Economic Forecast – Distributors

Distributors Strategize How To Make the Most of 2023

By Nicole Needles

The following are responses from MHEDA distributors across North America about what they forecast for 2023. They share their thoughts on the year ahead and the obstacles and opportunities they foresee playing important roles for both them and the broader economy.

Distributors have split down the middle regarding how 2023 will be. On the one hand, sales are predicted to either be steady or go up for most distributors. On the other, threats such as inflation still loom, making it difficult to predict which of the two will gain the upper hand. It’s safe to say that distributors and suppliers are holistically wondering what this year will hold for their companies and the industry.

Kathy Frank, SVP of Finance and Human Resources at Zion Solutions Group, LLC, said, “We are looking forward to continued growth in 2023.” They are expanding their business this year with new product lines and expect sales to increase. The only hindrance to this would be “an unexpected, dramatic event,” which could mean inflation, a recession or another economic flux. An emerging niche market Frank has noticed is the investment in new technology to support the expediting of goods-to-person.

Michael W Vaughan, CFO of Thomspon & Johnson, is also of two minds about the good and bad coming for the year. While sales for the company are expected to increase and new product lines introduced, “Manufacturer delays will continue into 2023 and rentals are anticipated to continue strength. Service demands remain robust,” Vaughan said.

In the same boat is Jerry Weidmann, President of Wolter Inc., who predicts sales for the company will be up, and also have expansion plans via acquisitions and new product lines. However, labor shortages and inflation are a factor to consider. “Inflation will drive revenue increases and cost or wage increases,” Weidmann said.

Nate Storey, President of Storage Solutions, Inc., expects business to be level and has a few concerns and bright sides: “Lead times have come down for ES & SH distributors. That is helping. The lower costs of goods are not helping us hit our overall rev and GP dollar goals.” Some of the most significant factors that Storey believes will be impactful are the “deflation in steel prices. Lack of demand growth in the industry per ITR report.” Storey also points out that automation is a significant niche market that has been around for a while but is gaining new popularity. Overall, Storey says, “Business is out there. Despite the cool-down in growth, there is still plenty of spending. Invest for the future, and we will be back to growth in the back half of 2023 into the next few years.”

In addition to various shortages and inflation, many are concerned about lead times and orders being severely backed up. Thomas Duck, VP of Sales at Florida Forklift, says, “The shortages and inflation, we believe, will impact everyone in our industry. Lead times are still at record lengths.” The company is still hoping to expand to new locations and keep its revenue up.

MHEDA members have learned in the past few years how important it is to prepare for government, public health and economic situations – or the intermingling of all three – and ensure that processes are in place. When the time does come for shifts to be made due to influences outside of business control, having set plans is helpful, but so is knowing how to react and react excellently.

As said by Sandy Stephens, EVP of Solutions at Hy-Tek Material Handling, LLC, “Enterprise consolidation in response to recent and emerging macroeconomic conditions will create growth opportunities for intralogistics solutions providers.” Specific reactions or lack thereof can help or hurt businesses and the whole industry. Planning, reacting as well as staying consistent are the three facets that distributors agree are the most crucial for keeping up with the ever-changing economic climate.

Scott Hennie, President of MH Engineered Solutions, says, “Equipment lead times and customer speed to decision continue to extend the project life cycle and cash flow. Maintaining a strong project backlog and opportunity funnel continues to be critical.” Robert Burkhead, General Manager and VP at Ring Power Corporation, is in the same boat with continuing on the momentum that the company has built. They are “focused on improving market share for all products and services to continue growth.”

At the very least, distributors have a lull to take a step back, plan for the year and evaluate where their business stands. Bart Bates, CEO of B&H Industrial Services, says, “We have started to see some slowdown in new and used equipment purchasing over the last couple of months even though it is still strong compared to years past.” Speaking of slowing down, some are still concerned about labor shortages and supply chain issues, and others predict slowing down their business. Even with the slowdown, it may not be enough.

Jim Ripkey, President of Industrial Equipment at Hy-Tek Intralogistics, said, “Material shortages and supply chain interruption should stabilize a bit more in 2023, but far from normalizing to traditional levels.” With the hit the economy has taken recently, it is safe to predict that it may take a while to stabilize, if it does at all.

From the perspective of a CFO at Mid Atlantic Industrial Equipment LTD, “I believe there will be slight growth in the aftermarket with a substantial downturn in the equipment sales side,” said David Lang. Lang believes the drop on the equipment sales side will be due to customer hesitancy to upgrade their equipment, in addition to being adversely affected by the growth in the aftermarket. Especially in the dock and door and industrial truck sectors, this may bring sales down despite business expansions and gaining a little economic rhythm.

Politics and the economy are intertwined. Whatever happens in the landscape of one will affect the ecosystem of the other. Many distributors believe that the subsequent turnover of power in the government will bring more changes. As of now, things are up in the air and are leaving businesses wondering what they can expect next. The divide between those who are happy or unhappy with the government makes predictions even more blurry. Jim Radzik, President of Storage Equipment Systems, Inc., says that the “political landscape makes things uncertain.”

There were a few other trends that distributors foresee happening shortly. Automation was widely regarded as a vast emerging market. Others also mentioned they had seen an increase in outsourcing work that requires physical labor rather than hiring more people or having current employees perform those tasks.

There was a wide variety of concerns and factors that distributors believe will impact their business in one way or another in 2023. A few were concerned that there needed to be more people with the correct qualifications and more people entering the workforce. This concern is present in adjacent industries as well, such as construction. More often than not, incoming generations need to be taught about jobs in the material handling industry. This gap adversely affects labor shortages in the industry. A few businesses felt that their growth in previous years was due to a rare “up” in the economy and is not sustainable for the coming years.

Whether that is due to business slowing down or inability to keep up with current clientele and orders, rare growth and waning might be due to outlying factors. Speaking of clients and orders, the high volume of both of these things was widely brought up by distributors and either concerned them or was an exciting prospect, depending on the business’s standing. At the beginning of the year, diesel prices were extremely high. This hike is still the case for some, or the detriment was enough to last into 2023. Similarly, many were concerned about shipping costs in tandem with the diesel prices.

Overall, time is the only way to know what will happen with the economy, how MHEDA members will be affected, and what new trends will emerge in 2023. All of the trends, issues and benefits are each likely to appear for at least a short time in the coming year.

About the Author
Nicole Needles is Editor of The MHEDA Journal and a graduate of the University of Florida School of Journalism.