June 2008 - Modern Distribution Management

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June 2008

Airgas Announces Price Hikes

Companies, Free, Gases & Welding Equipment, News, Subscriber Only, Top Distributor Sectors /

Radnor, PA-based gases distributor and supplier Airgas, Inc. announced that beginning Aug. 1, 2008, or as contracts permit, it will raise prices on gases and equipment. Prices will increase, on average, 20% for bulk and cylinder acetylene, argon, and hydrogen; 15% for bulk and cylinder oxygen, nitrogen, carbon dioxide, helium, and specialty gases; and 15% for cylinder and bulk equipment rental fees.
 
Prices will also increase for hardgoods and safety supplies, and delivery and other service charges.
 
Airgas attributed the increases to jumps in product costs from suppliers and rising operating costs at plants and distribution facilities, driven by raw material, energy, electricity and labor costs. Rising metal prices are also driving up costs for cylinders, …

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Graham Packaging to Go Public in $3.2B Deal

Free, News, Operations, Paper Products & Packaging Distribution, Subscriber Only, Top Distributor Sectors /

Hicks Acquisition Company has agreed to buy Graham Packaging Holdings Co., York, PA, and then take it public with the Graham Group and The Blackstone Group in a transaction valued at $3.2 billion.
 
The company will be renamed Graham Packaging Co. after the deal is completed and will be listed on the New York Stock Exchange. Blackstone has agreed to hold the largest ownership stake for at least two years.
 
Graham Packaging had about $2.5 billion in sales in 2007. The company supplies blow-molded rigid plastic containers for the branded food and beverage, household, personal care/specialty and automotive lubricant industries. The company supplies many global consumer product companies, including PepsiCo, Coca-Cola, Danone/Dannon, Ocean Spray, Heinz, Abbott, Arizona …

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Oil Prices Strain Manufacturing Sector

Economic Trends, Free, Research & Analytics, Subscriber Only /

In a new Manufacturers Alliance/MAPI report, The Future of Oil: Are We There Yet?”, the author says oil price spikes have “created headwinds for the manufacturing sector.”
 
Among other things, the new report covers the impact on manufacturing costs:
 
“In 2002, the manufacturing sector spent $1.7 billion for residual and distillate fossil fuel,” the author writes. “Assuming the price of oil holds steady at its May 2008 level for the remainder of 2008, manufacturers will spend approximately $7.4 billion for residual and distillate fuel oil for all of 2008. Some of the increase reflects larger output, but by far most of the increase in spending (96%) is attributable to the four-fold increase in the average refiner acquisition cost of oil since …

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Avnet Acquires Source Electronics

Companies, Electrical, Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

Electronics distributor Avnet, Inc. has acquired Source Electronics Corp., Hollis, NH.
 
Source is a provider of outsourced custom programming services for integrated circuits (IC). Source serves original equipment manufacturers (OEMs), contract manufacturers (EMS) and component manufacturers. From facilities in Brazil, China, Mexico, Singapore and the U.S., Source supports end markets including consumer electronics, automotive, mobile communications, telecommunications, networking, computing and enterprise storage.
 
Source will be integrated into the services operations of Avnet Logistics, a division of Avnet that delivers logistics and programming services globally.
 
For the fiscal year ended June 30, 2007, Avnet had revenues of $15.68 …

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SKF Agrees to Buy PEER Bearing

Finance, Free, Mergers & Acquisitions, News, Power Transmission/Motion Control/Fluid Power, Subscriber Only, Top Distributor Sectors /

Swedish manufacturer SKF has agreed to acquire Waukegan, IL-based PEER Bearing Company and its manufacturing operations in Thailand and China. PEER will continue to operate as a standalone business.
 
PEER manufactures deep-groove ball bearing and tapered roller bearings. In 2007, PEER had about 1,400 employees and sales of about $100 million.
 
SKF is a manufacturer of industrial and automotive materials, including rolling bearings, seals, mechatronics and lubrication systems, with 110 manufacturing sites worldwide. In 2007, sales were SEK 58.6 billion (US$9.8 billion at current exchange …

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GDP Final Estimates: Economy Grows 1% in 1Q

Economic Trends, Free, News, Research & Analytics, Subscriber Only /

Real gross domestic product -the output of goods and services produced by labor and property in the U.S. -increased at an annual rate of 1% in the first quarter of 2008 (that is, from the fourth quarter to the first quarter), according to final estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.6%.
 
The GDP estimates released today are based on more complete source data than were available for the preliminary estimates issued last month. In the preliminary estimates, the increase in real GDP was 0.9%.
 
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, exports of goods and services, and federal government spending that …

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Norandex Acquires Area Vinyl Siding Distributors

Building Materials/Construction, Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

Norandex Building Materials Distribution, Macedonia, OH, has acquired Area Vinyl Siding Distributors, LLC, a distributor of vinyl siding and accessories serving the greater Baton Rouge, LA, area.
 
Area Vinyl’s two locations -in Walker, LA, and Gonzales, LA -will operate under the Norandex Building Materials Distribution name, with company president and owner CJ Serpas becoming Norandex District Manager in charge of both locations, as well as Norandex’s existing New Orleans branch. All Area Vinyl employees will be retained.
 
Norandex Building Materials Distribution distributes exterior siding, windows, and doors in the U.S., operating more than 150 branches in 37 states.
 
Norandex is part of the Saint-Gobain Building Distribution Sector with over 4,000 …

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Canadian Wholesale Revenues Rise in April

Economic Trends, Free, News, Research & Analytics, Subscriber Only /

Source: Statistics Canada
 
Canadian wholesale sales rose for the second consecutive month in April, largely as a result of increased demand in the personal and household goods and the machinery and electronic equipment sectors.
 
Wholesalers sold $43.4 billion worth of goods and services in April for a gain of 1.4%, following a 0.7% increase in March.

In April, five of the seven wholesale sectors reported higher sales, with the only declines coming from the automotive and farm products sectors.

Despite the back-to-back monthly increases, overall wholesale sales have lost a bit of momentum since the second half of 2007 and are still slightly below the peak attained in March 2007. A significant …

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Applied Industrial: 4,000 New Products in 08/09 Catalog

Companies, Free, News, Subscriber Only, Top Distributor Sectors /

Applied Industrial Technologies, Cleveland, OH, distributor of bearings, power transmission components, fluid power products, tools and industrial supplies, has launched its 2008/2009 catalog.
 
The catalog has 4,000 new products, including the debut of DeWalt tools, plus more than 20,000 bearing and power transmission parts, more than 9,000 fluid power products, and an enhanced 48-page Technical Reference section that includes formulas, conversion tables, fluid power troubleshooting information and more.
 
The catalog includes product lines for MRO and fluid power systems, including:

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MDM June 25, 2008

Subscriber Only /

This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription (within 30 days of purchase), which includes two issues a month plus access to more than six years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to …

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Thomas & Betts Sells Share in Leviton

Electrical, Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

Memphis, TN-based Thomas &Betts Corp. has sold its minority interest (29.1%) in Leviton Manufacturing Co., Little Neck, NY, back to the producer of electrical and electronic wiring devices for $300 million.
 
Thomas &Betts is a designer and manufacturer of electrical components used in industrial, commercial, communications and utility markets. The company is also a producer of commercial heating and ventilation units and highly engineered steel structures used, among other things, for utility …

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Report: McKesson Likely to Settle Claims in Pricing Case

Free, Legal Issues in Wholesale Distribution, Operations, Pharmaceutical & Health Care, Subscriber Only, Top Distributor Sectors /

Bloomberg reports that drug wholesaler McKesson Corp. will likely settle damage claims of as much as $15 billion for inflating prices on prescription drugs paid by private health-benefit plans and individuals. McKesson has more than $100 billion in annual revenues. The drug distributor has denied the claims made in the lawsuit. The Bloomberg article offers good background on the case. Read it here.
 
Related articles from MDM:
McKesson May Face Treble Damages in Class Action …

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MDM Interview: Mexico or China?

Research & Analytics, Subscriber Only, Top Distributor Sectors /

Globalization has been driven in part by Western firms outsourcing manufacturing to Asia, but the long-term viability of shipping across the Pacific Ocean is under question given high logistics costs and rising wages in those markets.
 
That’s according to Texas A&M University’s Supply Chain Systems Laboratory, a research arm of the school’s industrial distribution program. The organization is putting together a consortium to study manufacturing trends and how to improve throughput in the Mexico-Central America-Texas region.
 
Dr. Barry Lawrence, director of the industrial distribution program at Texas A&M University, spoke with MDM recently about the critical factors affecting trade and growth in Mexico, why he thinks labor costs are losing out to logistics, why …

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Hagemeyer Builds Out Green Catalog

Companies, Free, Subscriber Only /

When customers started asking for more environmentally friendly options, Hagemeyer North America recognized an opportunity to meet customer needs and help the environment at the same time. The distributor created an all-green catalog.
 
A lot of these products are products that we already offered; this catalog is just the first time we’ve collected them into one vehicle,”says Brad Pulver, Hagemeyer North America’s vice president for product strategy.
 
Most environmental offerings focus on electrical, because that’s the easiest, Pulver says. But Hagemeyer wants to provide a broad range of products across all three of the distributor’s service areas: electrical, industrial and safety.
 
Hagemeyer will continue expanding the catalog offerings as suppliers …

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Replacement Market a Boon for HVAC Distributor Watsco

Companies, Free, HVACR, Plumbing Products & PVF Distribution, Subscriber Only, Top Distributor Sectors /

As the housing market continues to slump and new installations of central air systems with it, Watsco Inc., Coconut Grove, FL, continues to increase profits by building upon the growing replacement market.
 
Senior Vice President Barry Logan told attendees at the Piper Jaffray Industrial Growth Conference on June 11 that environmental mandates and aging systems have driven the replacement market to 75 percent of the business Watsco is doing today.
 
The mandate signed into law in 2001 required that all new air conditioning and heat pump units improve efficiency by 30 percent by 2006. In addition, use of refrigerants that deplete the ozone was to be phased out entirely by 2010.
 
Though new products don’t need to be in place before 2010, Watsco already …

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MDM News Digest 3812

Free, Subscriber Only /

Plumbing &HVAC distributor Ferguson, Newport News, VA, has opened a new clearance center in Pomona, CA. The 7,600-square-foot retail space, in an existing warehouse, offers excess inventory and discontinued material from Ferguson warehouses and showrooms in the Southern California area. Ferguson is a Wolseley plc company, a UK-based distributor of plumbing, HVAC and building materials. More
 
Chicago-based Grainger, facilities maintenance distributor, will open four new facilities, relocate one other, and expand and enhance three existing facilities throughout the U.S. Gulf region. The move is part of the company’s market expansion initiative.

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Distributors Respond to Flooding in the Midwest

Free, Subscriber Only /

Flooding in the Midwest is keeping distributors there busy helping customers recover from the extensive damage the waters brought.
 
One of the hardest hit was Cedar Rapids, Iowa’s second-largest city. The AP reported that about 1,300 city blocks flooded and 24,000 people fled their homes.
 
In Eastern Iowa, where Cedar Rapids is located, distributors worked long hours to help customers minimize potential damage before and during the flooding.
 
In one case, a Ferguson employee made a late-night run in heavy rain to the HVAC/plumbing distributor’s Waterloo, IA, distribution center -50 miles each way -to get mechanical plugs for contractors working to prevent floodwaters from seeping into the local hospital.
 
The distributor worked with …

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Mitigating the Risks of Private Label

Legal Issues in Wholesale Distribution, Operations, Subscriber Only /

This article looks at the most common mistakes distributors make in private label and how they can protect their brand in the marketplace with successful branding.
 
It does not really matter what you call it -private label, private branding, store brand, white label, proprietary brand -coming through on the implied promise of quality or experience that comes with the product line should be front and center. Unfortunately, many distributors who have ventured into private label have not kept a sharp focus on a branding strategy and the risks if not done right.
 
Brand management, says Evergreen Consulting’s Brent Grover, involves creating, growing and protecting a product or group of products sold under a particular name. Here are keys to successful branding, …

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Staples and Corporate Express Deal Changes Retailer’s Focus

Free, Grocery & Foodservice Distribution, Subscriber Only, Top Distributor Sectors /

Ending speculation about the possibility of a hostile takeover, Staples reached a friendly agreement to buy Dutch office supplies distributor Corporate Express NV in a deal valued at €3.1 billion (US$4.8 billion at the current exchange rate). The deal will shift Staples' market focus to 60 percent contract and delivery. 

The decision to change the business focus of Staples followed the numbers: delivery in North America for Staples grew 14 percent in 2007, making it the fastest growing and most profitable of the company's offerings. Retail, which currently makes up 60 percent of Staples' business, has been struggling in the current economy.

In addition to the dramatic growth of delivery and contract services, the acquisition provides opportunity to expand …

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The Ups and Downs of an ESOP

Management, Strategy, Subscriber Only /

Over the past 10 years, the U.S. has seen solid growth in the number of companies with Employee Stock Ownership Plans in place, increasing overall by nearly 30 percent since 1999, according to one national group. One industry expert says the distribution sector is following that trend. This article looks at the benefits and challenges to moving forward with an ESOP.
 
More companies are starting to look into ESOPs not only as an exit strategy -though that remains the No. 1 impetus -but also as a way to receive tax benefits, fend off purchase by a competitor or improve employee productivity and retention. However, a unique set of challenges comes with those benefits.
 
The non-profit National Center for Employee Ownership estimates that new companies establish …

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