The past few weeks, with a few economic indicators going up here and there, have given many distributors a glimmer of hope that we might be near the trough of the business cycle.
For distribution executives, this is the toughest part of the cycle. The difficult decisions made on the way down are not easy, but the bottom line often does the deciding; conserving cash is king. Few distributors and manufacturers have avoided layoffs; indeed some have cut their work force for the first time in decades.
It’s always possible to be too conservative, but this downturn has redefined what that means. Markets are volatile. A day of strong orders is followed by a day when phones are quiet. It’s impossible to forecast effectively to start the rebuilding process. …
Latest In Management
Current economic conditions have impacted the way businesses think about doing business, according to a recent article and survey found in The McKinsey Quarterly.
The article, Strategic planning: Three tips for 2009,” warns businesses against abandoning strategic planning for survival mode, because eventually the crisis will end.
Focusing solely on the recession is a mistake for two reasons, according to the piece:
First, market trends are already established, and managers and executives should continue to focus on those for long-term business planning.
Second, fixation on the economy itself creates tunnel vision that could …
The stimulus package passed in February is about more than just shoring up business-as-usual organizations, says Pembroke Consulting’s Adam Fein. Fein identified more than $15 billion that has been allocated to enhance or create green projects on the state and federal level – a significant increase over previous funding. For example, state energy programs will receive $3.1 billion dollars – a funding jump of 70% over 2008.
This new funding can be a boon for distributors, particularly those that service the electrical and homebuilding/renovation sectors. Money will flow into projects for weatherization – anything from rewiring to insulation – and for improving the smart grid.
States and municipalities are still trying …
Distributors across many sectors face a decision many never faced before: whether to implement layoffs. This article offers insight from two distributors on deciding who, when and how, as well as expert opinion on best practices in this difficult time.
Business is off about 40 percent from a year ago for one industrial distributor in the Midwest. As a result, for the first time in 22 years, the owner has had to lay off roughly a fifth of his small staff. It was one of the worst days of my life, he says.
The fear in employees' eyes as they walked to the conference room the day the layoffs were announced was palpable, he says. The process has taken an emotional toll on him and the remaining workers. For many distributors, a dramatic drop in demand in the …
The negative perception some have of the stimulus package may be grounded in part in truth, says Adam Fein of Pembroke Consulting. But there are positives to be found in the American Recovery and Reinvestment Act of 2009 (ARRA). Fein presented his review of the opportunities and impacts of the bill for distributors in a recent MDM Webcast.
While the economic stimulus package may not be perfect, Adam Fein saw a potentially damaging level of pessimism in some of the responses to a survey conducted the week the bill passed. About one-fifth of executives indicated they would decrease their focus on growth initiatives because of the stimulus bill, Fein says.
Fein recommends distributors turn their heads from the bad, and instead consider areas where they can benefit from new …
Valley National Gases, Independence, OH, has launched a new line of safety products through the VNG Safety Products Catalog.
“With 12,000 items available, our customers now have access to a full selection of quality safety items for virtually any safety related need,” Jerry McGlumphy, product manager/hardgoods for Valley National Gases said.
Valley National Gases is a distributor of industrial gases, safety supplies, first aid supplies, industrial supplies, gloves, safety glasses and medications. The company operates over 96 locations in 18 states, servicing a multitude of industrial segments from fabrication, to health care, energy to university/research servicing customers in the Industrial and Residential …
A recent industry survey looked at Special Pricing Allowances. According to the survey by Allen Ray Associates and Channel Marketing Group, about a third of distributor respondents have more than 250 individual SPA, customer-defined, agreements. Another 13.6% had more than 100 SPAs.
About two-thirds say that the number of SPAs they negotiate will increase. Just 9.1% feel that they will eventually have fewer SPA agreements.
Distributors in the survey ranked SPAs as a 7.64 on a scale of 1-10 in importance to their current and future profitability.
"SPAs can be a competitive advantage for manufacturers and distributors to take market share when appropriately used," Allen Ray says. "The key is distributors claiming their funds to ensure …
Drug distributor Cardinal Health, Dublin, OH, says that when it spins off its Clinical and Medical Products businesses later this year it will reduce its global workforce by 800 over six months and eliminate an additional 500 positions through normal attrition and not filling open roles. The distributor also plans to implement cost control measures and reductions in discretionary spending.
The actions are in response to a "delay in hospital capital spending" specifically, and the decline in the global economy generally, according a press release.
Cardinal said back in January that the spending delay is only a "temporary concern," according to an article at WSJ.com.
Cardinal Health, Inc. is a $91 billion global …
In a short time, we have grown accustomed to reading (and in my case, writing) articles and headlines filled with words like, decrease, “decline” and “fall.” That’s why when, as reported this month, housing starts saw a slight increase, and new orders for durable goods went up, the words “unexpectedly” and “surprising” started to appear. Confidence went up, at least a little – badly needed in our battered economy.
That said, as soon as the word “increase” and all its synonyms came back, however briefly, there were plenty of economists and analysts ready to moderate our excitement that things might finally be hitting rock bottom. “The modest signs of stability in the U.S. economy are …
Two recent MDM interviews offered some perspective on retaining quality employees.
Graybar Senior Vice President and CFO Beatty D’Alessandro told me (at the recent NAW meeting in January) that the company keeps its focus on drawing employees who take a long-term view. He says finding the right people with the right values is crucial from the get-go, but that providing the right training and the right opportunities are just as important in keeping the right people in place. He says: "The model is built around people who are going to come and stay versus people who job-hop around the industry."
In the latest issue of MDM, Grainger’s new president of international businesses, Court Carruthers, says that nurturing employee development is a passion of his. A …
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 …
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 …
Arguably, there has never been so much stress put on so many wholesale distribution businesses. By necessity many distributors are revising the models that have served well as successful growth engines – for decades in many cases. Revision is an understatement for some, as they see revenues drop double digits and radical changes in customer buying behavior.
Some distributors are making changes out of necessity. Others have built a business based on long-term strategic plans, and they have the most options for coming out of this current downturn stronger. These options have the potential to yield significant market share and competitive advantage over the next 12-24 months.
We are in a major transitional period in this industry as companies adapt to these …
UK-based distributor Wolseley plc is once again looking to exit its U.S.-based Stock Building Supply operations with a deadline of 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 on the Wolseley site. “We cannot go on with markets deteriorating like that.”
Wolseley said it prefers a joint venture partner for the business, though closing Stock – the worst-case …
Acknowledging press reports in recent months, UK-based building materials and plumbing/HVAC distributor Wolseley plc has confirmed that it has held "discussions to consider the merits of an issue of new equity."
"Any decisions will be communicated to shareholders through the appropriate channels at the appropriate time," Wolseley said in a press release.
London’s Financial Times reported this week that hopes were high that Wolseley would unveil a 1.2 billion pounds rights issue (roughly US$1.5 billion).
Wolseley continues to be burdened by high debt levels. It recently announced its net debt had grown to 3 billion pounds (US$3.7 …
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 …
The board of directors of Melville, NY-based Arrow Electronics, Inc. will name Michael J. Long CEO at the company’s annual meeting on May 1, 2009. Long will replace William E. Mitchell, who has held the post since 2003.
An 18-year veteran of Arrow, Mr. Long has served as president, COO and a director of the company since March 2008, with responsibilities for all of the company’s business operations.
Mike’s commitment to driving profitable growth and talent development and his outstanding record of achievement have been critical to Arrow’s strong financial and market position, Mitchell said. “His solid leadership in our global operations and success in delivering on Arrow’s strategic initiatives will ensure …
W.W. Grainger has increased the number of SKUs in its catalog 33 percent, year-over-year. The massive scale of Grainger’s product expansion over the past few years indicates a reorientation of Grainger’s traditional model.
Five years ago, Grainger invested in a multiyear branch expansion program in the top 25 major metro markets. The goal was more local sales people and larger, more merchandise-oriented branches. In 2003, the company set an aggressive 7-10 percent annual growth rate target, and this effort was the engine. The company saw an opportunity to take market share from competitors by increasing presence in local markets.
The effort was all about increasing customer service. The recent product expansion effort has come with an increased focus …
The economic outlook looks very grim right now. The housing-led slowdown that began in 2007 has now turned into a deep U.S. recession that looks likely to be the longest and deepest downturn since the 1930s.
Unprecedented financial and credit market volatility has reduced prospects for a quick turnaround. Both U.S. Gross Domestic Product (GDP) and the wholesale distribution industry's revenues will decline this year.
As I see it, the companies with the will, the skill, and the till have the best chance of surviving the downturn and coming out with a better position on the other side:
- The skill to manage their businesses well despite a crisis; …
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 …
