January 25, 2010 - Modern Distribution Management

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January 25, 2010

Economic Update: Uncertainty Keeps Economy in Check

Continued uncertainty has dampened the sense of optimism that pervaded economic news last month; this month, the tone has been more cautious with a sense of realism. Dominique Strauss-Kahn, managing director of the International Monetary Fund, warned audiences in Tokyo and Washington, D.C., that much of the growth is dependent on government stimulus packages, placing the economy in a precarious position if any of those programs end too quickly.

Several indicators in the past month reversed course, posting declines after …

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Segment Financial Trends

Every year the Profit Planning Group prepares an analysis of distribution financial performance for its financial benchmarking clients. The company prepared a summary of the finding exclusively for readers of Modern Distribution Management. The information focuses on 2008, which is the last year for which complete financial information is available.

Given recent economic turbulence, 2008 may seem like ancient history. But the financial results for 2008 provide useful insights for distributors and their suppliers. They provide a clear picture of how firms responded to economic challenges. They also reflect the limits of such data.

This analysis covers 40 lines of trade in distribution. The results for distribution are divided into three groups:

  • Industrial — Lines of trade in distribution that primarily service the factory floor or commercial facilities.
  • Construction — Lines of trade that primarily serve the construction trades.
  • Consumer — Lines of trade that sell consumer products or sell products utilized by retailers in their operations.

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Commentary: Current Economic State Parallels Past Cycles

Recovery from the recession, if indeed that’s the proper term for what’s going on today, has turned out to be almost as dangerous and difficult as the recession itself. The traditional down-and-up cycle which distributors by time honored tradition have been programmed to expect just hasn’t happened this time around. Instead of the neat, sharp snap-back of pent-up demand, the re-hirings, the gearing up we’ve been conditioned to look for, there has been little, if any perceptible shift away from the cautious, tight-fisted buying policies evolved in the depths of the recession.

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