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MDM BLOG: MANAGING THE LOSS OF SALES IN A DOWN ECONOMY
"They try to lower accounts receivable and reduce inventory to make
up for selling less. Inevitably that leads to sales declines getting
even worse. Back orders go up. Customer service goes down and what might
be a 10% sales decline becomes a 15% sales decline." While cutting
inventory and accounts receivable is a normal reaction, Bates tells MDM
that the moves are compounded by the fact distributors don't have much
cash. The answer is making it up on the gross margin. Most distributors
- even if they do a good job on gross margins - have inefficiencies they
can address. Now is a good time to examine your pricing practices.
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M&AIDG TO ACCEPT LUTHER KING CAPITAL MANAGEMENT'S BIDAfter a couple weeks of going back and forth, Industrial Distribution Group has announced it will accept Luther King Capital Management's bid of $12.10 per share, or close to $136 million. Platinum Equity, the other player left in the game, told IDG it would not match or beat LKCM's bid. LCKM already owns 15% of IDG shares. This transaction will take the industrial distributor private. IDG was formed with an initial public offering in 1997 with the roll-up of nine strong regional companies. The company had annual sales of $250 million, and by the end of 1999 had growth through acquisition to 13 hub operating companies and 65 locations. As MDM Publisher Tom Gale said in his recent Perspective, "IDG, unlike many other roll-ups, was a survivor. The three bidders in this deal are either direct competitors or a significant owner of IDG. In the tightening industrial and integrated supply markets, we are seeing how these assets are being valued by these strategic bidders." More...
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UNLOCK NEW PROFITS WITH FORECASTING & INVENTORY
PLANNINGAre you finding that your current systems lack the speed, flexibility and responsiveness to manage demand in an increasingly complex supply chain environment? Discover how distributor are using demand planning to improve forecast accuracy by 20-40%, increase on-time deliveries up to 20%, and slash inventory investments and increase turns by 15-20%. Find out where your company fits on the Demand Planning Maturity Model and discover strategies and technologies you can apply to improve forecasting and inventory management. Click to download the Demand Planning for Distributors white paper. | ||
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EconomyMDM BLOG: WADING THROUGH 2008Yesterday’s numbers weren’t surprising to most distributors, but they reinforce that this year is about doing some hard work to position and strengthen the business, says Publisher Tom Gale in this blog. GDP rose at a 0.6% annual rate in the first quarter of 2008 to mirror the fourth quarter of 2007. The Federal Reserve lowered its key interest rate by one-quarter percentage point to 2.0 percent, the lowest since November 2004. What the numbers aren’t saying: Certain markets are beginning to soften in the last 30-60 days for some industrial distributors, but sales levels still exceed expectations set last fall. Products bound for end-use markets in energy, export and infrastructure are staying strong. There is no question that the weak dollar is keeping industrial and niche parts of construction and equipment markets strong. The concern now, which the Fed addressed yesterday, is whether consumers will stop spending. No one knows if the tax rebate will act as enough of a lubricant in the second and third quarters to continue to soften the inevitable impact on industrial markets. More...
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CanadaTHE YEAR 2007 WAS A MIXED BAG FOR CANADIAN MANUFACTURERSSoaring industrial product prices and robust demand for resource-based goods offset declines in some of Canada's key durable goods industries in 2007, according to a Statistics Canada report. Manufacturers posted a modest 0.4% increase in sales to $613.4 billion. Employment fell by an estimated 55,300 jobs and total hours worked declined 2.9%. However, labor productivity in the sector increased 1.9% last year, nearly four times the gain for the economy as a whole. Operating profits also increased. But manufacturers faced several major challenges, including the rising exchange value of the Canadian dollar and the weaker export market in the U.S. The Canadian dollar surpassed parity with its U.S. counterpart by late September, making Canadian-manufactured goods more expensive south of the border. In addition, events in the U.S., such as the ongoing sub-prime mortgage situation and declining consumer confidence, weakened demand for Canadian-made goods in this market. However, exports to other countries increased. More...
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