May 2008 - Modern Distribution Management

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May 2008

Preliminary Estimates: U.S. GDP Growth at 0.9% in 1Q

Real gross domestic product -- the output of goods and services produced by labor and property in the U.S. -increased at an annual rate of 0.9 percent in the first quarter of 2008, according to preliminary estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.6 percent.
 
The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 0.6 percent.
 
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, exports of goods and services, federal government spending, and private inventory investment that were ...

GDP Growth ‘Muddling Along Above Zero’

U.S. Gross Domestic Product preliminary estimates came out today (Thursday), and they are higher than previously thought -0.9% growth in the first quarter as compared with previously estimated 0.6% growth for the quarter. (The government releases three estimates for each quarter -Advance, Preliminary, and Final.)
 
A Q&A feature by Knowledge(at)Wharton (a service of the Wharton School at the University of Pennsylvania) recently featured finance professor Jeremy Siegel and management professor Witold Henisz talking oil prices and what's next for the U.S. economy. Here's what they had to say about their prognosis for the economy as a whole:
 
Siegel: I just did some kind of 'back of the ...

New Orders for Manufactured Goods Fall in April

New Orders
New orders for manufactured durable goods in April decreased $1.0 billion or 0.5% to $214.4 billion, the U.S. Census Bureau announced. This was the third decrease in four months and followed a 0.3% March decrease. Excluding transportation, new orders increased 2.5%. Excluding defense, new orders decreased 0.3%.
 
Transportation equipment, down three of the last four months, had the largest decrease, $4.8 billion or 8.0% to $56.1 billion.
 
Shipments
Shipments of manufactured durable goods in April, up following two consecutive monthly decreases, increased $2.5 billion or 1.2% to $212.2 billion. This followed a 0.9% March decrease. Computers and electronic products, up following two consecutive monthly decreases, had the largest ...

MAPI China Trade Analysis: Surplus for Manufactures Surges

China's trade surplus declined by 8%, from $62.9 billion to $58 billion, from January-April 2008 compared year-over-year with 2007, the result of higher oil prices and other crude materials imports, yet the surplus for manufactures surged by 34%, according to a Manufacturers Alliance/MAPI analysis of Chinese trade data for the first four months of the year. China's worldwide trade surplus in manufactured goods is on track to rise from $444 billion in 2007 to $586 billion in 2008.
 
Ernest H. Preeg, MAPI Senior Fellow in Trade and Productivity and author of India and China:  An Advanced Technology Race and How the U.S. Should Respond, also notes that the Chinese surplus was down by 2% with the U.S. but rose by 26% ...

Distributors Tackle the Rising Cost of Fuel

Nearly a third of distributors in a recent survey by Channel Marketing Group and Allen Ray Associates say that increased fuel costs have significantly impacted profitability" because they can't pass it on to customers. Another 37% said fuel costs somewhat impacted profitability, as most of the increase cannot be passed onto customers. About 22% said the fuel costs have had limited impact, as they have absorbed some but passed most onto customers.
 
About half of respondents had calculated incremental costs, seeing an increase of 25%-40% over prior-year expenses.
 
How are they addressing rising costs? More than half are absorbing them. Another 25% say they would like to add a surcharge, but because competition hasn't, they are afraid they will lose business. About ...

EnPro Acquires Air Perfection

EnPro Industries, Charlotte, NC, has acquired Air Perfection, Inc., Dixon, CA. Air Perfection audits, sells and services compressed air systems. Air Perfection distributes compressed air products, including those made by Quincy Compressor, an EnPro Industries company, and it will be operated as a unit of Quincy.
 
Air Perfection has 44 employees at its Dixon facility.
 
EnPro Industries, Inc. is a supplier of sealing products, metal polymer and filament wound bearings, compressor systems and components, diesel and dual-fuel engines and other engineered ...

RBC Bearings Sales Up 8% in Fiscal 2008

RBC Bearings Inc., Oxford, CT, international manufacturer of highly-engineered precision plain, roller and ball bearings for the industrial, defense and aerospace industries, reported sales for fiscal 2008 were $330.6 million, an increase of 8% from 2007. Excluding the impact of the decrease in the class 8 heavy truck market, sales rose 12%.
 
Profit for fiscal 2008 was $40.2 million, compared with $28.5 million in the same period a year ago.
 
Sales for the fourth quarter of fiscal 2008 were $92.1 million, a 13.7% increase from the fourth quarter fiscal 2007. Sales for the fourth quarter increased 15.7%, excluding the impact of the decrease in the class 8 truck market.
 
For the fourth quarter, the company reported profit of $12 million, compared with ...

Electroindustry Business Confidence Indexes Rebound

Following sharp drops a month ago, NEMA's Electroindustry Business Confidence Indexes (EBCI) for both current and future North American conditions rebounded in May.
 
The EBCI for current North American conditions, after tumbling to 27.3 in April, sprang back to 48. Though the rebound in the EBCI for future North American conditions was far less pronounced, the 2.5 point rise erased most of the previous month's loss and brought the index back to near its March level.
 
Meanwhile, current and future conditions indexes for the other three world regions included in the EBCI survey were generally down in May.
 
The Electroindustry Business Confidence Index gauges the business confidence of the electroindustry in Asia, Europe, North America, and Latin ...

Rexnord Core Sales Growth at 9.1% in Fiscal 2008

Rexnord LLC, Milwaukee, WI, diversified industrial company with platforms in power transmission and water management products, reported sales in the fiscal 2008 were up 47.6% to $1.85 billion, due to acquisitions. Core sales growth was 9.1%.
 
Power transmission fiscal 2008 sales were $1.34 billion, an increase of 13.2%. Core sales growth in PT was 9.3%.
 
Water management sales were $511.2 million; core sales growth was 8.6%.
 
Fourth-quarter sales were $502.3 million, an increase of 30.1%. Core sales growth was 8%.
 
Power transmission fourth-quarter sales were $372.6 million, an increase of 17.7%. PT core sales growth was 9.4%. Water management sales in the fourth quarter were $129.7 million. Core growth was 4.3% in this ...

Performance Food Group Acquisition Complete

The acquisition of Performance Food Group Company, Richmond, VA, by The Blackstone Group and Wellspring Capital Management has been completed. The transaction is valued at $1.4 billion.
 
Performance Food Group is being merged with a wholly owned subsidiary of VISTAR Corporation, a specialty foodservice distributor controlled by affiliates of Blackstone and Wellspring.
 
The newly combined company, known as Performance Food Group, is expected to have revenues approaching $10 billion and more than 10,000 associates.
 
As a result of the merger, Performance Food Group Company's common stock was delisted and ceased trading on the NASDAQ Global Select ...

ERIKS Will Own 95% of Econosto May 30

As of May 30, 2008, ERIKS will hold 95% of shares in valve manufacturer Royal Econosto NV. The distributor will buy the company for €8.21 a share.
 
Econosto has two divisions: flow and sealing technology (the production, sale and distribution of valves, gaskets, sealing products, hoses, couplings, instrumentation systems, chemical seals, etc.); and Comfort and Environmental Technology (production and sale of domestic and industrial HVAC and energy systems and services.)
 
ERIKS and Econosto will terminate the listing of Econosto on Euronext Amsterdam as soon as practicable in consultation with Euronext ...

Former Lawson Products Salespeople Plead Guity in Kickback Scheme

Former Lawson Products salespeople pleaded guilty at the end of last week to giving kickbacks to government employees, according to the Chicago Daily Herald. The case involved seven employees of Lawson or its subsidiary Drummond American Corp. and some of the government employees who bought from them.
 
As reported previously at mdm.com, sales agents were indicted on federal fraud charges, allegedly paying kickbacks totaling $140,000 to employees of some of their customers, including suburban municipalities, school districts, a non-profit organization and private businesses. They disguised the kickbacks as purchasing incentives. In return, the sales agents allegedly obtained higher sales commissions based on greater volume and prices.
 
Government employees are ...

Canadian Wholesale Revenues: Modest Rebound in March

Source: Statistics Canada
 
Canadian wholesalers reported a modest rebound in sales in March, helped by higher deliveries of building supplies and machinery and electronic equipment. However, the increase was not enough to prevent a second consecutive quarterly decline in sales.

Sales increased by an estimated 0.6% to $42.7 billion, recouping some of the 2.1% decline reported in February.

On a quarterly basis, wholesale sales fell 0.8% in the first quarter, following a 0.3% decline in the fourth quarter of 2007. First quarter sales were affected by a large drop in the motor vehicles trade group, which registered its fourth consecutive quarterly decline, as well as continued weakness in the beleaguered lumber ...

Competitive Advantage in MROP

Case Studies: Hard Dollar Savings in MROP
Case Studies: Soft Dollar Savings in MROP

The procurement of maintenance, repair, operating and production supplies (MROP) accounts for 20 percent of total spending in an organization, but consumes about 80 percent of the time, effort and expense in purchasing, according to The 20% Solution: A Practical Guide to Dramatic Cost Reduction in MROP Procurement, a new book by industry veteran Joel Roth. This article contains excerpts and case studies from Roth's book.


Roth says that very few organizations have analyzed and identified improvement potential in MROP procurement beyond price quotes. However, ...

Case Studies: Saving Hard Dollars in MROP

Case Studies: Hard Dollar Savings in MROP
Feature: Competitive Advantage in MROP

There are many paths to reducing "hard-dollar"invoice expenditures for MRO materials. Here are examples of some of those provided in The 20% Solution:
 
Special Negotiated Discounts -To negotiate the best deal, it is essential to understand the needs, problems and objectives of each party. Example: An earth products processor required special cartridge filters for its calcining and grinding equipment.

These filters were ordered 20 at a time, at a cost of $450 each, plus freight and emergency premiums due to long lead times and lateness in ...

Case Studies: Saving Soft Dollars in MROP

Case Studies: Saving Hard Dollars in MROP
Competitive Advantage in MROP

Purchase order costs include the entire procurement cycle: requisitioning, sourcing, placing the order, expediting, receiving, transporting, stocking, paying and so on. There are numerous soft-dollar savings that distributors can help their customers achieve, including bar coding, storeroom management, vending machines and electronic customized catalogs.

Potential cash flow and other improvements may very well exceed hard dollar savings potential. Here is one example outlined in The 20% Solution:
 
Consolidated Invoicing -The vast bulk of work performed in most ...

Go Beyond `Brochureware’ Online

Web sites are becoming increasingly important for distributors as a way to connect with customers and provide valuable information about products and services. This article looks at how you can build a simple but effective site that allows you to interact with and inform potential and existing customers.
 
Building an effective Web site is not about selling online. It's about providing another avenue for customers to connect with your company. So say experts in Web site development and optimization, as well as in the distribution industry.

Increasingly, Web sites are becoming more important to and expected by customers as they seek to learn more about your capabilities and potential fit as a supplier.
 
Go beyond brochureware"-using just a picture of ...

Robert C. Fernley of Association Management Firm Fernley & Fernley Dies at 85

Nationally recognized association executive Robert C. Fernley, 85, died May 8. Fernley was Chairman of the Board from 1962 to 1988 of Fernley &Fernley, a fifth-generation association management firm now run by G.A. Taylor Fernley.

The firm was started by T. James Fernley, a hardware wholesaler, in Philadelphia. T. James'son, Thomas A. Fernley Sr., joined his father when, in 1909, a number of other national associations approached them to serve as their organizations'management team. Fernley &Fernley manages several distribution associations, including the Industrial Supply Association and the Gases and Welding Distributors Association. The Association Management Company Institute presented Fernley with its Distinguished Service Award in 2004.

Fernley was active in ...

Tornado Hits Distributor’s DC

Early in the morning May 9, Industrial Distribution Group's Belmont, NC, distribution center was hit by a tornado. The distributor suffered an estimated $5 million to $7 million in damages, CEO Charles Lingenfelter told MDM.

The office building, a separate facility, was not hit, but the distribution center was severely damaged. Inventory was damaged by water and flying debris. Fortunately, nobody was hurt because the tornado hit in the middle of the night.

Lingenfelter estimates it will take a minimum of four to six months to repair the facility in part due to lead times on required materials.

Until then, the distributor is utilizing a temporary distribution facility about four miles away that local officials helped the distributor find. IDG has had to ...

Tightened Credit Markets, Economy Play Role in Bidding War for IDG

The tightened credit markets and the economic downturn were center stage in the bidding for Industrial Distribution Group Inc., Atlanta, GA, according to a proxy statement recently filed by IDG with the SEC about its plan to be acquired by Luther King Capital Management.

In fact, Platinum Equity, which was originally the winning bidder for the industrial distributor, had first bid $12 a share in December 2007 but reduced its offer to $10 a share in mid-January. The private equity firm cited risk in improving IDG's MROP and integrated supply business due to an overall decline in the industrial economy.

This prompted investment banking firm Robert W. Baird &Co. to go back to five bidders for new written proposals. Among the five bidders was WESCO, who showed an interest in ...

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