August 2008 - Modern Distribution Management

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August 2008

Fastenal Agrees to Settlement in Wage-Hour Case

Industrial and construction supplies distributor Fastenal Company, Winona, MN, has agreed to settle a class action wage-hour lawsuit that claims Fastenal misclassified Fastenal employees as assistant managers and as a result those employees were denied overtime as required under the Fair Labor Standards Act and several state statutes.
Two former employees originally filed the suit against Fastenal on Oct. 18, 2007. Fastenal has agreed to pay $10 million in cash to cover claims by eligible class members, plaintiff attorneys' fees and costs and payments to named plaintiffs. The settlement is still subject to court approval.
The distributor denies the allegations in the lawsuit, but says it has agreed to enter the settlement to avoid significant legal fees, the ...

The Sticky Areas of the Fair Labor Standards Act

Fastenal has announced an agreement to settle a wage-hour lawsuit filed against it toward the end of 2007. Wage-hour law can be a tricky area for employers, as we reported in our premium content newsletter back in October when the lawsuit was filed. In light of Fastenal's settlement, it's probably worth revisiting that report.
One lawyer from the national employment law firm Fisher &Phillips told me at that time that it's not unusual to see legal problems arise from confusion over the exemption status of certain workers, as Fastenal has recently seen. So-called "white-collar" exemptions depend in part on what kind of work the employee is ...

Canadian Industrial Prices Index Rises 0.4% in July

Source: Statistics Canada

The Canadian price indexes for manufactured goods and raw materials registered lower monthly growth in July than in the previous four months, increasing 0.4% and 1.4% respectively, primarily as a result of the slowdown in the rise of petroleum prices.

From June to July, prices charged by Canadian manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 0.4%, down from the average monthly growth rate of 1.5% observed from March to June. The increase in the index in July was almost entirely attributable to a 2.4% rise in the prices for petroleum and coal products, which was the lowest rate in five months.

The prices for products other than petroleum and coal ...

New Orders Rise 1.3% in July

New orders for manufactured durable goods in July increased $2.9 billion or 1.3% to $219.3 billion, the U.S. Census Bureau announced. This was the third consecutive monthly increase and followed a 1.3% June increase. Excluding transportation, new orders increased 0.7%. Excluding defense, new orders increased 2.8%.
Shipments of manufactured durable goods in July, up three of the last four months, increased $5.3 billion or 2.5% to $218.3 billion. This followed a 0.9% June increase.
Unfilled orders for manufactured durable goods in July, up 29 of the last 30 months, increased $6.6 billion or 0.8% to $824.4 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.9% June ...

3M Acquires Polyfoam Products

3M, St. Paul, MN, has acquired Polyfoam Products Inc., a structural adhesives company specializing in foam adhesives for tile roofing and other adhesive products for the building industry.
Polyfoam's patented professional tile roofing system provides an alternative to mechanical fastening. The unique polyurethane adhesive locks tiles in place and eliminates the need for nails or screws to fasten tiles to the roof, which can leave thousands of tiny puncture holes, according to a 3M press release.
The addition of Polyfoam's polyurethane foam formulations and polyurethane dispensing equipment will broaden 3M's industrial adhesives portfolio and enhance our presence in the industrial and building and construction markets,"said Patrick Deconinck, vice president and ...

Interline Brands Acquires Eagle Maintenance Supply

Interline Brands, Inc., Jacksonville, FL, distributor and direct marketer of maintenance, repair and operations products, has acquired Eagle Maintenance Supply, Inc., a $17 million distributor of janitorial and sanitary supplies to the institutional marketplace.
Michael Grebe, Interline CEO, said: "Eagle Maintenance Supply fits very well into our strategic acquisition program. It extends our platform within the attractive institutional marketplace by bolstering our janitorial and sanitary product offering and strengthening our market position in the Northeast from Washington, D.C. to ...

DXP Enterprises Acquires PFI for $65M

DXP Enterprises, Inc., Houston, TX, has acquired Massachusetts-based PFI, LLC, for $65 million. PFI distributes fasteners, rivets and hose clamps.
The company has locations in Georgia, North Carolina, Illinois, Ohio, Texas, California, Massachusetts and Florida.
PFI's sales for the year ended May 3, 2008, were $71.9 million.
DXP provides pumping solutions, integrated supply and MROP (maintenance, repair, operating and production) services and distributes pumps, bearings, power transmission, seals, hose, safety, fluid power, and electrical and industrial ...

Graybar Sales Up 5.5% in First Half

Graybar, St. Louis, MO, distributor of electrical, telecommunications and networking products and related supply chain management and logistics services, reported a 5.5% increase in sales in the first half 2008 to $2.7 billion. Profit grew 19% to $47.4 million.
While the construction sector showed signs of weakness, strong performance in networking-related product sales coupled with continued growth in the overall communications and data market helped offset the construction market's impact on growth, according to Graybar.
Graybar has more than 250 North American distribution facilities. ...

Anixter Acquires Two European Distributors

Anixter International Inc., Glenview, IL, distributor of communication products, electrical and electronic wire &cable, fasteners and other small parts, has acquired Sofrasar SA and partnership interests and shares in Camille Gergen GmbH &Co, KG and Camille Gergen Verwaltungs GmbH.
Sofrasar is headquartered in Sarreguemines, France, and Gergen is based in Dillingen, Germany. Both companies are fastener distributors.
Anixter is paying $40 million in cash and assuming $19 million in debt. The combined annualized sales for these businesses are expected to be more than $110 million in 2008.
The move is consistent with Anixter's geographic expansion of its OEM Supply business in Europe. We have added another key building block that will drive future ...

Wholesale Trade: Productivity Rises 2.1% 2006-2007

Labor productivity -defined as output per hour -increased in wholesale in 2007 by 2.1% from 2006 to 2007, according to a new report from the Bureau of Labor Statistics. Output per hour and unit labor costs increased as well.
Between 1987 and 2007, labor productivity in wholesale trade increased at a 3.3% average annual rate.
Output per hour grew in 12 of 19 detailed wholesale trade industries in 2007. Commercial equipment wholesalers experienced the largest productivity gain, 13.7 percent. Unit labor costs fell in seven of the 19 detailed industries, but rose 1.9 percent in wholesale trade overall.
From 1987 to 2007, labor productivity rose 3.3% per year in wholesale trade, on average. Output increased 4.1% per year and hours grew 0.7% per year. ...

Ryerson’s Journey with Platinum Equity

An article by Forward magazine (published by the Metals Service Center Institute) looked at Platinum Equity -a private equity firm relatively well-known in the distribution industry for its investment in Strategic Distribution and bid for Industrial Distribution Group. It also owns Ryerson Inc. and recently sold PNA Group to Reliance Steel and Aluminum. While much of the article is focused on how well Platinum has done in the metals industry and how its operating model is different from other private equity firms, it does provide a decent glimpse into how it approaches investments. For one, Platinum has tended to look at moves its makes much ...

Doing Business Down South

Latin America can be a challenging market, but companies that approach it with an open mind to learning a different culture of work and play have seen success. This article from the Pittsburgh Business Times looks at how some Pittsburgh-based businesses (mostly manufacturers) have approached business south of the border.

Some of the thoughts outlined in the article:

  • Requirements to become a legal business are different in each country. Requirements for gaining government approval for a product (such as drugs) also differ.
  • The market dynamics are -not surprisingly -different. In one drug ...

Bunzl Sales Up 14% in First Half

Bunzl plc reported sales for the six months ended June 30, 2008, were up 14% to £1,964.2 million (constant currency +10%).

Overall trading was strong despite increasingly difficult economic conditions as the year has progressed, particularly in the UK and the eurozone," said Anthony Habgood, chairman. "These results again demonstrate Bunzl's strength across its international markets and its ability to take advantage of growth opportunities."

Bunzl also announced it has completed two acquisitions in Spain.

The company has recently purchased Marca Protección Laboral SL and Marvel Protección Laboral SL. Marca and Marvel supply personal protection equipment, principally workwear and clothing, to redistributors throughout ...

UPDATED: Zilliant, Advanous Announce Strategic Alliance

Zilliant, provider of price optimization and management software for manufacturing, high-tech, distribution and industrial service companies, has formed a strategic alliance with Advanous, a provider of pricing and margin management solutions to distributors.

We have identified the opportunity to merge that enterprise pricing software with distribution domain expertise," says Jon Ladle, president of Advanous. "We looked at what our technology does and what PROS, and Zilliant and others do, and we've found it to be complementary and not competitive in nature. As we looked at what additional value we can bring to distributors it's a natural extension of what we do to work with those vendors to maximize the value of their software to help distribution ...

Sperian Protection to Buy Combisafe

Sperian Protection has agreed to buy Combisafe International AB, Northampton, UK, a developer and supplier of height safety and access systems.
Combisafe expands Sperian's current fall protection system portfolio. It also reinforces Sperian's presence into the fast growing Middle-East market with their operations in Dubai and further expands Sperian's presence in the Northern European Market.
Combisafe is majority controlled by Fairford (Sweden).
Sales were 293 MSEK (32 MEUR) in 2007. The purchase price will be 590 MSEK (63 MEUR) at closing. ...

A Look at Housing Production Numbers

Just as distributors are keeping a closer eye on their inventory in uncertain times, single-family home builders are also doing so by slowing the pace of new production by nearly 3% in July, according to the Commerce Department and reported by the National Association of Home Builders. NAHB says this is the lowest rate of single-family housing starts since January 1991. (See housing starts numbers for July here.)
The president of NAHB says: "Though some may be inclined to focus only on the negative angle of this report, there is definitely a bright side. The actions that home builders are taking right now to keep a lid on new production are slowly but surely helping to bring supply and demand back into ...

MDM Interview: Trends in Inventory Management

Effective inventory management practices often get lost in the shuffle when sales are soaring. But distributors can improve profitability by tightening their inventory management practices. This interview reviews current inventory management trends. Jon Schreibfeder, president of Effective Inventory Management, spoke with MDM recently about how more distributors have recognized the importance of inventory management to their business success.

MDM: How are distributors currently approaching inventory management in light of uncertain economic conditions?
Jon Schreibfeder: People are really tightening their belts. They are much less likely to invest in speculative inventory. They are much more concerned about selling what they buy rather than ...

Commentary: Managing the Customer Service Life Cycle

Every business tends to put on a full-court press to get customers in the door. Many have processes to build existing customer relationships into larger ones. Fewer businesses have a process for saying goodbye or retrieving ex-customers. But in tightening markets, distributors often see customers jump to a lower-price competitor. How often do you experience a customer returning after a year, or after they realize the better value your company delivers? What percentage of lost"customers return?

These issues came to mind following an unpleasant experience closing the account with our credit card processor. I switched to a more cost-competitive service after four-plus years (three-year agreement with automatic annual renewal) with an Omaha-based affiliate of my local banking ...

Latin American Market Opportunities

An analysis of the three major markets in Latin America -Mexico, Brazil and Argentina -forecasts solid growth for manufacturing markets in the region for the remainder of 2008 and into 2009. The author of that analysis, based in the region, spoke with MDM about what sectors are driving the growth.
All sectors of manufacturing in Latin America will likely see some growth in 2009, but automotive manufacturing has had particular strength partly due to internal demand in Brazil and Argentina, says Fernando Sedano, author of the Manufacturers Alliance/MAPI Latin America Outlook 2008-2009.

Mexico, the third market included in the analysis, has seen slower growth because of its close economic ties to the U.S., but has begun to make up ground through exports to ...

Legislative Outlook 2009

This article looks at five key issues distributors and manufacturers should watch closely in the next year.
The U.S. House of Representatives plans to adjourn for the year on Sept. 26. And, with the August recess not over until Sept. 8, Jade West, senior vice president for Government Relations for the National Association of Wholesaler-Distributors, doesn't expect much more to get done before a new Congress takes its place in January.

However, distributors and manufacturers may want to keep their eye on a few critical issues going into the next session.
The prices of finished energy goods -including home heating oil, gasoline and lubricating oils among others -increased 28 percent from July 2007 to July 2008, according to ...

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