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ECONOMIC OUTLOOK REPORTS

It provides a thorough look at the state of the U.S. wholesale distribution economy today and what factors are influencing underlying demand.
Our 2024 EOR is a comprehensive economic reference guide to the U.S. wholesale distribution industry and its many different verticals. It is comprised of 20 different subreports.

Premium Monthly

This issue is packed with 10 articles that span Amazon’s VMI launch, features on Watsco, ABC Supply and City Electric Supply, distributors’ industry event spending and more, plus an HVACR Market Profile.

Market Insight Reports

Find a wealth of data and analysis extracted from the 3Q24 Baird-MDM Industrial Distribution Survey, including trending charts and figures for revenue and expectations, plus plenty of interesting commentary.
See our top Premium M&A articles from July-September 2024, including QXO’s rollout plans; Sonepar’s Purchase of Summit Electric; What to know before expanding across state lines; and the latest EBITDA trading multiples.

Case Studies

This case study explores the plumbing, HVACR, PVF and industrial supplies distributor’s past decade of growth through diversification, private branding and increased customer loyalty.
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Strategic alliances between distributors should be aimed at improving business for all participants. But this isn’t always the driver of organizations that enable independent distributors to get together.

“Our experience is that it’s often reactive in nature,” says Brent Grover, principal at Evergreen Consulting LLC and author of The Little Black Book of Strategic Planning for Distributors. Grover recently took part in an “Ask the Author” webcast event with MDM, answering audience questions about his new book, which is available at www.mdm.com/littleblackbook.

In his experience, the frequent focus on national accounts …

In the recent MDM Webcast, Managing for Profit: Five Building Blocks of Success, Jonathan Byrnes, senior MIT lecturer and author of Islands of Profit in a Sea of Red Ink, offers strategies in five key areas that can, when applied together, help managers lead companies to a better bottom line. The webcast, the final in a four-part series on managing for profitability, is available on DVD at www.mdm.com/islands.

Even in leading companies, 30 percent to 40 percent of the business is unprofitable. At the same time, 20 percent to 30 percent is highly profitable, enough to subsidize the loss, according to Jonathan Byrnes, senior MIT lecturer and author of Islands of Profit in a Sea of Red Ink. While many business leaders tend to focus on the unprofitable aspects of their businesses in an attempt to fix what’s broken, Byrnes says companies would do well to focus more on those products and initiatives that contribute to the bottom line.

“If you don’t secure that business, you’re really in trouble,” he says.

In the recent MDM Webcast, Managing for Profit, Byrnes recommends leaders focus on five building blocks that, when executed effectively and simultaneously, can …

More than half of U.S. counties have been designated as natural disaster areas after the worst drought in more than 50 years ravaged crops and pastures this summer. As of Aug. 28, 2012, nearly 53 percent of the country was still in moderate drought or worse, according to the U.S. Drought Monitor, released weekly by the National Drought Mitigation Center at the University of Nebraska-Lincoln.

Manufacturers and distributors serving these markets will or already have seen an impact as the drought continues to dampen economic activity.

The impacts have been widespread, from cracking …

4217Cover

This is the PDF of this issue of Modern Distribution Management.

Table of Contents:

  • Grainger Goes Mobile: What It Means
  • Commentary: The Pros & Cons of Strategic Alliances
  • Managing for Profit
  • The Impact of Drought on Businesses
  • Distribution Financial Metrics & Trading Multiples

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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.

The value of construction spending put in place in 2006 was $1, 198.0 billion, 4.8% above the $1,143.7 billion spent in 2005.


The value of private construction in 2006 was $928.7 billion, 3.3% above the $899.0 billion spent in 2005. Residential construction in 2006 was down 1.9% …

Prices charged by manufacturers in Canada, as measured by the Industrial Product Price Index (IPPI), were up&nbsp ; 1.4% 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.


&nbsp ;


On a 12-month basis, the IPPI rose by&nbsp ; 3.6%, 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.


&nbsp ;


The Raw Materials Price Index (RMPI) was up by&nbsp ; 5.2% from November to December, closing the year …

Economic activity in the manufacturing sector contracted in January after a one-month expansion, while the overall economy grew for the 63rd month, according to the latest manufacturing ISM Report on Business.


After a slight rebound in December, the manufacturing sector did not grow in January. New Orders remained positive, but little change has taken place as the PMI has averaged 50.5% in the past four months. In overall terms, manufacturing lost momentum in the second half of 2006 and is starting 2007 in a less than robust fashion, according to the Institute for Supply Management.


Results show a decline in the Inventories Index to the lowest level since February 2002, indicating a significant liquidation is taking place in many supply chains. …

Company Snapshot

  • One distribution center and five branches, based in Livonia, MI.
  • Number of employees: 58
  • Key products: Bearings and power transmission

We strive to be problem-solvers in the marketplace by providing end-user training. It's a service the customer values and one that our competition can't easily duplicate. It adds real value to what we offer and helps us build stronger relationships with our end users.

More than eight years ago we began receiving requests from customers for maintenance-related training. We viewed these requests as opportunities for us to grow our business.

We sat down with those customers to determine the specific areas where they needed …

Dear Editor:



I would like to disagree with MDM’s editorial on Home Depot (MDM Jan. 10, 2007) – on several levels.



1) The job of company management, within certain limits, is to maximize shareholder value. HD stock was over $43 in 2000. According to the inflation calculator provided (on the Web) by the Bureau of Labor Statistics, that adjusts (for inflation) to about $50 in 2006. I would guess it will adjust another dollar higher in 2007 money, so make it $51.


Essentially, HD paid Bob Nardelli more than $450 million over six years to go backwards. The spending power of the money invested in HD stock by shareholders who bought the stock the day he was named Big Cheese DECLINED. You cite Nardelli’s accomplishments. If he’s not responsible for …

Sales. November 2006 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $331.3 billion, up 1.0% from the revised October level and were up 7.9% from the November 2005 level. November sales of durable goods increased 1.2% from last month and were up 7.7% from a year ago. Compared to last month, sales of motor vehicle and motor vehicle parts and supplies were up 5.0% and sales of electrical and electronic goods increased 2.9 %. November sales of nondurable goods were up 0.7% (+/-0.7%) …

As the lead article in this issue illustrates, the inflation threat largely driven in 2005 by energy price hikes has moderated, particularly the last few months of the year. Wholesale prices rose 1.1 percent in 2006, compared to 5.4 percent in 2005. But wholesale prices except food and energy – the core inflation rate – moved up 2 percent in 2006 following a 1.4 percent gain in 2005.


Distributors need to look more closely at the stats in their own sectors, as there are a lot of mixed signals. Materials for durable manufacturing increased 13 percent in 2006; prices for materials/components for construction increased 4.3 percent.


But as these pages pointed out (Adam Fein article in Nov. 10, 2006 MDM), distributors really need to watch steroid revenue growth produced …

Click here for charts showing inflation by product group – 16 products, including tools, fasteners, machinery/equipment, fluid power, and others, are displayed in this document.

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This is an overview of wholesale price inflation trends in the past year for commodities in industrial and construction channels. Overall, core inflation rose 1.1 percent in 2006 -a significant slowdown from 2005. But the Federal Reserve still sees inflation as a potential threat in the next year, albeit at lower levels.

Thanks to a slowdown in energy price increases, wholesale prices rose 1.1 percent in 2006, in contrast to the 5.4 percent rise in 2005, the Bureau of …

This table highlights key financial metrics and trading multiples for 30 publicly traded distributors in the industrial and building products industries. Download the pdf in this article to see the data. Also find graphic illustrating median EBIDTA multiples for the same distribution companies.



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These materials,&nbsp ; prepared by Robert W. Baird & Co. for MDM are for informational purposes …

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