Nassim Nicholas Taleb, who wrote his 2007 bestseller, The Black Swan: The Impact of the Highly Probable, to help readers prepare for highly improbable and unpredictable events, is probably amazed at today’s confluence of earth-shaking challenges — the lingering impact of COVID-19, the war in Ukraine, a shaky economy recession and raging inflation.
The title of Taleb’s book comes from the ancient belief that all swans were white, a theory disproved in the 17th century by the discovery of black swans in Australia. According to www.wikipedia.com, that discovery came to represent the existence of the improbable, and the fact that just because something is outside our realm of experience doesn’t mean it can never happen.
Taleb, a one-time Wall Street trader, uses the lessons of the black swan in his book to support his thesis that business professionals are blind to randomness, particularly the events that represent large deviations from what they consider the norm.
While you can debate if any or all of today’s geopolitical, economy and world health challenges were truly improbable or unpredictable, there’s little question that together they are some of the biggest economic and geopolitical obstacles we have seen in a generation. Three years ago, I don’t think anyone expected the worst pandemic in a generation or thought Putin would invade Ukraine. And back then, who really thought $4 gasoline, copper prices stubbornly above $4 a pound, +30% price increases for all sorts of electrical products and lead times for switchgear extending out to 12 months would be a reality in 2022?
The good news is that many if not most electrical distributors, manufacturers and reps proved they can survive and even thrive despite the black swan challenge of the pandemic when it hit in 2020 by adapting to pandemic-induced restrictions and hybrid officing strategies. It’s incredible that not even two years after navigating through the worst of the pandemic, the electrical market has three more huge challenges to overcome — raging inflation, astronomical price increases and outrageous lead-times.
Electrical distributors are once again proving they are more than up to the challenge. As you learn in this issue’s Top 150 cover story, many of the nation’s largest electrical distributors are not only coping with today’s historic price increases and delivery issues, but have figured out how to gain market share.
For example, Dakota Supply Group, Plymouth, MN, grew its market share last year by investing in inventory in early 2021, according to John Gearman, the company’s Electrical Segment manager. In the utility market, Johnny Andrews, chief operating officer, TEC Manufacturing & Distribution Services, Georgetown, TX, said his company grew in 2021 because of its “sole-source alliances with electrical cooperatives and municipal customers, and having an inventory positioned for service to our customers (low stock-out percentage) and not primarily around high turns.”
James DeRosa, general manager, YESCO Electrical Supply, Columbiana, OH, said his company’s growth came from having product on hand from enhanced purchasing in 2020 and a new GSA (General Services Administration) contract with the federal government that’s bringing in orders from the USDA, U.S. Navy and other federal agencies.
The scale of today’s price increases and lead times for electrical products is indeed mind-boggling, but these challenges will eventually subside. They won’t go away as fast as anyone would like and the size of these increases is indeed larger than anything in recent history, but veteran executives in the electrical wholesaling industry have seen them before.
Savvy industry executives are using the “what-if” contingency plans they developed for crisis situations to help manage their businesses. As always, it comes down to doing the best job possible of servicing the most basic distribution service responsibilities — getting the right products to customers in the right quantities when and where they need them at a reasonable price.