based on historical data, September should be a good month also.
DTAM information is available for anyone wishing to look at larger trends in the industry. For details on Budde Marketing’s services, visit BuddeMarketing.com.
INDUSTRY NEWS
> The U.S. Department of Commerce announced last week that the U.S. will ban exports of more advanced AI chips to China. Read more.
> Time reports on how the AI landscape has shifted in the past year, and where the industry could go next. Read more.
> Apple, caught off guard by the generative AI boom, will spend $1 billion to catch up to the other major industry players. Read more.
INDUSTRY TRENDS SURVEY
The October ERA Industry Trends survey is now closed and results are in!
Please note: ERA sends this survey monthly to one contact from each ERA member firm via email. Please be on the lookout for this survey in your email inbox. If you don’t see it, check all email folders, including spam. The email will come from no-reply@mail.client.
If you have been completing the survey monthly, many thanks! Our survey is only made better by a robust and diverse universe of responding companies. Help us make this survey a valuable resource for you and the rest of our members by taking 5 minutes to complete this each month. The results are visible only to ERA members and gives us a great cross-section of what our members see on the horizon for the near and long term.
VIEW 2023 SURVEY RESULTS
ERA NEWS
> COLT — ERA’s live, virtual chapter officer leadership training program — will take place Nov. 1-3, and registration will end tomorrow, October 25! Chapter officers, or those interested in pursuing a chapter leader role, are encouraged to attend and gain creative ideas and practical knowledge about increasing member engagement and excitement in their local ERA chapter. View more information.
> 2024 ERA Conference registration is at 85 percent capacity for attendees! Want to secure your seat at the most popular industry event, and have the opportunity to network with more than 600 rep, manufacturer and distributor leaders? Do not wait. Register now! Show your support for this great event by becoming a sponsor.
FOR YOUR CALENDAR
Browse the searchable ERA Industry Calendar for upcoming national and local chapter events!
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Manufacturing data reports from the Institute for Supply Management (ISM) are released at the beginning of every month and can be accessed at 
Registration is now open for ERA’s Chapter Officer Leadership Training program (COLT), scheduled for Nov. 1–3, 2023!
The Summer 2023 issue of The Representor is now available!
So, how was your EDS? I bet it seems like a lifetime ago…yet it was only in May! We all got home with a folder full of notes and new business cards or QR code-generated contacts. What did we talk about again? Was I going to reach out to them or were they going to contact me? Do I wait a little bit longer or take the initiative to reach out to them? How long is it when it becomes too long to follow up? My vote is NEVER! It is sort of like sending a thank you note or email; there is no expiration on either.
> The hurrier I go – the behinder I get!
EXECUTIVE COMMENTARY
Walter Tobin, ERA CEO
by Walter E. Tobin, ERA CEO
This time a year ago, many of us were asking our partners (and were also asked by them), “How’s business?”
We then may have listed a litany of challenges that we were dealing with: long and uncertain lead times, unclear/inaccurate forecasts from our customers and being asked to adhere to and/or pass along NCNR clauses that had never seen before. There were shipping issues, port backups, the Great Resignation phenomenon, work-from-home issues, the search for the “golden screw”— so many things for us to consider and manage every day.
Yet, when a follow-up question was asked or we asked, “How’s your revenue this year?” we often said or heard, “We are having a record year!”
How was that even possible? I guess there must have been some product somewhere that was able to be shipped and billed to someone.
Was all of this product really needed? We have now become aware that there was a lot of double/triple ordering done to hedge our bets on averting product shortages. We may have agreed to NCNR clauses that we would have never even considered to agree to in the past, all while hoping that our own “golden screws” arrived on our docks.
So here we are a year later. Lead times have returned to a more normal cadence and many golden screws have been received. The NCNR clauses that we agreed to are now being enforced, all leading to a period of declining bookings with book-to-bill ratios falling below 1:1. We are now relying on our past order backlog to sustain us.
Bookings down, billings falling, inventory rising…yikes! What are we do to now? Some companies have adopted a “damn the torpedoes: full speed ahead” policy: cancel open orders, refuse shipments on past orders placed and accepted in good faith, renege on NCNR orders and begin to sell excess inventory on the open/gray market. This is all to achieve some short-term relief and to try to maximize their own quarterly/annual financials. Some of these tactics are working!
Some companies are demanding lower prices due to the return of a “buyer’s market” and to take advantage of companies who are now swimming (drowning?) in inventory. These companies are under pressure to reduce their own inventories and sell at reduced prices that will then lead to their own lower margins, which will then wreak havoc on their own financials.
In addition when companies sell their excess inventory to the gray market, it sits out there only to be sold down the road to customers who may take advantage of lower prices who may have bought this product from the authorized manufacturer/distributor channel who were relying on new orders down the road to help them sell their inventory. This excess inventory sits out there and then is sold down the road at lower prices —another short-term action that has longer-term ramifications on our supply chain.
When COVID-19 hit and the supply chain “broke,” why did it break? Because no one had any “upside” inventory to support the need for unforecasted demand inside of lead time. Customers were clamoring for manufacturers to simply “turn on” or build factories to support this unforecasted demand and many were asking as to why the distributors did not have more product on their shelves.
We will never learn, will we? But here we are again, looking to take margin away from the company to our left and right in the supply chain and to demand lower prices which then limits their ability to fund unforecasted inventory in the supply chain.
We need to try to take the long-term approach. It doesn’t help that Wall Street forces public companies to look at business on a 90-day horizon which forces public companies to do the yin and yang every 90 days. Wall Street also forces our publicly traded suppliers and channel partners to fight each other while customers are looking to us to right the ship, all while demanding lower prices.
A new and perhaps naive approach is for each one of us to ask the company above and below us in the supply chain for their help and guidance on preventing the supply chain disaster of the COVID-19 period from happening again. Ask, “What do you need from us?” Perhaps allow them to make a bit more margin on our business to then help fund new factories, unforecasted demand and shorter lead times. Build a true partnership based on mutual respect and trust, and not just on price alone.
Try it on one of your supply chain partnerships and see what they say. What harm can it do? You may end up positioning your company ahead of the rest of your competitors when times get tough again. It’s worth a try!
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