NAHAD panel: Industry must embrace change

COLORADO SPRINGS, Colo.—For an industry that has been in relatively good health in recent times, participants in a panel discussing the fortunes and future of the hose sector all said that those involved in the business must be ready to embrace change.

While touching on a variety of topics, the four—representing a hose producer, couplings maker and two distributors—said what works today in business won't necessarily work in the future. They participated in the panel, “Critical Issues Facing the Hose Industry,” during the recent NAHAD annual convention in Colorado Springs.

Don Fritzinger, president of Singer Equities Inc., which operates more than 35 distribution locations under a variety of monikers, said if he looks back at his 36 years in the hose industry, the major markets now are completely different from 1980. Strong markets for industrial hose that have fallen on hard times in recent years include such mainstays as steel, coal and—most recently—the oil and gas sector.

But then there are applications such as food and beverage that remain strong, including new ones such as bottled water, a sector that he said largely was non-existent when he started in management years ago at Goodall Rubber.

“I've worked in distribution for my whole career and seen a lot of changes that have taken place over time,” Fritzinger said. “First there is a little concern on the part of those owning businesses or running departments. But change isn't that hard because we're already living it.”

Andreas Gerstenberger, executive vice president and global head of ContiTech A.G.'s global industrial fluid systems business unit, attended parent company Continental A.G.'s annual executive convention earlier this year. Conti was celebrating its most successful year in its more than 140-year history, yet the CEO chose as a theme that if the firm continues to operate in the future the way it does now—in what would be termed a prudent business model—then that likely would be detrimental to financial results five to 10 years in the future.

Conti as a company largely has been focused on automotive but has made moves in recent years to boost the percentage of its industrial business, including its purchase in 2015 of Veyance Technologies Inc.

“Although the economies are growing, if we continue to do just what we have done, I think in our business here we will have a tremendous challenge in the next five years,” Gerstenberger said.

One advantage the hose industry has is there will always be an inherent need to transfer fluids.

“We are all somehow part of this,” the ContiTech executive said. “Maybe fluids won't be so much oil in the future, but there will be gas, water and beverages. At ContiTech, we also traditionally were focused on those industries which were growing, which were oil and gas. Now all of a sudden we are being forced to wake up and say, "If we don't diversify very quickly, we have a problem.' “

Jeff Scheininger, president of Flexline, a single location distributor in New Jersey, said business owners have to look far out in the future—five to 10 years—to determine a proper course of action.

“The amount of change that we are seeing in technology, in work force capabilities, in staffing capabilities and in government regulations is such that we need to be proactive and change our organizations not based on what we will see in 12 months, but what we'll see in 60 to 72 months,” he said. “I think our industry has evolved. We've seen a ton of consolidation. We've also seen the rise of the customer as the central driver of our industries. To that extent, that's a huge change.”

As a small business operating in an industry that has its share of giants, Scheininger said Flexline has diversified by becoming a multi-channel market company. “I also think as independent entrepreneurs in business, we tend to bring a greater and more productive use to the assets that we deploy than necessarily the larger organizations,” he said.

Baby boomers still make up the predominant part of the work force in many traditional industries. but company owners and executives increasingly have to figure out how to attract and retain the best of subsequent generations such as Gen-X and Millennials.

Fritzinger said it used to be you'd look for a good person to bring over from a competitor. But what that often led to was a group of “industry retreads” who went from business to business without adding any value. In the current day, he said he is talking to staff about training new people and succession planning.

“In our industry there is a lot of tribal knowledge,” he said. “You do need to know something about a product. But you need do know something about the occupations, meet with people and ask a lot of questions. You have to find out what type of problems they have that we have the potential to solve.”

Hiring still remains a risk. And while someone may have a lot experience, Fritz-inger said it has to be proper experience. “It takes 10 years to get 10 years of experience,” he said. “But you also have to guard against making sure he does have 10 years of experience, and not one year of experience 10 times.”

Tom Paff, president of Campbell Fittings Inc., said he has found that it's the youngest in the work force who are the sponges that are constantly wanting to learn more, along with being less jaded than many veterans. “This is a bit of an oldish industry,” he said. “Millennials like change. They like to see things change all the time.”

Gerstenberger said that as important as it is to have a sales force that can sell products, it's equally important for company leaders to be able to sell the hose industry to young professionals—particularly in an environment of relatively low unemployment. “We have to figure out how to get the best people out of the market,” he said. “How do we take our business, which is a little bit traditional, and make that attractive to the new generation.”

Scheininger said it's a challenge the entire industry faces. In speaking to younger professionals in the industry, he said they're probably the least challenged in terms of bundling the firm's services and making sure “that we're putting the engineering time and solutions into those applications that require those customers to pay for it. ...

“Their uptake of information is such that they are gleaning a lot from a lot of different modalities. As a model for training, what our fathers did with us doesn't stand up as well.”

The panelists all said keeping up to date with technology is imperative, with speed to get information and respond one common theme.

Scheininger said he spends a good deal of money to drive technology throughout his organization, and basically has tried to ignore return on that investment. “You can't monetize that,” he said. “What you can monetize is speed. I try to keep up with the big boys, and I try to get insights. You want to be able to see around the curve (to what is coming next). What data gives you is a mirror to stick out there.”

Fritzinger emphasized that at the end of the day, speed wins and that good information is vital in making decisions—from internal data for inside sales to purchasing to supply chain management. Technology now can provide information on customer buying habits, including when they last purchased a product, when was it tested and, if not, when will it need to be tested.

“You can't be in a position where you're going on your gut,” he said. “You need market data information. In the old days you would hire a sales person, put them on the road, hand them the keys to the car, and tell them to go drive around industrial parks and see what they could find. That's how unsophisticated it was.”

Paff said Campbell Fittings has taken internal steps to attack communication with customers in an efficient manner. “You've got to provide information that's working, and we've got to make sure it's going to the right people. You don't want the same message going to everybody. You've got to make sure customers are getting the information they want, not what we're sending around to everybody.”

Gerstenberger said when he joined Continental in 1992, people being hired were chemists, chemical engineers and production planning staff. “In the last five years, the corporation has hired thousands of software engineers—not mechanical engineers. These software engineers are able and willing to work together with mechanical engineers.”

He advised distributors and manufactures to invest in technology that isn't traditional such as hose and couplings, but know-how that can make their offerings unique and attractive to customers. He mentioned such tools as predictive maintenance for hose, along with exploring “smart factories” and further automation.

Looking at the future, Scheininger said it's imperative to him to find a way to decrease the amount of time he spends on human resource functions and regulations. “I calculated on a light month I'm spending 15 hours of my time and on a heavy month as much as 25-30 hours of my time on these, which adds no value to my customers.”

He is working with an outside provider on HR platforms and solutions that can help him collapse that time so he can concentrate on analytics, customer service and keeping up with changes in the industry.

Gerstenberger said any changes coming up can be tackled with what he sees as a mentality in the U.S., where the glass is always half full, which is different than European attitudes. “If we work on those together with this American optimism and entrepreneurship, and we are willing to change and adjust, we'll be OK,” he said.

Paff said he, too, is optimistic. “We've been through these ups and downs,” he said. “I see good things going forward. This industry collectively is not oil and gas; that's part of what we do. There are a lot of segments among parts to our businesses that are feeling a bit of oil and gas hangover right now. That will pass and we'll get back to what we really do well.”

Fritzinger said managers and leaders are responsible for guiding the “ship around the icebergs. We don't necessarily know where those next icebergs are going to come from in the next few years,” he said, “but the fundamental part of our business is we're in the people business. ... At the end of the day, I'm bullish. I'm one of those guys who's at the end of his career. The changes in things that are taking place out there are for the better. They will continue to speed up, and we will have great years ahead.”