MSC, Fastenal & Others Bullish on Manufacturing’s Future - Modern Distribution Management

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MSC, Fastenal & Others Bullish on Manufacturing’s Future

But executives report some softness in the latest quarter for manufacturing customers.

While many distributors and manufacturers say they are seeing weakness in manufacturing end-markets, many are optimistic about prospects in the years to come, and some are already seeing signs of improvement. Executives from MSC Industrial Supply, Fastenal, Genuine Parts Company and Snap-on shared their thoughts on the current and future state of these markets during each company’s quarterly conference call.

MSC customers, according to President and CEO Erik Gershwind, are clamping down on spending as a result of sluggish customer activity level. “Their spend on indirect, on MRO and metalworking, is down,” he said.

Willard Oberton, Fastenal CEO, said he is also seeing slowness on the manufacturing side. “If you look out at the industrial economy, and you look at what other companies are putting up for numbers, it's probably that manufacturing's maybe flat at best right now,” he said.

At Genuine Parts Company, parent company of industrial distributor Motion Industries, sales improvement is being held back by weakness in the sector. CEO Thomas Gallagher said one of the company’s biggest challenges in the second quarter was with OEM customers. “Many of these customers have a fair amount of their sales volume tied to the export market, and they're being adversely impacted by the strengthening of the U.S. dollar and by the overall slowdown in the global economy,” he said.

But the manufacturing market is likely to improve in coming years, said MSC’s Gershwind. “More and more, my discussions with supply chain executives that are key customers give me growing confidence that significant manufacturing growth is likely for North America over the next decade,” he said. “As the focus of supply chain moves from strictly a low-cost country sourcing mindset to one centered on supply chain speed, flexibility and proximity to customers, the premium is high to keep the manufacturing supply base local to the North American market.”

When the market does come back, Gershwind said, MSC will be well positioned. “When metalworking rebounds, I see a built-in gain there that's going to occur by virtue of the share gains that we're experiencing,” he said. “While today the results of those share gains are muted by soft customer activity levels, we would expect to grow disproportionately when the manufacturing economy rebounds.”

Tool manufacturer Snap-on is already starting to see improvement, according to President and CEO Nicholas Pinchuk. Big-ticket sales in its tools business grew substantially in the second quarter, which Pinchuk says is a sign of greater economic stability. When big-ticket sales weakened dramatically during the recession, Pinchuk says, the company learned how close an indicator of the economy’s health they can be. “People demurred or they decided not to purchase, and the fact that we're seeing this [increase] makes us feel pretty good about the marketplace,” he said.

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