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FCNews Volume 27/Number 13, November 5/12, 2012

By FCNews staff

DISTRIBUTION REPORT: A free report by the National Association of Wholesaler-Distributors’ (NAW) Institute for Distribution Excellence in conjunction with McGladrey, an assurance, tax and consulting services provider, looks at the world of distribution and what companies have done in the last 12 months and what they are expecting for the coming year. The 2012 Distribution Monitor Report is 26 pages of information, charts and commentary on what wholesalers are thinking and doing to remain competitive and relevant in a changing economy. The online questionnaire had 370 distributor respondents from all regions of the U.S. and ranging in size of less than $15 million in annual sales to over a billion. To get the report, go to tions/freereports.php.

OUTLOOK: Despite various concerns about the economy and what will happen after the elections, the Distribution Monitor Report states distributors are generally optimistic about their business prospects in the next 12 months, and most report their organizations are thriving or holding steady. In addition, distributor sales generally are still growing, but show some weakening. In fact, 38% say their businesses are thriving while 57% report business is holding steady and only 5% are declining. Unfortunately, companies tied to the housing market were the least likely to report their organizations are thriving. About 84% of distributors are optimistic when describing the current conditions of their businesses, and nearly 75% are similarly inclined toward optimism regarding the industry. Despite being hopeful in these two areas, only 47% are optimistic about the U.S. economy.

COST CONCERNS: A majority of distributor respondents anticipate an increase in the next 12 months for four out of the five costs listed on the survey’s questionnaire. These include transportation/fuel (77%), inventory/material/components (73%), energy/utilities (70%), equipment/machinery (55%) and cost of debt (31%). On the subject of fuel costs, 10% expect the increase will be greater than 10%. Also, of those who distribute retail/consumer products, 80% feel transportation and fuel costs will go up. To combat these costs, 58% are working with suppliers and customers to improve processes. Unfortunately, 46% of respondents are increasing prices, and 90% expect to do so permanently in the next 12 months while 61% will raise prices for services. Also, those in the construction market are more likely to substitute lower-priced inventory/materials/components and/or introduce or increase surcharges.

EMPLOYMENT: Despite concerns over increased costs, 66% of distributors report they will increase their total workforce in the next 12 months. According to the survey, distributors are most likely to add employees for their sales and marketing functions and customer service/sup-port. The projected placement of new employees for those in construction markets are more likely to add drivers and logistics staff, while those in retail/ consumer markets are more likely to add staff for inventory management. Most companies say they find the skilled talent they are looking for, but one-third of respondents report this being the case only sometimes; 5% say they rarely find the talent they need. When it comes to skill sets, 46% say finding drivers is the hardest, while 42% say it is people who can fill customer service/support roles.

INVESTMENTS: Lastly, when it comes to investing in businesses, 64% expect to increase spending in capital equipment compared to 2011. The biggest capital expenditure target among distributors in the next 12 months is information technology at 66%, and 15% of distributors will increase their IT spending by more than 10%. The report notes IT spending is a priority in every distribution market group as many organizations turn to technology to streamline processes and improve connectivity with suppliers and customers.

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