Lindsay Young, Author at Modern Distribution Management - Page 3 of 11

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Finding Opportunity in Inventory

Distributors are slimming down.
 
The sudden drop in sales in November left many distributors with too much inventory and not enough demand. Maximizing cash flow has become the name of the game. To do this, distributors are paring down and better managing inventory. They are shortening their forecasting time frame (to consider just the past three months rather than the past half year or more), analyzing their replenishment processes (in many cases ordering more frequently), improving communication with vendors and returning to basic best practices in inventory management. Many are also digging more deeply into their technology tools to find ways to increase efficiencies in the inventory management …

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Features
Inventory Reductions On Tap

Effective inventory management practices are gaining importance as distributors reduce inventory levels in response to demand drops and a renewed focus on cash flow. This article examines best practices for approaching the task.
 
In mid-November, sales for many distributors – with few exceptions – plummeted. Distributors were caught with excess inventory in an environment of much lower demand.
 
Many distributors are now working down inventory to maximize cash flow. And they have returned to a focus on the basics: accurate forecasting, reliable safety stock parameters, improving communication with vendors and getting a good handle on the product that is already in their warehouses so they can avoid overstocking.
 
A top concern for …

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Economic Trends
Warren Buffet Finds Reason to Be Hopeful in Annual Letter

Berkshire Hathaway Chairman Warren Buffet found reason to be optimistic in his 2008 annual letter to shareholders (released at the end of February and available here).
 
He uses a slew of graphic metaphors – "By year-end, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game." – but threw in some optimism, reminding his shareholders that the country has "faced far worse travails in the past." Among those: two great wars, a dozen or so panics and recessions; virulent inflation leading to a 21½% prime rate in 1980; and the Great Depression, when unemployment was between 15% and 25% for …

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Companies
Graybar & Other Wholesalers On Fortune’s Most Admired List

Fortune magazine’s annual World’s Most Admired Companies list is out.

Of any wholesaler-distributor, Graybar showed up the most. The electrical distributor ranked No. 1 in diversified wholesalers, but also found itself in the top 10 on several breakout lists, including management quality, long-term investment, financial soundness, quality of product and services, use of assets, people management and innovation.

(An interview with Graybar CFO Beatty D’Alessandro was featured in the Feb. 25, 2009, issue of MDM. Read it here.)

Foodservice distributor Sysco also made the financial …

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Companies
For Grainger, Product Expansion Will Continue to Be A Priority

Chicago-based facilities maintenance distributor Grainger won’t be slowing its product expansion anytime soon. According to Fred Costello, vice president-product management, the strategy is a priority going forward.
 
This year, Grainger’s catalog is 64,000 SKUs thicker, or 33% larger than last year’s. Grainger now has 240,000 SKUs available in print, and 300,000 on its Web site. The goal of the product expansion is to fill gaps in its already broad offering and reach out to new customers, in an effort to become a "one-stop shop," Costello tells me.
 
MDM Publisher Tom Gale recently wrote in the Feb. 25 issue of MDM that Grainger has a history of building market share in downturns; Grainger’s …

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Companies
Grainger Plans to Continue Rapid Product Expansion

Chicago, IL-based facilities maintenance distributor Grainger has added 64,000 products to its catalog, along with 27,000 more to its Web site. The additions to the company’s catalog are a 33 percent increase over last year’s 180,000. (Some products were also removed this year.)
 
Grainger now has 240,000 products in its catalog and 300,000 online.
 
In an interview with MDM, Fred Costello, vice president – product management, says Grainger will continue adding products over the next several years.
 
Every catalog will continue to see a similar increase, Costello says.
 
“Product line expansion is a Grainger priority. … I can say with confidence that our Canadian and Mexican business units are also …

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Economic Trends
The Latest Round of Economic Forecasts

Most forecasts put an economic recovery sometime in 2010. Fed Chairman Ben Bernanke reaffirmed that today, although the headlines on his statement (though all accurate) tell slightly different stories:
 
Bernanke: Economy Suffering Severe Contraction (Associated Press)
Bernanke Sees 2010 Recovery Only if Banks Stabilize (Bloomberg)  
Bernanke Says Recession Should End in 2009 (Wall Street Journal)
 
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Economic Trends
Creating a More Flexible Work Force

More ideas on managing in a downturn come from DC Velocity, a magazine focused on logistics.
 
A recent article offered some ideas to build a more flexible work force to better respond to today’s uncertain conditions.
 
Hiring older workers and interns is advice I hear often; many distributors are unaware that a lot of schools have internship programs. You can fill a vacant spot a lower price while training someone who could work for you post-graduation. Older workers are attractive because many are looking for part-time work and they are known to be reliable and productive. What’s more, they require little training if they have worked for you or a similar company their whole lives.
 
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Free
Trends in Business Technology for 2009

A recent McKinsey Quarterly report (registration required) outlined changes it expects to see in business technology this year, including some of the findings MDM found in its distribution-specific report. Businesses in every industry are looking to automate more processes and use more productivity-based tools. E-commerce is becoming more common; however in the distribution world, more larger distributors than smaller have taken advantage of Web-based storefronts, catalog systems and electronic communication with supply chain partners.
 
Businesses are also looking to cut costs in IT, just as they …

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Is It Possible to Avoid Layoffs?

Knowledge@Wharton asks what the strategy is behind recent layoffs in an article on their site. More than half a million jobs have been lost since September outside of the financial services world, the article estimates. The author says that the job cuts "highlight operational weaknesses and strategic issues that have been lurking under the surface for years." And now the downturn has brought those issues to the surface.
 
In the recent MDM Webcast, "Manage the Panic of 2009: New Rules for New Economic Realities, Evergreen Consulting’s Brent Grover told participants that managing cash is key …

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Economic Trends
Moving Past the Cuts

Employees and their managers are on edge these days; uncertainty about jobs, strategic direction and generally the future of the company can breed a wide range of emotions.
 
A recent Wall Street Journal article addressed this, and the advice offered can be used by employees and managers at all levels. The article says that it takes deliberate thought and action” to get past the cuts.
 
The highlights:

Free
Keeping Your Senior Managers

A recent survey shows that engagement among your top executives may be falling faster than any other group of employees, according to the Corporate Executive Board. (Read BusinessWeek article here.)

A CEB survey showed that just 13% of senior executives at the vice president level or higher (down from 29% two years ago) say they are willing to go above and beyond what is expected of them.”
 
CEB speculates that most companies feel that senior leaders are “just grateful to have a job.” But the reality is, “valued players are increasingly likely to be looking around.” According to the survey, one of four …

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Economic Trends
Adam Fein on Surviving the Recession

On his blog, Pembroke Consulting’s Adam Fein gives us his take based on his experiences at the National Association of Wholesaler-Distributors meeting last week on how the best companies are surviving the recession.”
 
He says:
 
“As I see it, the winners are those companies with the will, the skill, and the till to survive this recession. Here are some specific ideas I heard from executives at the wholesaler-distributors that are growing faster (or shrinking more slowly) than competition.”
 
His ideas: Work harder, enforce profit discipline, stay connected, acquire distressed competitors, and keep perspective (ie, …

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Free
Some Not-So-Bad News

With the exception of a few strategic acquirers, it’s pretty rare these days that we hear about a distributor actually expanding in the U.S. But one metals distributor is doing just that.
 
Chicago-based metals distributor and processor Ryerson Inc. announced recently it will open two new service centers in Utah and Texas by the end of the first quarter 2009. What’s more, the Platinum Equity-owned distributor doubled its stake in Chinese venture VSC-Ryerson China Ltd from 40% to 80%. VSC-Ryerson had $160 million in 2008 sales.
 
It’s one piece of not-so-bad news after a slew of falling fourth-quarter and year-end results.
 
At the National Association of Wholesaler-Distributors annual meeting this week in Washington, D.C., I heard …

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Economic Trends
Economic Forecast Places Start of Recovery in 2010

We all left the presentation by Institute for Trend Research’s Alan Beaulieu feeling more than a little pessimistic. This is not surprising, given that Beaulieu’s economic forecast did not see any sort of recovery until 2010. What’s more, he forecast that things would get worse before they get better.
 
He spoke at the National Association of Wholesaler-Distributors annual meeting going on this week in Washington, D.C.
 
Beaulieu forecast the recession we are in right now – though he admits that in some areas he didn’t foresee how bad it could get. The first half of his presentation was filled with a lot of doom and gloom, but the second half was more productive, focused on strategies to come out the other side of this recession …

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Building Materials/Construction
Fastenal Starts to See a Slowdown in the Fourth Quarter

Fastenal Company, Winona, MN, reported sales for the year ended Dec. 31, 2008, were $2.34 billion, an increase of 13.5 percent from the prior year. Profit was up to $279.7 million, an increase of 20.2 percent.
 
While its annual numbers were strong, the distributor said in its earnings call that the fourth quarter slowed significantly.
 
In October, sales growth was at 11.9 percent; November was at 6.8 percent, and December saw no sales growth. CEO Willard Oberton said that December was the first time in Fastenal’s 42-year history that the distributor saw no growth year-over-year.
 
Looking forward into 2009, things are very slow, Oberton said. “It’s difficult out there. Right now, looking at our January sales numbers, we …

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Economic Trends
Manage the Panic of 2009

Distributors, to say the least, are facing more uncertainty now than in recent memory.

In a recent MDM Webcast, Manage the Panic of 2009: New Rules for New Economic Realities," Evergreen Consulting's Brent Grover says we are now seeing the worst business conditions in his decades of work in the industry.
 
"Distributors are not accustomed to dealing with this uncertainty," he told participants. "Or the speed of decline in demand and prices."
 
Now more than ever leaders need to avoid hunkering down, and instead strategically prepare their companies for the upswing. When the downturn does reverse course, fewer companies will emerge, …

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Free
Options Outside of Standard Downsizing to Bolster Profits

Long-time industry consultant Bruce Merrifield addresses profitability in a recent post to his Web site. He says that companies have options outside of traditional downsizing moves to boost performance in these tough times.

He asks: How do we carefully: either sculpt away our corporate bloat (losing customers, products, people); or, redeploy losing-activity resources into revitalizing the ripped, profitable athlete that is hiding within the general average numbers?”
 
Toward the end of his post, found here, he recommends: 

Building Materials/Construction
Report: Wolseley Seeks Cash Infusion

A report from the Sunday Times in England says that global building materials and plumbing distributor Wolseley plc is in talks with investors and private equity groups to raise possibly more than $500 million (converted from British pounds) in what the paper calls a rescue fundraising.
 
According to the article, a final decision on how much cash is required and whether they will move forward on this will be made in the next three weeks before the end of its financial half year. The distributor will report results next week.
 
Here is the article.

 
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Companies
MSC Case Illustrates Complexities in Doing Business with Government

The Melville, NY-based distributor of metalworking and MRO supplies, MSC Industrial Direct Co. Inc., is facing an audit by the General Services Administration related to government sales and compliance with the Trade Agreements Act. According to an SEC filing of its quarterly results, "the U.S. Department of Justice has advised the company that GSA OIG’s audit identified non-compliant sales and potential liability arising therefrom." MSC reported however that it does not anticipate its potential liability, if any, to have "any material adverse effect on the company’s consolidated financial position, results of operations or liquidity."
 
And that’s all we know. MSC is one of many companies that do business with the government, which has stringent rules …

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