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This new-look issue offers research on suppliers’ changing purchase minimums, distributors’ (lack of) AI progress and geopolitical impacts; and updates on Ferguson, Home Depot-SRS Distribution and more.
This issue compares AI adoption rates in manufacturing vs. distribution; explores Grainger’s role as a ‘Problem-Solver’; examines Border States’ acquisition path; and shares takeaways from the MODEX expo.

Market Insight Reports

See our in-depth M&A articles from the first three months of 2024, including the Home Depot-SRS blockbuster; the acquisition strategy for Ferguson and Border States; and the latest EBITDA trading multiples.
Find a wealth of data and analysis extracted from the 1Q24 Baird-MDM Industrial Distribution Survey, including trending charts and figures for revenue and expectations, plus plenty of interesting commentary.
The report features in-depth articles that recap the year that was 2023 in distribution dealmaking, a full rundown of every deal we covered in October-December, the latest EBITDA trading multiples and more.
Find a wealth of data and analysis extracted from the 3Q23 Baird-MDM Industrial Distribution Survey, including trending charts and figures for revenue and expectations, plus plenty of interesting commentary.
Find a wealth of data and analysis extracted from the 3Q23 Baird-MDM Industrial Distribution Survey, including trending charts and figures for revenue and expectations, plus plenty of interesting commentary.

Home Depot CEO Frank Blake reinforced his drive to refocus on the business' retail division at the company's annual investor and analyst conference. To that end, Blake told participants that acquisitions outside of the retail core won't be a priority for us.

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HD Supply ended the year at 12% of Home Depot's overall sales - HD hopes that number will grow to 15% by the end of the year. Still HD Supply, which reached $12 billion in sales in 2006, had a 6.9% decline in organic growth in the fourth quarter. That is consistent with the down housing market.

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Retail also suffered in the fourth quarter 2006 with a profit drop of 28%. Sales were up just 4%. For the year, organic growth was down 2.8%.

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HD does not expect ...

New Orders
New orders for manufactured durable goods in January decreased $17.1 billion or 7.8 percent to $203.9 billion, the U.S. Census Bureau announced in a preliminary release. This followed two consecutive monthly increases including a 2.8 percent December increase. Excluding transportation, new orders decreased 3.1 percent. Excluding defense, new orders decreased 7.8 percent.


Shipments of manufactured durable goods in January, up five of the last six months, increased $0.5 billion or 0.2 percent to $211.4 billion. This followed a 0.5 percent December increase.

Unfilled Orders

Unfilled orders for manufactured durable goods in January, up twenty of the last twenty-one months, increased $1.0 ...

Industrial production decreased 0.5 percent in January after an increase of 0.5 percent in December. Output in the manufacturing sector declined 0.7 percent in January; about one-half of the decrease was a result of a drop of 6 percent in motor vehicles and parts.

The output of utilities rebounded 2.3 percent, as temperatures moved back toward seasonal norms, while the output of mines moved down 1.2 percent. At 111.9 percent of its 2002 average, overall industrial output for the month was 2.6 percent above its January 2006 level.

The rate of capacity utilization in January fell 0.6 percentage point, to 81.2 percent. Even so, it was 0.1 percentage point above its year-earlier level and 0.2 percentage point above its 1972-2006 average.

Market ...

Wolseley CEO Chip Hornsby sat down with MDM recently to talk about the distributor's market moves, its localized strategy, the current housing market and the importance of leadership training. Hornsby also addressed the $25-billion global distributor's potential expansion into new but complementary sectors, which should slow while the company digests the acquisitions it has made in the past 18 months.

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Wolseley is the parent company of Stock Building Supply and HVAC/plumbing distributor Ferguson in the U.S. The second part of this interview, focused on Wolseley's European ambitions, will be in the March 10 issue of MDM.

MDM: What are the key issues for Wolseley in North America to develop markets in terms of services, product mix, ...

In the mid-1990s, Mayer Electric Supply, Birmingham, AL, prepared and mailed its invoices and statements in-house. The distributor had employees who printed the mailings on high-speed printers at night and used a machine to fold and stuff the mailings. It also maintained a Pitney-Bowes postal machine.

It was quite a cost factor to do all of that, says Mayer Electric CIO Barry Carden.

So Mayer started looking at outsourcing its paper billing. The electrical distributor, which serves mostly the Southeast U.S., found a provider in 2001. Despite a few issues - like some double mailings - the service worked well and saved Mayer time and money. But that company was sold to a larger corporation, which decided to cut smaller customers out of the mix, including ...

Company Snapshot:

  • Number of branches: 45

  • Number of employees: 450

  • Key customer base: Food processing, manufacturing, industrial

Inventory management provides both a challenge and an opportunity for all distributors. Our stock is our lifeline. If we do not maintain adequate supplies of merchandise, we lose sales. On the other hand, inventory costs money. The ongoing struggle is to have just the proper amount on hand, but not too much.

In past years, we've fallen into the distributor habit of not thinking about surplus inventory until the end of the year. During an annual inventory taking, it was obvious that we had accumulated way too much stock on our shelves.

Recently, we've ...

Wholesaler-distributor revenues were $3.903 trillion last year, up 9.8% from 2005, unadjusted for seasonal variations. Wholesale revenues for durable goods were up 8.8%, and nondurable goods sales were up 11%. The increase in sales was slower than in years' past, partly due to a slowdown in commodity inflation.

The MDM Inflation Index, which measures a cross-section of industrial supplies, rose 3.47 percent from December 2005 to December 2006. In comparison, the index rose 5.58% from December 2004 to December 2005. Here's the breakdown in sales by sector for 2006.


December 2006 sales of merchant wholesalers, except manufacturers' sales branches and offices, were $337.1 billion, up 1.8 percent from the revised November level and were up 8.6 percent from the December 2005 level. December sales of durable goods increased 1.1 percent from last month and were up 7.0 percent from a year ago. Compared to last month, sales of hardware and plumbing and heating equipment and supplies were up 4.2 percent and sales of motor vehicle and motor vehicle parts and supplies increased 2.9 percent. December sales of nondurable goods were up 2.5 percent from last month and were up 10.2 percent from last year.

Inventories . Total inventories of merchant wholesalers, except manufacturers' sales ...

Last week saw a feeding frenzy of rumors in distribution, with action on both sides of the Atlantic. The biggest hunters suddenly became the hunted.

The history of independent distribution channels has repeatedly provided pointed lessons that size, more often than not, is the real giant slayer. It is tough to institutionalize flexibility and strong service levels - the hallmark of local distribution - across states, much less international borders. The next few years may tell whether there is an opportunity to create a global platform that doesn't self destruct on its own growth plans.

Some might say too much money is overheating valuations and expectations. The surprise is that the M & A market in distribution (and overall) remains hot in 2007, with most expecting ...

Release taken from Statistics Canada

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Wholesalers ended the year on a high note, with the automotive sector providing much of the impetus for the largest monthly gain in over two years.

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Wholesale sales jumped&nbsp ; 2.7% in December to&nbsp ; $42.8&nbsp ; billion, following a 0.3% rise in November. December's increase was the largest since March&nbsp ; 2004.

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While a solid showing by the automotive sector (+7.5%) was behind much of December's rise, there were also notable gains in the other products" (mainly agricultural products, chemicals and recycled metals), personal and household goods and building materials sectors. Three sectors registered drops in ...

Taken from Statistics Canada

Canadian manufacturers ended&nbsp ; 2006&nbsp ; on a positive note as factory shipments increased for the second month in a row in December, thanks to strength in the transportation equipment sector.

The year-end rally was not enough to offset several months of weak performances earlier in the year. As a result, total shipments for&nbsp ; 2006&nbsp ; as a whole edged down&nbsp ; 0.6% to&nbsp ; $587.4&nbsp ; billion from the peak level in&nbsp ; 2005.

December's increase was widespread, with&nbsp ; 13&nbsp ; sectors representing&nbsp ; 74% of total output improving. On a monthly basis, factories shipped goods worth an estimated&nbsp ; $49.7&nbsp ; billion in ...

Privately-owned housing starts fell 14.3% in January, compared with the revised December estimate. Starts were down 37.8% below the January 2006 rate. Single-family in January were 11.2% below the December figure. The January rate for units in buildings with five units or more was 276,000.

Privately-owned housing units authorized by building permits in January were down 2.8% from the revised December rate, and 28.6% below the January 2006 estimate. Single-family authorizations were 4% below the December figure. Authorizations of units in buildings with five units or more were at a rate of 370,000 in January.

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Privately-owned housing completions in January were at a seasonally adjusted annual rate of 1,880,000, roughly even with the revised ...

The Producer Price Index for Finished Goods declined 0.6 percent in January, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported. This decrease followed a 0.9-percent advance in December and a 1.8-percent jump in November. At the earlier stages of processing, prices for intermediate goods moved down 0.7 percent compared with a 0.5-percent increase in the prior month. The crude goods index decreased 6.3 percent after rising 2.8 percent in December.

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Among finished goods, prices for energy goods fell 4.6 percent in January following a 2.2-percent rise in the prior month. The rate of increase in the finished consumer foods index slowed to 1.1 percent in January from 1.5 percent in December. By contrast, prices for finished ...

December U.S. manufacturing technology consumption totaled $321.35 million, according to The Association For Manufacturing Technology and the American Machine Tool Distributors' Association. This total, as reported by companies participating in the USMTC program, was down 6.9% from November, and down 0.5% from the total of $322.81 million reported for&nbsp ; December 2005. With a year-end total of $3,889.75 million, 2006 was up 26.8% compared with 2005.

These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTC program.

2006 was an exceptional year, with the highest U.S. consumption since 2000, says John B. Byrd III, AMT President. Growth should continue in 2007, at a more modest pace, as ...

Adam Fein, president of Pembroke Consulting, identifies four key trends in Facing the Forces of Change: Lead the Way in the Supply Chain, put together every three years by the National Association of Wholesaler-Distributors. He described these trends in a presentation at the NAW annual meeting in Washington, D.C., last month.

No. 1: Private Label
Adam Fein, author of Facing the Forces of Change: Lead the Way in the Supply Chain, says the use of private-label products will expand substantially over the next few years.

Benefits of a private-label strategy include capturing the manufacturer's margin, and the ability to control profit from the top to the bottom of the supply chain. Customer relationships often improve thanks to lower ...

W.W. Grainger, Chicago, IL, has released its updated 2007 catalog with more than 138,000 MRO products, an increase of 23,000 over last year.

Last year, the distributor increased its catalog by 40 percent, adding 39,000 new products.

This year Grainger has added more than 7,000 plumbing products, including high-grade pipes, valves and fittings; 4,000 material handling supplies such as conveyors, hoists and casters; 5,000 fasteners including nuts, bolts and screws; as well as 1,600 security products including locks and hinges.

The company expects incremental sales from its ongoing product expansion to account for 1 to 2 percentage points of its growth in 2007. The new catalog has more than 3,000 pages.

In addition, online Grainger has added new search and ...

Prices charged by manufacturers in Canada, as measured by the Industrial Product Price Index (IPPI), were up&nbsp ; 1.4 percent in December from the month before thanks to a significant increase in prices for petroleum and coal products, primary metal products, and motor vehicles. Higher prices were observed in the majority of product groups.

On a 12-month basis, the IPPI rose by&nbsp ; 3.6 percent, a higher rate of growth than the year-over-year increase recorded between September and November. The upward pressure came mainly from higher prices for primary metal products, pulp and paper products as well as fruit, vegetables and feed products.

Petroleum, Coal Drive Prices
On a month-over-month basis, manufacturers' prices were driven by ...
Modern Distribution Management's December Inflation Index, which measures a cross-section of industrial supplies, was up 0.23% from the previous month, and up 3.47% from December 2005.

Summary of&nbsp ; MDM Inflation Index for the past 12 months:

December 2006 Index&nbsp ; 267.1
November 2006 Index 266.5
October 2006 Index 265.9
September 2006 Index 265.6
August 2006 Index 265.2
July 2006 Index 264.0
June 2006 Index 263.0
May 2006 Index 262.1
April 2006 Index 262.1
March 2006 Index 262.1
Febuary 2006 Index 261.2
January 2006 Index 260.2
December 2005 Index 258.1

Please click below on Related Document to view a print-ready pdf of the&nbsp ; MDM Inflation Index for December 2006, listing the ten ...

Abrasives represented a market in 2006 of $2.76 billion, according to estimates by Industrial Market Information, Minneapolis.

These charts show the top ten industries, by SIC code, consuming these products; and the 2006 end-user consumption of these groups sorted by the nine government market regions.

Click on Related Document below to view a pdf of the chart and end-user consumption by region.


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