Jenel Stelton-Holtmeier, Author at Modern Distribution Management

DXP Enterprises: Supply Chain Services, Repair Remain Strong

When sales declined 11 percent in January, industrial distributor DXP Enterprises turned to Plan B: Expand products and services, grab market share and reduce the bets on the table. The plan may not be unique but the fact that it is already working – February and March results improved, according to President and CEO David Little – offers a positive outlook for the distributor for the rest of 2009.

The worst-case scenario presented during its year-end conference call by the distributor of pumping, supply chain management and MROP products and services was for sales to be down 20 percent in 2009. That’s based on multiplying January’s results by 12 months, Little says.

“There’s not a lot of clarity on what’s …

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March 25, 2009

Economic Trends

Global Report: Mexico Hit by Export Slowdown to U.S.

This is part of an MDM series of articles looking at growth opportunities globally.

The remaining optimism at the beginning of the global financial and credit crisis very often came from emerging markets. Though those markets’ growth slowed, they still saw growth, contrary to the negative trends seen in the U.S. Growth forecasts for Brazil, for example, were revised downward, but remained positive, and India continued to see investment growth.

And another emerging market – Mexico – continued to steadily plod along even as its trading partners suffered from a barrage of bad news. The picture has since darkened for many of these countries.

Until a few months ago, it was believed that the emerging markets, and …

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March 25, 2009

Economic Trends

Economic Indexes Continue Downward Trend

Economic indicators continued their downward trend in February, according to The Conference Board and Statistics Canada.

In the U.S., all three indicators from The Conference Board – the Leading Economic Index, Coincident Economic Index and the Lagging Economic index – declined by 0.4% for the month. The LEI has fallen 2.1% in the past six months; the CEI has dropped 3.1%.

Canada’s February composite leading index fell 1.1% after a 0.9 percent decrease in January, with 9 of the 10 components declining. The housing and stock markets continued to post the largest declines, while losses in manufacturing steepened as the auto industry began to implement extensive shutdowns at the turn of the year. New orders in …

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March 24, 2009

Economic Trends

A New Model Needed in the Steel Industry

Steel prices have been wild this past year – from record highs in mid-July to the current barely-breakeven lows. Steelmakers have seen a dramatic decline in demand, with global output sinking about 25% in January and North American output down 50%, according to Reuters. The unprecedented volatility has left many people related to the steel industry wondering where things might go next.

While no one knows that answer, what they can do is prepare for the new economic reality that will come out of this global financial and economic crisis. This was the message presented by Pierre Mangers of PricewaterhouseCoopers Luxembourg at the Handelsblatt Stahlmarkt conference in Germany earlier this month.

Mangers told attendees that the steel industry needs a new …

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March 16, 2009

Economic Trends

An Unintended Consequence of Lean

For years, lean has been a hot topic among manufacturers as a way to streamline businesses, operate more efficiently and cut costs.

But now that the recession is in full swing and uncertainty about the end looms, companies who have gone lean are facing an unintended consequence of that course of action: With a workforce that has already been trimmed and specially trained, where can you cut to save money?

Broad-based layoffs aren’t an option in those situations, according to a recent article at WSJ.com (read the full article here). Companies like Parker Hannifin have been trying to make cuts in other ways – such as reducing hours or cutting pay – but that may …

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March 10, 2009

Building Materials/Construction

Wolseley to Exit Stock Building Supply

Wolseley examines options for its beleaguered U.S. building materials business unit, which despite dramatic cost reductions continues to be a significant drag on the group’s overall performance.

UK-based distributor Wolseley plc is once again looking to exit its U.S.-based Stock Building Supply operations, this time by Aug. 1, 2009. Even after extensive cost-cutting measures last fall that included reducing headcount by an additional 3,000 and closing 86 branches, the business lost $246 million last year.

Stock Building Supply is heavily reliant on housing starts in the U.S., which declined from around 750,000 in Oct. 2008 to about 460,000 in January.

Enough is enough, John Whybrow, chairman of the board, says in a Webcast …

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March 10, 2009

Economic Trends

Suppliers to Automakers May Need Help, Too

We’ve been hearing the news for month: the U.S. Big Three automakers are in trouble. Suppliers to the automakers are also struggling.

According to a recent article at Forbes.com, even if the government bailouts succeed in heading off failure for Chrysler, GM and even Ford (though it says it doesn’t need any bailout money yet), the industry may fail "from the bottom up" if suppliers don’t receive help as well.

The author writes:
"With credit markets all but frozen, bankrupt suppliers wouldn’t be likely to obtain debtor-in-possession financing to stay in business during bankruptcy reorganization. Instead, many would be forced to liquidate. That would put the carmakers in a jam, because they can’t easily get the missing parts from …

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March 9, 2009

Companies

Wolseley’s Chip Hornsby: Realism, Fortitude Key In Today’s Times

Chip Hornsby, CEO of Wolseley plc, recently spoke at the National Association for Wholesaler-Distributors executive summit about Managing in Today’s Turbulent Economic Environment. In his speech, he offered five concepts executives need to live by in order to address looming questions brought about by today’s economic uncertainty.

Realism: Clearly identify problems for what they are and immediately assess them for the damage they potentially can cause.

Fortitude: “Do what has to be done to deal head-on with our business problems, no matter how unpleasant.”

Proactivity: “Address issues early, directly, and often.”

Perseverance: “See …

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March 4, 2009

Economic Trends

Latest Fed Beige Book: Economic Weakness Deepens

The Federal Reserve Board’s latest Beige Book report was released this week, and the results are in line with reports from other agencies: the U.S. economy continued to deteriorate in January and February.

The report, a compilation of commentaries from each of the 12 Federal Reserve Districts, states that 10 of the 12 districts indicated weaker conditions or declines in economic activity, while Philadelphia and Chicago reported their regional economies remained weak.

Here’s the overview: (Read the full report.)

Deterioration was broad-based, with only a few exceptions, including basic food production and pharmaceuticals. …

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March 4, 2009

Economic Trends

Survey: Many Companies Have Not Yet Cut Staff

On almost any given day, another company is announcing another round of layoffs in response to the recession. But even with the sky-high numbers we’re seeing, some analysts are beginning to say that it’s not as bad as it could be.

A recent survey conducted for Towers Perrin showed that companies have been taking a more measured approach to cutting costs, looking at a variety of options before resorting to layoffs. Of the 513 companies who responded to the survey, only 11% said they had made significant reductions in headcount (defined as 10% or more of the workforce). That said, 19% are now considering significant reductions or have such reductions planned.

Other methods being utilized include: hiring freezes or reductions, cutting travel and …

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February 24, 2009

Economic Trends

Distributors Left with High Levels of Devalued Inventory

The convergence of declining demand and rapidly deflating commodity prices has left many distributors holding onto significantly devalued inventory, no matter how good their inventory management systems were.

Why? Because distributors began stockpiling last year as prices climbed. When the prices plummeted, that stockpile didn’t look quite as good. Inventory levels jumped $6.2 billion in the fourth quarter, according to the U.S. Commerce Department.

(The Wall Street Journal recently ran an article, Firms Race to Regain Control Over Inventories, looking at how manufacturers are approaching the growing inventory problem.)

There are ways to mitigate this …

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February 10, 2009

Economic Trends

Mitigating Commodity Deflation

While many consumers were cheering the drop in the price of oil this fall, the sentiment was mixed when it came to wholesaler-distributors.

Certainly, transportation costs may come down – particularly for distributors who rely on their own fleets for delivery. But for those who sell oil-based products like plastics and industrial lubricants, the value of inventory has also plummeted.

The trend is not limited to oil. The prices of most products on the commodities markets are falling as the world economy continues its downward spiral. Copper has lost more than 60 percent of its value since last summer; lumber has fallen to the lowest prices in 20 years. Corn and wheat saw similar spikes and falls in the past year.

The bubble has …

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February 10, 2009

Economic Trends

On Renegotiating Contracts, Leases to Cut Costs

In today’s conditions, everyone is looking for ways to cut costs. One of the recommendations made by experts is to renegotiate set contracts. (See what Alan Beaulieu had to say on the subject of renegotiation in Economic Forecast Places Start of Recovery in 2010.)

How realistic is this method in cutting costs? According to a recent article on WSJ.com, companies have been able to negotiate savings of up to 15% of their operating costs by renegotiating leases. If you’re a good paying customer, there’s a chance your suppliers will also give you a discount if you agree to terms that can also help them, such as …

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February 3, 2009

Economic Trends

Small Distributors Look For Opportunity, Survival In Tough Economy

It’s not all doom and gloom in the industrial distribution world. According to the Nashville Business Journal, some companies are still finding opportunity. A new startup industrial distributor Alliance Distribution Partners LLC picked Gallatin, TN, to be its headquarters and will begin employing people immediately. (Full article can be read here.)

Though small – the company will employ 15 people initially, with expansion plans already in place to increase the workforce to 50 over the next two years – the move is a sign that there may still be opportunity for smaller distributors in certain markets. Of course, it’s yet to be seen whether the company …

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January 27, 2009

Economic Trends

After Strong 2008, Brazil’s Growth Slows

During the first part of 2008, the Brazilian economy experienced high growth in most sectors with an outlook for that expansion to continue. The first nine months saw loosened credit conditions, rising internal demand and strong export activity despite unrelenting currency appreciation.

But the fourth quarter was a different story. Growth slowed at an alarming rate.

Though the country is still in positive territory, the fourth quarter of 2008 was surprisingly on the downside, according to Fernando Sedano, an economic consultant for Manufacturers Alliance/MAPI based in Brazil. “I expect a tough first half of 2009.”

On the other hand, international companies that are already doing business there are seeing continued …

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January 25, 2009

Free

Conversation Over Shipping Options Doesn’t Happen Enough

Stop me if you’ve heard this one: A manufacturer, a distributor and a logistics coordinator are making a deal. The manufacturer says to the distributor, How do you want that delivered? The distributor says, “Overnight it to me on Tuesday; I need it Wednesday.” Meanwhile, the logistics coordinator mutters under his breath about how much money could have been saved by sending it LTL Monday night.

Sound familiar? The first part might, but what about the second? Did you know there was another option that could meet your needs and save you money?

For a recent article, three different players – Dan Muller of The Timken Company (the manufacturer), Doug Savage of Bearing Service Inc. (the distributor), and Don Louis of CoLinx (the …

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January 12, 2009

Features

Why LTL May Be A Better Option

Distributors can improve shipping predictability and decrease costs by reevaluating how they receive product from their suppliers. This article looks at how LTL is a little-considered option but can cost half that of parcel delivery and a third of overnight air deliveries.

Beyond renegotiating existing contracts, many wholesale distribution executives don't consider changes that can be made to shipping procedures to save money and improve cash flow.

It's like this is the way we've been doing it for so long, we don't think that there is another way, says Doug Savage, president of Bearing Service Inc., Livonia, MI.

But reevaluating shipping options and processes to get product from the manufacturer to the distributor can lead …

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January 10, 2009

Finance

Cardinal Health: The Evolution of a Spinoff

Evolution was the force behind the decision to spin-off one of drug distributor Cardinal Health’s two divisions, according to CEO Kerry Clark in an article that appeared in Columbus Business First. The spinoff -announced in September -is expected to be completed by June.

The restructuring turned an organization that was operating as several different companies under one umbrella into a more cohesive organization. The split made sense based on the two focuses: The Healthcare Supply Chain Services distributes drugs and supplies; Clinical and Medical Products researches and produces infusion pumps and drug-dispensing systems.

“The …

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December 31, 2008

Free

One Distributor’s Experience in Greening Its Warehouse

The desire to go green often is offset by concerns about the upfront cost of the necessary changes. Knoxville Wholesale Furniture, Knoxville, TN, spent $125,000 on three machines to process Styrofoam, plastic and cardboard for recycling, according to a recent article at knoxnews.com.

But the payback expected is more than worth that investment, according to owner Tim Harris. The company is already seeing tangible results from that purchase and other actions taken to green the wholesaler’s primary location: Instead of six loads of trash a day, the company empties one Dumpster of trash into the local landfill each week -slashing waste management costs. With the cost savings realized, Harris expects the investment to pay for itself in one year.

For more details …

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December 29, 2008

Economic Trends

A Few Bright Spots in Economic Picture

Optimism is a rare thing in today’s economy. Companies around the world are shuttering plants or cutting production to combat the recession that began in the U.S. and has since spread to other countries and continents. But according to the results of McKinsey Quarterly’s Economic Conditions Snapshot, December 2008, there are a few bright spots out there.

About 27% of companies responding to the survey are considering positive strategic moves, like introducing new products or expanding markets, in the coming months. About 13% are planning to do so without implementing any defensive measures, such as cutting capital spending.

And smaller and private companies appear to be doing better than their large and public counterparts. Executives of 62% of the small or …

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December 23, 2008

Posts By Jenel Stelton-Holtmeier

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