From everything I am reading, executives are taking a hard look at AI, automation, and eventually robots to help run the business and improve margins and “Sales per Employee” numbers.

The Distribution Strategy Group’s 45-page report provides an overview of where distributors are in the evaluation process and outlines individual steps to move forward.

•             63% in the exploring stage.
•             27% are cautious observers.
•             43% actively investing.
•             One distributor can be included in multiple categories.

Virtually all distributors now recognize AI as critical to business success and a top priority for growth. A dramatic mindset shift from just a few years ago.

Early Adoption is reporting big performance improvements

As of today, at least 61% of distributors and related sectors plan to use autonomous AI systems. Expect big changes by 2028.

• A small percentage is actually fully installed.
• Survey indicates that the Performance Gap and the ability to catch up are narrowing. By 2027-28, the performance gap will become insurmountable.
• Smaller distributors can leapfrog larger competitors.
• Obstacles at this time are. Skill gaps, Change Resistance, Budget concerns, and Incomplete data.

Leadership gaps

These are comments from just the first four pages of the report. 40 pages to go, and I will cover them.

The ELEPHANT in the room for some of you is the PERFORMANCE GAP issue, which I must have mentioned at least 20 times over the last couple of years. A bad outcome can result from “Doing Nothing,” as noted above, or from doing something that requires a major investment, which, because of installation problems or poor planning, fails to deliver the AI-related advantages. In either case, the value of your company presently will be reduced to what your balance sheet is worth, net of any debt on the books. In other words, worth net book value, which is substantially less than what it is worth now at some multiple of EBITDA or Free Cash Flow.

And here we go again. If you are near retirement age or lack the capital to invest in these changes, you should investigate how to transition out of the business at current value. NOW!

There are many avenues available to you, and if you wish to discuss this process, give me a call, and we can discuss options (at least 3 or 4).  I have a list of professionals I work with regarding taxes, equipment valuations, legal documents, etc. Done this many times and know the drill.

On the other hand, this is a perfect opportunity to expand your current operation by rolling up those dealers not wanting to venture into the AI adventures. There is private equity out there looking for a home. Interested? You can call me as well.

Another topic to think about is the type of equipment and equipment/robots or some combination thereof that will be purchased by manufacturers and wholesalers to use in sync with their shop and warehouse technology. There seem to be numerous options for humanoid models that can walk, run, and move things, etc.

What you don’t want to do is wind up with used units and rental assets that will be hard to sell 3-5 years from now. I have to think that customers are going through the same thought process, and don’t want to wind up with used units worth less as a percentage of the new price in 2026.

I can see customers wanting to rent more or asking for an RPO (Rental Purchase Option), deal to minimize their risk. Some surveys I saw recently regarding construction equipment indicate these options are requested more by customers. Dealers are being asked to increase their rental units rather than purchase new units for inventory. I know that last month’s issue included a market analysis stating that all markets will be a “go”. And I can agree with that, as long as the AI, Automation, and Robots upgrades are installed on shop floors and in warehouses. But will the equipment required for these new systems match what you are buying this year and next? Or what customers are buying this year or next year?

Let’s discuss something more exciting.

TARIFFS! 

What a mess. I am writing this the day after the Supreme Court issued its ruling. All I could think about was the mess that would be created if they had to refund those who paid them. And, of course, they have to be paid back. (LOL with that one).

So, there I am, sitting in my office, listening to the tariff news and wondering how they will ever get around to refunds, if need be. And lo and behold, a gentleman appears on Squawk Box, stating he has the import and related tariff data for all inputs. The company name is FlexPort. It uses a platform that coordinates global logistics from the factory to the customer’s door. CAN YOU BELIEVE THIS?  I thought some of you may need help if you are looking to issue refunds and/or have to return refunds to customers. And I hope none of your tariff sales were collected on items without a tariff… could get expensive.

But the best part of this day was getting up at 6 am to watch the 7 am Hockey Game. What a game!

About the Columnist:

Garry Bartecki is a CPA and MBA with GB Financial Services LLC, and a Wholesaler columnist since August 1993.  E-mail [email protected] to contact Garry.