MDM NEWS UPDATE: January 3, 2008

• Construction Spending Up Slightly in November
• Manufacturing Contracts in December
• Forecast: Manufacturing Flat in 2008
• Berkshire Hathaway Buys Majority of Manufacturing Conglomerate Marmon Holdings for $4.5B

Planning

SUCCESSION PLANNING FOR DISTRIBUTORS: WHAT'S NEXT?
Over the next five to seven years, distributors will see quite a few owners in their 70s and 80s, many of whom will sell the business for estate reasons. But even if you're not in your late years, it is still critical to plan for the unforeseeable that could leave the business on unstable ground. Succession planning is also about preparing for what happens at retirement. One fluid power distributor summed it up this way: "The earlier you can start the process, the better." This article is an introduction to succession planning and why it is important. More ....

CREATE CUSTOMERS FOR LIFE
Bearing Service Inc., Livonia, MI, has capitalized on its customers' needs for maintenance training. LeRoy Burcroff, vice president for sales, writes in this article that distributors sometimes have to dig for those opportunities. For example, Burcroff visited a customer that printed lottery tickets, and took a tour to learn more about how things worked. He stopped to talk to a press operator, who was replacing printing rolls, and determined that the operators were installing the bearings incorrectly and had been for the past 15 years. So Bearing Service did a training session with the operators, and eliminated the excess downtime that was occurring everytime they had to replace the rolls. "Training the operators how to do the job correctly did mean we lost bearing sales," he writes. "But we now have a customer for life." More…

MINIMIZING SURPLUS INVENTORY
It's easy for distributors to fall into the habit of not thinking about surplus inventory until the end of the year. IBT's Larry Brand and Rex Davis write though that the bearings and PT distributor has gotten smarter about the process. First task: to minimize surplus inventory by redistributing product to where it was most needed. But IBT found SOME items were not in demand at other branches. IBT was able to work with vendors that have well-established ways of handling surpluses. But for those products that vendors wouldn't take back, IBT turned to other companies through services like Trading Block on Timken's PTPlace.com. IBT also experimented with contacting past customers to sell them the product at a lower price or by sending it to other countries. More ....

TAKE CONTROL OF PRICING: MAXIMIZE YOUR PROFITABILITY
As customer bases shift, competition intensifies and commodity prices seesaw, it’s more crucial than ever for distributors to maximize profitability by magnifying the value they provide for their customers and not competing on price alone. Increasing prices by 1 percent without hurting volume can improve profits as much as 11 percent. “If a sales force is out negotiating deals, there’s very little control. They come back and say, ‘I’ve got a deal at $90. I know our price is $100, but if we don’t give them $90 we won’t get the deal.’ And everyone feels as if they are being held for ransom,” says Jim Saunders of Pricing Solutions Ltd., Toronto, Ontario. More ....

STRATEGIC PRICING: CREATE A VALUE-BASED APPROACH
If you are implementing a pricing structure from scratch, and want to unfreeze an organization from its old habits, plan for at least 12 months of work to "make it stick," Mike Marks and attorney Gene Zelek told participants in a recent MDM Audio Conference on the subject. “It’s more than just coming up with a new price sheet and imposing it,” says Marks, a principal in Indian River Consulting Group. More...

Legal

HIGH COURT LOOSENS RULE ON MINIMUM RESALE PRICES
The U.S. Supreme Court has made it easier for manufacturers to set minimum resale prices. At the end of June, the Justices ruled in Leegin v. PSKS, Kay's Kloset that challenges to minimum resale prices will be judged on a case-by-case basis by the "rule of reason," a more flexible legal doctrine that requires the challenger to prove price-setting was anticompetitive and did economic harm. "Per se" was a much stricter enforcement that assumed that minimum price setting agreements were on their face illegal, regardless of circumstances. More...

10 THINGS TO CONSIDER IN A NON-COMPETE
After training and grooming a green employee into a highly productive and valuable member of the team, employers are frequently frustrated to learn that the employee is now their chief competitor. More frequently, employers are asking or requiring employees to sign non-competition agreements – employment contracts that restrict the rights of employees to set up shop across the street, or take your trade secrets with them when joining a rival.

If you are considering establishing a non-competition agreement for your employees, here are 10 things you should think about. More...

Technology

MDM TECHNOLOGY CASE STUDY: WEIGHING THE COST OF A WMS
This marine supplies distributor started to become frustrated when it would let down a customer by sending the wrong item or when its inventory records indicated an item was in stock, but in reality it was not. “You can build up a lot of goodwill with your customers, but you can burn through it in a hurry by not servicing them properly,” one of the owners says. The distributor was making a call to a customer at least once a week to apologize for sending the wrong item or the wrong quantity.

The distributor changed its thinking on the cost of a warehouse system: “What would it be worth to our company if we were able to hire someone who would come in and improve our inventory and picking accuracy as well as our throughput in the warehouse? That would be a pretty valuable employee and we would be willing to pay for that," the owner tells MDM. More...

TECH CASE STUDY: OUTSOURCED BILLING
In the mid-1990s, Mayer Electric Supply, Birmingham, AL, prepared and mailed its invoices and statements in-house. The distributor had employees who printed the mailings on high-speed printers at night and used a machine to fold and stuff the mailings. It also maintained a Pitney-Bowes postal machine. The cost was high, so Mayer started looking at outsourcing its paper billing. The electrical distributor, which serves mostly the Southeast U.S., eventually found a provider that could fit its needs. It is moving toward electronic invoicing for all its customers, and automated signature capture when a shipment is confirmed. More ....