Lindsay Young, Author at Modern Distribution Management

Free

Now Not the Time to Shy Away from Price Increases

A recent survey by McKinsey Quarterly (found here) says that nearly half of all respondents don’t expect their companies to raise prices over the next six months. The manufacturing sector was the one exception.

On the manufacturing side, nearly 90% have seen an increase in the cost of inputs. And only in the manufacturing sector, McKinsey says, did a majority of respondents say their companies had raised prices and will continue to do so in the next six months.

My takeaway: Now is not the time to shy away from price increases. Suppliers are eager to pass on their rising …

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June 18, 2008

Finance

A Shift in Deal-Making

The prognosis for the distribution M&A market was mixed in the recent MDM Webcast Distribution M&A 2008 Update: Redefined Value in a Tough Market.”Three industry experts spoke on concerns of the credit crunch, valuation drops, a strained economy and inflation in relation to prospects for distribution mergers and acquisitions in the next couple years. Here’s a summary of the two-hour event.

Deal activity has fallen significantly from the boom years of 2005 and 2006, but the market has not yet fallen off a cliff. Still, companies are less willing to take a risk in the current market unless the acquisition target is top-notch and hitting its numbers, says Jon Skelly of PCE Investment Bankers.

“Distribution M&A activity has fallen dramatically from the record …

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June 10, 2008

Finance

Why Some Companies Draw Smaller Premiums in the M&A Market

What does an A” company look like?

In MDM’s recent Webcast, Distribution M&A 2008 Update: Value Redefined in a Tough Market -order the recorded presentation/transcript here -Evergreen Consulting’s Brent Grover addressed why some companies draw smaller premiums in the M&A marketplace.

One factor: the quality of the distributor’s assets. Smaller companies generally draw a smaller premium but can boost their value to the higher end if they consider the following, according to Grover:

“It will have a well-balanced sales force meaning, not being overly dependent on any one or two salespeople. The sales force will have a good balance of age and experience so they’re not all going to …

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June 6, 2008

Economic Trends

Distributors Tackle the Rising Cost of Fuel

Nearly a third of distributors in a recent survey by Channel Marketing Group and Allen Ray Associates say that increased fuel costs have significantly impacted profitability” because they can’t pass it on to customers. Another 37% said fuel costs somewhat impacted profitability, as most of the increase cannot be passed onto customers. About 22% said the fuel costs have had limited impact, as they have absorbed some but passed most onto customers.

About half of respondents had calculated incremental costs, seeing an increase of 25%-40% over prior-year expenses.

How are they addressing rising costs? More than half are absorbing them. Another 25% say they would like to add a surcharge, but because competition hasn’t, they are afraid they will lose business. About …

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May 28, 2008

Subscriber Only

Go Beyond `Brochureware’ Online

Web sites are becoming increasingly important for distributors as a way to connect with customers and provide valuable information about products and services. This article looks at how you can build a simple but effective site that allows you to interact with and inform potential and existing customers.

Building an effective Web site is not about selling online. It’s about providing another avenue for customers to connect with your company. So say experts in Web site development and optimization, as well as in the distribution industry.

Increasingly, Web sites are becoming more important to and expected by customers as they seek to learn more about your capabilities and potential fit as a supplier.

Go beyond brochureware”-using just a picture of …

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May 25, 2008

Economic Trends

Tightened Credit Markets, Economy Played Role in IDG Deal

The tightened credit markets and the economic downturn were center stage in the bidding for Industrial Distribution Group Inc., Atlanta, GA, according to a proxy statement filed this week by IDG with the SEC about the distributor’s plan to be acquired by Luther King Capital Management.

In fact, Platinum Equity, which was originally the winning bidder for the industrial distributor, had first bid $12 a share in December 2007 but reduced its offer to $10 a share in mid-January. The private equity firm cited risk in improving IDG’s MROP and integrated supply business due to an overall decline in the industrial economy.

This prompted investment banking firm Robert W. Baird &Co. to return to five bidders for new written proposals. Among the five bidders was …

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May 21, 2008

Finance

Human Due Diligence’ in M&A

A recent article in the Wall Street Journal (subscription required) says that executives who don’t conduct thorough “human due diligence” before completing an acquisition can suffer “steep long-term attrition.”

One featured researcher says that in a recent study, he found targeted companies lose close to 21% of their managers each year, more than double the turnover experienced in non-merged firms, for at least 10 years after an acquisition. The article goes on to say that though no two companies manage employees and operations in exactly the same way, the more their decision-making styles and value overlap, the more they will benefit from the merger. …

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May 14, 2008

Companies

Sonepar USA on the Hagemeyer Deal

Sonepar USA CEO Tony Burr recently spoke with MDM on the distributor’s plans to buy Hagemeyer assets, the state of the economy and the impact of copper and fuel prices on the electrical distributor’s business. In this article, Burr says Sonepar will treat the acquisition of certain Hagemeyer assets much like it does other acquisitions by keeping management and the company’s way of doing things in place.

Sonepar will likely keep Hagemeyer as a standalone operation after acquiring certain of its assets from Rexel. The plan will probably be to keep it as a standalone operation,”Tony Burr, Sonepar USA CEO, tells MDM. “It has a different customer base, predominantly, and a different market approach.”

Sonepar USA’s parent company -Paris-based Sonepar -has agreed …

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May 10, 2008

Companies

Sonepar’s Plans for Hagemeyer

Sonepar USA plans to approach the integration of Hagemeyer’s U.S. assets much like it does any other company it acquires, CEO Tony Burr tells MDM in a recent interview. It has a different customer base, predominantly, and a different market approach,” he says. Sonepar has not yet acquired Dutch electrical distributor Hagemeyer’s assets in North America, Asia-Pacific and select European markets from Paris-based Rexel, but the plan is to do so before the end of the year.

Sonepar’s strategy is to leave acquired companies’ trading names and management in place; with this operating structure, the distributor recognizes that distribution is largely a local business and that it is important to cater to local needs.

In Hagemeyer’s case, “We’ll find there will be some …

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May 7, 2008

Companies

Product Mix & Growth for MSC Industrial

The interest in safety products has been building in our customer base for the past few years,”Gershwind said. “We definitely saw a demarcation point after 9/11. Our customer base has a heightened sense of awareness of keeping the workplace safe and protecting the well-being of their employees.”

Gershwind said that penetration of existing accounts was a key growth strategy for the industrial distributor, based in Melville, NY. The company is also working to sell more MRO and safety products to customers acquired when it bought J&L …

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April 25, 2008

Free

Getting Sold on Green

Environmental sustainability in distribution center facilities is a growing trend, according to Bob Shaunnessey, executive director of the Warehousing Education and Research Council, which recently released its 2007 Facilities Trends Report.

In the spirit of Earth Day -Tuesday, April 22 -some of the changes distribution and manufacturing companies are making: recycling more materials, switching out bathroom facilities to use less water per flush, using less packaging to ship their products and asking suppliers to use less packaging so there is less waste. They are putting in more energy-efficient lighting, and installing motion sensors so that when no one is in a particular area, the lights stay off.

I think ‘the right thing to do’ set the stage for the …

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April 22, 2008

Economic Trends

Current Economic Climate Ripe for Gaining a Strategic Advantage

A slew of economic indicators out this month don’t portend well for the U.S. economy. Many economists are uttering the R” word, but it is noteworthy that many are preceding it with “mild.”

An overview: While industrial production increased this month, for the quarter it fell slightly. Housing starts plummeted nearly 12% in March, and 37% from last year at this time. The Institute for Supply Management’s monthly purchasing managers’ report on manufacturing continues to indicate contraction in the sector. Oil prices continue to skyrocket, and prices at the pump are following suit. (Take this brief survey on the impact fuel costs are having on your business by clicking …

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April 16, 2008

Companies

MSC: Safety Products Catalog Part of Growth Strategy

MSC Industrial Direct’s latest Safety Products Catalog launch is part of its strategy to further penetrate existing customer accounts, according to Erik Gershwind, MSC’s senior vice president of product management, marketing and strategy.

The interest in safety products has been building in our customer base for the past few years,” Gershwind said. “We definitely saw a demarcation point after 9/11. Our customer base has a heightened sense of awareness of keeping the workplace safe and protecting the well-being of their employees.”

Gershwind told MDM that penetration of existing accounts was a key growth strategy for the industrial distributor, based in Melville, NY. The company is also planning to grow its business into new customer and product …

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April 14, 2008

Human Resources in Wholesale Distribution

Case Study: Inviting Employees to the Table

Houston, TX-based Hisco, a $191-million distributor of die-cuts, adhesives and MRO materials to the electronic assembly industry, wanted to optimize the balance between branch autonomy and centralized control in its 30 locations in the U.S., Mexico and Puerto Rico. It used the front-line experience of its branch employees to make it happen.

Hisco is 100-percent employee-owned, giving it an entrepreneurial feel, with no employee or executive holding more than 3 percent of the company’s stock.

And so while branch managers at Hisco are empowered to run their branches, make hiring decisions and manage assets to best-serve the needs of customers in individual markets, it was important to Hisco that some functions be centralized for efficiencies and that the …

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April 10, 2008

Companies

HD Supply CEO: No More Divestments

In an interview last week with MDM, HD Supply CEO Joe DeAngelo spoke on his vision for HD Supply, post-Home Depot.

Speaking with DeAngelo, I came away with the feeling that HD Supply was back (if it was ever really gone) and ready to move forward as a more focused organization after the turmoil of last year: We woke up in the first part of ’07 and found out we’re for sale mid-February, and so we go with the flow with that and then find out when we’re just about sold that there is a liquidity crisis, and the deal is going back and forth. And then on top of that is a major residential downturn to contend with,” DeAngelo said.

Moving forward, DeAngelo told MDM that the company is finished selling off pieces of the business -“I’ll be very clear: We have no plans …

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April 2, 2008

Research & Analytics

Helping Customers Go Green

In addition to saving money by energy-efficient improvements to their own facilities, some distributors are helping customers go green by promoting products that lessen their impact on the environment, including energy-efficient motors, drives and lighting, windows, fittings, cleaners and finishers, and water-saving products.

Not only does the eco-friendly product trend help the environment, if done right, distributors can take advantage of this to become the source of green expertise for their customers; in turn, distributors can become the source for eco-friendly products in their markets.

Portland, OR-based Eoff Electric Supply, a subsidiary of Sonepar USA, has done just that. For the past 12 years, it has worked to help customers cash in on energy …

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March 25, 2008

Legal Issues in Wholesale Distribution

The Changing Face of Product Liability

More distributors have been hit with product liability lawsuits. If pursuing a private label, distributors must educate themselves on all possible risks associated with taking on a manufacturing role. Distributors and their customers must also be aware of the risk of counterfeits in the supply chain, another potential source of liability claims.

Nearly 250,000 circuit breakers can fit into one shipping container. Look at how many possible homes these circuit breakers infiltrate and how many lives and properties can be damaged if the circuit breakers are defective or not installed properly,”says Bernie Heinze, attorney and president/CEO of Sequent Insurance Group, Philadelphia, PA.

“And that is just one container. The amount of product that is coming into …

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March 10, 2008

Economic Trends

Recession a ‘Self-Fulfilling Prophecy’?

Could a recession in the U.S. be a self-fulfilling prophecy,” as some in MDM’s recent Reader Survey on the Economy contended? Some in the survey blamed the media, saying talk of a recession was overblown; one said: “Talk like this feeds on itself.”

Some other comments indicated belief that consumer confidence and business spending is heavily influenced by media reports, and that customers have become “afraid” to spend money.

How do you view the role of the media in economic slowdowns? What are you seeing in your business?

Comment below in the box under “Write Your …

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March 5, 2008

Free

Selling to the World’s Largest Customer

According to our recent report on federal contract compliance by attorneys Andrew Mohr and C. Kelly Kroll, government agencies are growing more aggressive about auditing contracts with suppliers. The government, after all, is the “world’s largest customer,” buying some $350-plus billion in commercial goods and services each year. Many distributors are eager to get a piece of the pie.

But the federal government leverages this buying power by including in its contracts numerous laws and regulations that typically won’t be found in traditional commercial contracts. Some rules are intended to protect workers, some aim to promote contracting for small and minority businesses, and still others promote …

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February 26, 2008

Legal Issues in Wholesale Distribution

Counterfeits in the Supply Chain

Here’s an overview of the scope of global counterfeit trade, as well as what a few companies in one industry -electrical goods -have been doing to protect their intellectual property and, more importantly, the health and safety of product end-users. The second article in this series, published March 10, 2008, will focus on the changing face of product liability in regard to both counterfeits and private label.

Square D, best known in the U.S. as the flagship brand for the Schneider Electric North American Operation Division, realized there might be a problem with counterfeiting of its circuit breakers when the manufacturer started seeing an increase in defective product returns.

When we would go to check the returned product, we would find out they were …

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February 25, 2008

Posts By Lindsay Young

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