trend reports have been up every quarter since the first quarter 2003.
“Explosive growth in residential housing has been driving these increases, but now the speculative housing bubble has burst. With home sales plummeting and median home prices falling for the first time in more than 10 years, the downturn in real estate is already impacting the overall economy,” he said.
According to the Dodge report, residential housing was off 8 percent in the first nine months of the year.
But Hahn said in some areas things are looking up. Nonresidential building is up 13 percent and non-building construction is up 16 percent. Total construction is ahead 1 percent for the year. In nonresidential, warehouses, hotels, amusement projects, churches and health care facilities are leading the way, Hahn reported. In non-building, highway and bridge expansion is ahead 11 percent; utilities and water supply construction are also ahead significantly.
Geographically, most U.S. increases are in single digits except for the South Central states, which are ahead 12 percent. Many distributors at the STAFDA convention said they had considered diversifying or had already diversified into nonresidential construction.
“The outlook for 2007 varies by industry, but an overriding concern is that if autos and housing both stay depressed, the economy faces recessionary pressure,” Hahn said.
Speeches:
Georgia Foley, STAFDA executive director
Doug Hahn, president (Hahn Systems Inc.)
Jeff Campbell, manufacturer member (Irwin Industrial Tools)
The Specialty Tools and Fasteners Distributors Association continues to grow participation in its annual trade show and convention. STAFDA had more than 6,100 participants at its November 2006 show in Las Vegas, NV.
Despite a slowdown in residential housing this year, the show was still the association’s largest ever with 933 booths, 14 percent more than the previous record 2005 in Baltimore. About 27 percent of exhibitors were new to STAFDA this year.
STAFDA’s current membership stands at 2,782 companies, including 1,211 distributors, 1,205 associates, 241 rep agents and 25 affiliates or trade press.
The organization has members in more than 30 countries.
Here are some notes of interest from speeches given at the opening of the show.
Supplier-Distributor Relations
In his State of the Industry speech, Jeff Campbell, vice president of sales, Irwin & Lenox Industrial Tools, took on offshoring, inflated prices and supplier relationships with distributors.
Top industry concerns include raw material availability and inflated prices, as well as a shortage of skilled labor. “From a manufacturer’s perspective, I think suppliers have done a good job keeping pricing relatively low compared to the real cost of goods, not to mention the cost pressures we all have with health insurance premiums, rising energy bills, wages and overall operating expenses.”
To offset cost pressures, suppliers are focused on improving productivity and reducing labor costs in plants. But many manufacturers continue to move to low-cost countries or outsource production, Campbell said. Labor cost is often a significant factor in that decision.
But consumer sensitivity to country of origin is low and continues to decline, he said. The main challenge with outsourcing is the exposure of products to patent infringements and protecting intellectual property. Another challenge, Campbell said, is the 90 to 120 day lead time from offshore countries. “This is especially challenging as some believe unplanned purchases represent more than 50 percent of the commercial and contractor’s daily tool and accessory spend.”
An upside to outsourcing is that as the standard of living increases in countries such as China, the market for products will also grow. Many global manufacturers and large industrial distributors are getting a foothold in these marketplaces.
Campbell also addressed supplier-distributor relationships. “Relationships between suppliers and STAFDA distributors are not where they need to be. Some relationships and levels of partnerships are deteriorating,” he said. Some reasons supplied include big boxes, national chains and Web retailers’ taking suppliers’ time and focus; email culture eroding the personal touch; industry consolidation resulting in attention focused on big distributors; sensitivity around supplier job site activity; and sales support turnover.
“I’m sure all these things have contributed … but when you peel the onion back and take a hard look at the situation, I believe the biggest reason for the tension is that STAFDA suppliers and distributors do pick partners and not everyone is going to be happy, especially when sales and profit dollars are negatively impacted.”
“… The supplier and distributor are not unlike a marriage. For it to work well and last, it depends on communication. Infrequent, bad or no communication equates to a poor relationship. But frequent, good and meaningful communication, including listening by both parties, makes for a great marriage. There is no doubt we can all do a better job at working together … to win more share of the professional contractors’ business.”
State of Construction
Doug Hahn, STAFDA president, and president of Hahn Systems Inc., Indianapolis, IN, reported that STAFDA distributors are coming off three of the best consecutive sales years in memory. STAFDA
