June 2009

A Compensation Strategy Review

Features, Human Resources in Wholesale Distribution, Legal Issues in Wholesale Distribution, Management, Operations, Strategy, Subscriber Only / Patti Redden

Wholesale distribution executives should not underestimate the impact of changes to compensation programs on their work force. To manage this sensitive area in these difficult times, a smart, proactive approach is needed to effectively manage human capital.

With today’s economic environment and turbulent times, it is no surprise that many companies have had to reshape their business as executives scramble to keep their companies afloat. Business leaders are challenged to find a balance between current finances and long-term strategy.

These business decisions also require a close look at the deployment of human resources, including difficult decisions regarding layoffs, restructuring compensation programs and pay practices, reductions in benefits, …

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Watsco, Carrier Corp. Go Forward with Joint Venture

Companies, Finance, HVACR, Mergers & Acquisitions, Plumbing Products & PVF Distribution, Subscriber Only, Top Distributor Sectors / Lindsay Young

HVAC distributor Watsco Inc. and air conditioning product manufacturer Carrier Corp., a unit of United Technologies Corp., are moving forward with their plans to form a joint venture that will distribute Carrier, Bryant and Payne products throughout the U.S. Sunbelt, Latin America and the Caribbean.

The U.S. Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 related to the joint venture.

When it closes, the deal will nearly double Watsco’s sales. Watsco is a distributor of air conditioning, heating and refrigeration equipment, parts and supplies in the HVAC/R industry, operating 412 locations serving 40,000 customers in 34 states.

Watsco and Carrier’s …

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Commentary: Lessons from Detroit for Distributors

Free, Management, Perspective, Strategy, Subscriber Only / Tom Gale

Many of our readers are seeing direct impacts from the wrenching transformation taking place in the U.S. auto industry. While it is easy to focus on the negative and sensational news our national media regurgitates constantly, there are some important takeaways from this situation for distributors and manufacturers who sell through independent distribution channels.

First: The recent financial meltdown did not cause the downfall of the Big Three. The financial crisis precipitated what arguably was more than two decades in the making. Remember the ghost of Ignacio Lopez, GM’s purchasing chief in the 1990s?

In the 20-plus years I have been covering industrial distribution channels, the supply-chain relationship between these manufacturers and their …

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MDM News Digest 3911

Subscriber Only / MDM Staff

UK-based building materials distributor Wolseley plc reported sales for the nine months ended April 30, 2009, were £12 billion (US$19.2 billion), up 0.2% year-over-year. Excluding the impact of foreign currency, sales were down 15%. Pre-tax profit fell 80% – 88% in constant dollars – to £72 million (US$115 million). Continued weakness across most markets, led by the commercial and industrial sectors in the U.S., and significant declines in the UK and Ireland and Nordic region, have led to continued cost reductions for the distributor. In the nine-month period, Wolseley has reduced headcount by 13,746 worldwide – including the elimination of 5,317 positions through the exit from Stock Building Supply in the U.S., effective …

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MDM June 10, 2009

Subscriber Only / MDM Staff

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 seven years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to subscribe.

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Electronics Distributors Say Demand Weak

Electrical, Free, Subscriber Only, Top Distributor Sectors / Lindsay Young

Electronics distributors were the focus of a recent article by Reuters, which said that the companies reported no improvement in demand except in China and a few niche areas. But the article offered some relatively positive news. The supply chain is moving again "after practically grinding to a halt."

Still, the CEO of Ingram Micro – Greg Spierkel – told Reuters that "green-shoot messages" are premature. He went so far as to say that the industry is in the worst stages, and if it has not yet hit bottom, it will in the coming months. Avnet’s CEO had similar sentiments.

The article did say that distributors expect to benefit from falling …

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Fed Beige Book: Downward Economic Trend Shows Signs of Moderating

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

According to the Federal Reserve Beige Book economic report released Wednesday, economic conditions remained weak or deteriorated further during the period from mid-April through May, though five Districts noted the downward trend is showing signs of moderating. Though expectations of contacts within the Districts have improved, economic activity is not expected to increase substantially through the end of the year.

Here is an overview of the report:

Manufacturing declined or remained weak in most Districts. New York characterized the sector as having stabilized, while Dallas mentioned signs of stabilization. In contrast, Richmond reported a rise in both new orders and shipments.

Transportation contacts in most Districts say that …

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MDM Interview: Auto Bankruptcies Hit the Channel

Features, Subscriber Only, Top Distributor Sectors / MDM Staff

After more than 30 years in manufacturing, Douglas K. Woods left his position as president of Parlec Inc., to become president of the Association of Manufacturing Technology. Woods has a long history in the machine tool industry, working at all levels, from small tool and die shops to multibillion-dollar machine tool corporations. Woods recently spoke with MDM Associate Editor Jenel Stelton-Holtmeier about the impact of the auto industry bankruptcies and financial woes in other sectors, the role of AMT in the channel, and trends in manufacturing technology.

This is the first of a series of interviews with association presidents about trends in industrial, construction and other distribution markets.

MDM: In just the past few months, both …

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HD Supply White Cap’s Growth Plans

Building Materials/Construction, Companies, Features, Finance, Mergers & Acquisitions, Subscriber Only, Top Distributor Sectors / Jenel Stelton-Holtmeier

With the acquisition of ORCO Construction Supply, HD Supply White Cap Construction Supply business is taking advantage of ways to grow in a tough marketplace. ORCO filed for bankruptcy protection at the end of April; it will surely not be the last distributor to be purchased out of bankruptcy. White Cap president Tom Lazzaro spoke with MDM about the acquisition and other initiatives the distributor is pursuing.

CEO Joe DeAngelo told MDM after Home Depot sold HD Supply in 2007 that acquisitions would remain a key growth strategy for the wholesaler-distributor. He saw plenty of opportunities in particular for the company’s specialty construction business, White Cap Construction Supply.

Yet as the marketplace crumbled – led by the …

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MDM Industrial Inflation Index: April 2009

Economic Trends, Research & Analytics, Subscriber Only, Top Distributor Sectors / MDM Staff

Modern Distribution Management’s April Inflation Index, which measures a cross-section of industrial supplies, was down 0.11% from the previous month, and up 5.73% from April 2008.

Please click below to view a print-ready pdf of the MDM Inflation Index for April 2009, listing the 10 individual product categories that make up the index. …

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DGI Supply to Acquire Tool Crib Supply

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

Industrial distributor DGI Supply, a DoAll company, has agreed to acquire Tool Crib Supply, an industrial distributor based in Bensenville, IL, according to a report by Quality Magazine.

Tool Crib Supply’s customer base is mainly in metalworking. DGI’s plan is to combine Tool Crib Supply’s inventory with its own and move order fulfillment to Wheeling, IL, its home …

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Wholesale Revenues Fall 0.4% in April

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

April 2009 wholesale revenues were $309.4 billion, down 0.4% from March and 19.5% from April 2008, according to the U.S. Census Bureau.

April sales of durable goods were down 1.9% from last month and were down 23.4% from a year ago. Sales of motor vehicle and motor vehicle parts and supplies, were down 7.8% from last month and sales of metals and minerals, except petroleum were down 6.5%. Sales of nondurable goods were up 0.8% from last month, but were down 16.1% from last year.

Sales of farm product raw materials were up 10.5% from last month and sales of beer, wine, and distilled alcoholic beverages were up 2.6%.

Total inventories were $405.4 billion at the end of April, down 1.4% from the revised March level and were down 6.2% from a year ago. …

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Employers Remain Cautious on Hiring Plans for the 3Q

Free, Human Resources in Wholesale Distribution, Operations, Subscriber Only / Lindsay Young

Survey results released today by staffing firm Manpower Inc. show that employers are still reluctant to add staff in the third quarter 2009. The hiring picture in the U.S. is unchanged from the survey’s second-quarter results, but the rate of labor market contraction is expected to level off.

The firm suggests that the results imply the "worst in behind us," though the survey covered mostly hiring plans and not downsizing. So while the analysis itself may be sitting on a shaky foundation, the overall results do show that globally, the employers surveyed remain cautious and are waiting to see whether the third quarter plays out better than the first and second …

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Chicago Fed Forecast: GDP to Bounce Back in 2010

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

At the 16^th annual Automotive Outlook Symposium sponsored by the Chicago Federal Reserve, the following median economic forecast of participants was presented:

"The nation’s economic growth in 2009 will be substantially slower than in 2008, inflation will turn negative (because of lower energy prices and the large amount of slack in the economy), and the unemployment rate will rise substantially. Real GDP, after having fallen 0.8% last year, is forecasted to decrease 1.8% this year and then rise to an above-trend rate of 3.2% in 2010. After rising 1.5% last year, inflation, as measured by the Consumer Price Index, is expected decline 0.5% this year and then rise at a moderate pace of 1.6% in 2010. The unemployment rate, after having …

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Grainger May Sales Fall 10%

Companies, Facilities Maintenance (MRO), Free, News, Subscriber Only, Top Distributor Sectors / MDM Staff

Grainger, Chicago, IL, reported daily sales in May 2009 declined 10% versus May 2008, primarily the result of weak demand across all customer end-markets and geographies. Foreign exchange negatively affected sales by approximately two percentage points.

Sales from pandemic related product as a result of the H1N1 virus outbreak positively affected sales by one percentage point.

U.S. sales were down 9%; Canadian sales were down 14% (down 1% in local currency). Sales from Other Businesses were down …

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Watsco, Carrier Corp. Joint Venture Moves Forward

Companies, Finance, Free, HVACR, Mergers & Acquisitions, News, Plumbing Products & PVF Distribution, Subscriber Only, Top Distributor Sectors / MDM Staff

HVAC distributor Watsco Inc. and manufacturer Carrier Corp., a unit of United Technologies Corp., are moving forward with their plans to form a joint venture that will distribute Carrier, Bryant and Payne products throughout the U.S. Sunbelt, Latin America and the Caribbean.

The U.S. Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 related to the joint venture.

Watsco and Carrier’s joint venture will be named Carrier Enterprises LLC. The venture will operate 110 locations in 20 states and Puerto Rico, the Caribbean and Latin America and serve more than 19,000 air conditioning and heating contractors.

Carrier will contribute 95 locations in the U.S. Sunbelt and …

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April Machine Tool Consumption Down 70.7% YTD

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

April U.S. manufacturing technology consumption totaled $97.04 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 41.5% from March and down 77.7% from the total of $435.34 million reported for April 2008. With a year-to-date total of $497.40 million, 2009 is down 70.7% compared with 2008.

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

Industry executives have speculated whether we have reached the bottom of this current economic downturn, said Douglas K. Woods, AMT president. “The 41% drop in …

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Grainger Agrees to Acquire Full Ownership of India Joint Venture

Companies, Facilities Maintenance (MRO), Free, News, Subscriber Only, Top Distributor Sectors / MDM Staff

Chicago, IL-based Grainger, broad line distributor of facilities maintenance products, has agreed to acquire full ownership of its joint venture in India, Asia Pacific Brands India Private Limited, an industrial and electrical wholesaler-distributor. Grainger is paying $1.2 million.

"We are excited about growing our business in India," said Grainger’s CEO Jim Ryan. "As that economy gets more competitive, Indian companies want efficient and reliable ways to get the quality products they need to keep their facilities running and their employees safe. With annual revenues of approximately $30 million, Asia Pacific will provide us a starting position in a large, high-potential MRO market."

Late last year, the company wrote down its investment in …

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Canadian Building Permits Fall 5.4% in April

Building Materials/Construction, Economic Trends, Free, News, Research & Analytics, Subscriber Only, Top Distributor Sectors / MDM Staff

Canadian contractors took out $4.3 billion in building permits in April, down 5.4% from March. A 14.4% decline in non-residential permits in April more than offset a 4.1% increase in the value of residential permits.

In the non-residential sector, the value of permits fell 14.4% to $2.0 billion. The decrease was largely a result of lower commercial construction intentions in Ontario and lower institutional construction intentions in British Columbia.

In the residential sector, the value of permits rose 4.1% to $2.3 billion. This was attributable to increases in single-family permits in eight provinces. The total value of intentions was down in four provinces: Ontario, British Columbia, Newfoundland and Labrador, and …

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Schneider Electric Agrees To Buy Indian Manufacturer

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

France-based Schneider Electric has agreed to acquire Indian manufacturer Conzerv Systems. Conzerv designs and manufactures technologies for energy audits and energy management systems, primarily for industrial and commercial end-users.

Conzerv generates sales in excess of €10 million annually and employs 337 people.

With this acquisition, Schneider Electric will significantly reinforce its position to capture opportunities in the fast growing energy efficiency field in India. Conzerv products will also expand Schneider Electric’s offering in power monitoring for its international markets.

Schneider Electric has locations in more than 100 …

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June 2009

A Compensation Strategy Review

Watsco, Carrier Corp. Go Forward with Joint Venture

Commentary: Lessons from Detroit for Distributors

MDM News Digest 3911

MDM June 10, 2009

Electronics Distributors Say Demand Weak

Fed Beige Book: Downward Economic Trend Shows Signs of Moderating

MDM Interview: Auto Bankruptcies Hit the Channel

HD Supply White Cap’s Growth Plans

MDM Industrial Inflation Index: April 2009

DGI Supply to Acquire Tool Crib Supply

Wholesale Revenues Fall 0.4% in April

Employers Remain Cautious on Hiring Plans for the 3Q

Chicago Fed Forecast: GDP to Bounce Back in 2010

Grainger May Sales Fall 10%

Watsco, Carrier Corp. Joint Venture Moves Forward

April Machine Tool Consumption Down 70.7% YTD

Grainger Agrees to Acquire Full Ownership of India Joint Venture

Canadian Building Permits Fall 5.4% in April

Schneider Electric Agrees To Buy Indian Manufacturer

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