It’s not necessarily the miner who finds the gold

By Bill Wade -- Industrial Distribution, 2/7/2008 9:38:00 AM

I have read with interest (and some amusement) various business commentators trying to unravel the Gordian knot of world trade … especially the so-called “China Syndrome:”

• What will be left in the United States once everything is finally manufactured in China?
• With all that investment in Asia, who will finance our national debt?
• With the Euros taking over the heavy equipment OEM, where do independents fit?

The great stampede to the Far East has a number of similarities with a commercial explosion that happened in the infant United States over 150 years ago: the California Gold Rush.

The biggest similarity may end up being the simple fact that it was not the gold diggers that made the money in the Gold Rush. Similarly, it won’t be the outsourcers who end up with the big payoff this time.

The first millionaire created in 1849 in California was not James Marshall, the luckiest lumberjack in the world, who first saw a glimmer at the bottom of the American River. Nor was it any of the 80,000 prospectors and miners who swarmed tiny Yerba Buena (which was promptly renamed San Francisco by the mayor.)

The richest man in California was a distributor named Sam Brannan, who created overnight a near monopoly on picks, shovels and pans.

He was followed in quick succession by others who understood the critical nature of serving a local market and its rapidly changing needs. Characters like bankers Henry Wells and William Fargo, dry goods distributor Levi Strauss and butcher Phillip Armour realized the power of local market access.

Even a heavy-duty wagon maker and wheelwright named John Studebaker was able to respond to entirely new customer demands.

Just as East Coast businessmen had to sit on the sidelines during this creation of West Coast wealth (and, some would argue, separate culture), no one in China, Germany or Brazil will ever have the detailed access to the market that today’s independent distribution specialists enjoy.

The industrial supply chain is as totally dependent on that “last mile” access as any cable or phone provider. Simply stated, independents know where to find the gold.

But just as in 1849, this exclusive access is threatened by technology. Back then it came in the form of Western Union and the Central Pacific Railroad.

Broad information flow in the pages of the new San Francisco newspaper CALL (which featured reporting by some guy named Samuel Clemens) spread the word of expanding business opportunities. Hardly the Internet, but it was effective in communicating the details of new market opportunities.

As fast as things change now, they can’t be outdone by the Forty-Niners, who saw their city burn to the ground six times in one year, only to re-sprout better and bigger each time.

Major structural change may be at our front door. Now is the time for independent distributors to take stock of where they stand—not in meeting today’s needs using mostly yesterday’s tools—but for a future featuring worldwide supply chains, Internet-based everything, “over-teched” equipment and trained personnel shortages.

Now is a great time to start thinking about everything you and Sam Brannan might have in common.

Bill Wade is the managing partner of Wade & Partners, an Elgin, Ill.-based consulting firm specializing in the automotive, heavy vehicle and industrial aftermarket. He can be reached at (847) 760-0067 or BWade@wade-partners.com.