September 2008 - Page 4 of 4 - Modern Distribution Management

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September 2008

Commentary: A Difference in Degrees

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As a pivot point in the flow of products from the point of manufacturing to end use, distributors have several key roles -scout, gatekeeper, product and solution provider, marketer, arbiter. Every successful distributor combines these roles into a unique set of skills that creates value for customers as well as suppliers. Distributors create the most efficient market system into highly fragmented industries and local economies by effectively managing these market relationships both upstream and down. It's a fairly simple equation that is complex to execute well.
 
Not that most distributors have time to sit around and ponder their place in the universe. But that's just it. The interview that leads this issue touches on a key differentiator that separates a relatively few ...

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Anixter Agrees to Buy World Class Wire & Cable

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Anixter International Inc., Glenview, IL, a distributor of communication products, electrical and electronic wire &cable, fasteners and other small parts, has agreed to acquire World Class Wire &Cable Inc., Milwaukee, WI, for $62 million in cash and the assumption of debt.
 
World Class is a distributor of electrical wire and cable. It has a single operating site in Waukesha, WI, and has about $60 million in annual sales. The acquisition will complement Anixter's presence in the Midwest.
 
Anixter International has locations in 248 cities in 50 ...

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Pricing, M&A in an Uncertain Economy

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When it comes to making decisions in an uncertain market economy, executives sometimes throw out the processes that have brought success during the up times. According to two recent articles from The McKinsey Quarterly, that is the wrong move. Instead, executives should be aware of current market forces while at the same time moving forward under the tried and true principles that have served them well in the past.
 
In its recently posted article, M&A Strategies in a Down Market, McKinsey analysts say that though executives are encouraged to "invest in a downturn," they've found that most executives shy away from doing so in an uncertain ...

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Canadian Building Permits Increase in July

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Source: Statistics Canada
 
After declining 5.3% in June, the value of building permits increased 1.8% to $6.4 billion in July, mainly as a result of multi-family dwelling permits in Central Canada and industrial construction intentions in Saskatchewan.

In the residential sector, the value of building permits rose 2.7% to $3.7 billion, mainly as a result of an increase in the value of multi-family dwelling permits in Ontario, Quebec and Manitoba.
In the non-residential sector, the value of building permits edged up 0.6% to $2.7 billion. An increase in industrial construction intentions more than offset declines in both commercial and institutional permits.

Residential: Increase in ...

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Parker Hannifin Buys German Manufacturer

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Parker Hannifin Corp., Cleveland, OH, a manufacturer of motion and control technologies, has acquired Lingk &Sturzebecher of Stuhr, Germany, a manufacturer of light weight carbon fiber high pressure cylinders and actuators including those based on composite technologies, for aerospace, mobile and industrial markets.

This composite material technology will enable Parker to develop hydraulic components with significantly reduced energy burden for the power systems of machines equipped with hydraulics.
 
Terms of the transaction were not disclosed. In the fiscal year ended Dec. 31, 2007, L&S achieved 7.6 million euros (approximately US$11.2 million) in sales.
 
L&S will become part of the global operations of Parker's hydraulic technology business. It will ...

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Baldor Electric Buys Poulies Maska

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Baldor Electric Company, Fort Smith, AR, a manufacturer of industrial electric motors, power transmission products, drives and generators, has acquired Poulies Maska, Inc., Ste-Claire, Quebec.
 
Maska, a manufacturer of sheaves, bushings, couplings and related mechanical power transmission components, will increase Baldor's presence in the power transmission market with its complementary products, said John McFarland, CEO of Baldor. Additionally, the acquisition provides Baldor with a second plant in China to support international ...

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Federal Reserve Beige Book: Consumer Spending Slowing

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According to the Federal Reserve Beige Book economic report release Wednesday, consumer spending is slowing. The report is based on information from 12 Federal Reserve Districts in the U.S.

Here's a broad overview of what they said. (For more, including district detail, click here.)

Overall, reports indicate economic activity is slow and business conditions are "weak," "soft" or "subdued." Not all markets are seeing this, however, as Boston and New York had signs of stabilization and Kansas City has seen a slight improvement.

Auto sales are falling or steady at low levels; tourism was mixed; and demand for services has lessened. The transportation ...

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Will Global Conditions Bring Back Offshore Production?

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Are global conditions at a tipping point? Should offshore production move back home -or at least closer to home? That's what manufacturers need to consider, says this article in the McKinsey Quarterly. "Turbulent" economic winds are undermining some of the factors that pushed production offshore in the first place, according to McKinsey.
 
The article presents some interesting numbers, based on the fact that crude oil has risen from $28 a barrel in 2003 to more than $100 a barrel now: The cost of shipping a standard 40-foot container has tripled since 2000. Wage inflation and a weaker dollar aren't helping matters. Wages in China have increased on ...

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Manufacturing Contracts in August

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Manufacturing contracted in August, according to the latest Manufacturing ISM Report on Business.
 
The PMI indicates a slight decline in manufacturing during August. This continues the 2008 trend toward negligible growth or contraction each month, but ultimately results in very little overall change in the sector, the Institute for Supply Management reports. This month's report shows the first signs of lower prices as the Prices Index fell significantly, though still at an inflationary level. Export orders picked up additional momentum.
 
Five industries reporting growth in August included Paper Products; Computer &Electronic Products; Miscellaneous Manufacturing; Apparel, Leather &Allied Products; and Chemical Products. The industries reporting contraction in ...

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H.B. Fuller Buys Adhesives Supplier in Egypt

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H.B. Fuller Company, St. Paul, MN, has acquired Egymelt, a manufacturer and marketer of hot melt and specialty water-based adhesives headquartered in Cairo, Egypt.
 
The acquisition of Egymelt establishes our geographic presence in one of the fastest-growing regions in the world, further expanding our manufacturing footprint in a manner consistent with our five-year strategic plan,"said Michele Volpi, president and CEO. "This transaction will allow us to enhance our service offering to global accounts, improve the economics of existing sales to the region and augment our current growth profile."
 
Egymelt employs 21 people and had net revenue in 2007 of $4 million. The principle assets acquired include a manufacturing facility, equipment, and inventory. The results ...

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Motion Industries Acquires Drago Supply Company

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Motion Industries, the industrial parts group of Genuine Parts Company, Atlanta, GA, has acquired Drago Supply Company, a regional industrial supplies distributor headquartered in Port Arthur, TX. Drago Supply has eight locations in Texas, Arkansas and Louisiana. Motion expects the purchase to generate annual revenues of $75 million.
 
The acquisition of Drago allows Motion Industries to continue its expansion in the industrial supplies market, an area where we see significant growth opportunities," said Thomas C. Gallagher, president and CEO of Genuine Parts Company, "Drago is a well-established company with an excellent reputation among their industrial and commercial customer base throughout the south central U.S. Together, Motion Industries and Drago are positioned to ...

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Taking Stock of Inventory Practices

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According to Jon Schreibfeder, president of Effective Inventory Management, distributors are taking a good hard look at their inventory management practices right now in light of uncertain economic conditions. In a recent interview with MDM, he said that effective inventory management practices can get lost in the shuffle when sales are soaring.
 
Schreibfeder told MDM:
 
"I cannot think of a sector that is not looking at their inventory and becoming more conservative about how they're stocking products. The challenge is that they still have to have what their customers need. They're putting in more thought and using more tools. A lot of distributors have a good set of tools in their ...

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Robert Kaplan: Take Care Where You Cut When Times Are Tough

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I recently interviewed top management expert, Harvard Business School Professor Robert Kaplan, one of the originators of the performance management system the Balanced Scorecard. (Here's his biography on the Harvard Web site.) He's come out with another book (with David Norton) -The Execution Premium: Linking Strategy to Operations for Competitive Advantage.
 
The concept behind the book is to show organizations how they can mesh strategy and operations to attain corporate goals using a deliberate six-stage management process. Kaplan says that many organizations try to ...

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Precision Castparts Agrees to Buy Airdrome Holdings

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Precision Castparts Corp., Portland, OR, has agreed to acquire Airdrome Holdings, LLC, which consists of Airdrome Precision Components and AF Aerospace Ltd. 
 
APC, Long Beach, CA, is a supplier of hydraulic and pneumatic fluid fittings for airframe applications. AFA, Rugby, England, manufactures machined components for aerospace applications, including fittings and other fluid conveyance products, ultra-high tensile bolts, and machined details. Fluid fittings, manufactured in nickel, titanium, and stainless steel alloys, are the connectors for hoses transporting fuel, hydraulic fluid, and pneumatic pressure throughout an aircraft. 
 
The acquisition of Airdrome continues to expand and enhance our critical aerospace fastener product portfolio,"said Mark ...

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