Strategies for Surviving the Recession

By: Adam Fein, Founder and President of Pembroke Consulting I was in Washington recently for the National Association of Wholesaler-Distributors' 2009 Executive Summit. The overall mood was much more subdued than previous meetings given the economy and recent wholesale distribution sales trends.

But as always, the real value of the meeting came from the informal networking and idea sharing. There were hundreds of wholesale distribution executives at the event, so I took the opportunity to find out how some of the best are dealing with the recession. 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.

Work Harder – Working at a wholesaler-distributor is fun when times are good and customers want to buy. But the never-ending stream of bad economic news and unpleasant headlines can make even your toughest employees feel discouraged. I spoke to many business owners who are recommitting themselves and their teams to good old-fashioned hard work. They are pushing the salesforce to make more calls, getting customer services to hustle a little harder, and trying to outrun competitors that show signs of weakness.

The owner of an extremely successful wholesaler-distributor quoted Thomas Jefferson to me: “I’m a great believer in luck and I find the harder I work, the more I have of it.” His sector was down 25 percent last year, but his company’s sales only dropped by 5 percent.

To read the entire article Click Here. Fein will be part of the program at the NAWLA Executive Conference, April 26-28. Click Here for Executive Conference details and information.

NAHB IBS Economic Forecast: Housing Will Continue to Struggle in ‘09

During the recent IBS Show in Las Vegas, a presentation by NAHB’s Crowe estimates that builders will sell just 420,000 new homes this year.

A subdued group of economists speaking at the International Builders’ Show in Las Vegas this morning agreed on one thing: the housing market will weaken still more in 2009.

“My forecast is built upon an imbalance of supply and demand,” said David Crowe, chief economist at the NAHB, who estimates the country currently has more than 1.5 million existing and new homes available for sale or for rent that no one wants or can afford to buy. 

Frank Nothaft, chief economist at Freddie Mac, and David Berson, chief economist at The PMI Group, also spoke during the morning press conference.

Such excess inventory—the result of foreclosures and other factors--is hammering builders in specific and the housing market in general as home values slide. (Overbuilding by new-home builders is not a factor in this excess supply, according to Crowe, who said that less than one-third of those 1.5 million excess homes are new. “What builders are facing is an oversupply of homes not entirely of their making,” he said.)

Regardless of the reason, home prices are expected to weaken still more, particularly in major metropolitan areas, according to Berson, who suggested it may take two to three years for the housing market to stabilize. According to a proprietary index developed by PMI, 97 percent of the nation’s metropolitan statistical areas (MSAs) are at risk of having lower home prices in two years than they did in late 2008. For some of the most troubled markets—Riverside-San Bernardino, Calif., and many in Florida—the likelihood of having lower home prices is more than 99 percent.

And the job market will offer little help to builders during that time. According to Crowe’s current forecast, the unemployment rate could rise as high as 8.5% by the end of 2009 before finally beginning to ease in 2010’s second quarter. That bodes ill for the housing market. According to an analysis of loans in Freddie Mac’s own portfolio, the single biggest trigger for a mortgage becoming delinquent is unemployment. “We will see elevated delinquencies on conventional loans to prime borrowers,” Nothaft predicts.

Such trends are affecting consumer confidence, which is at record lows. People “are afraid to go out and purchase anything of major importance, and clearly that would include a home,” Crowe said. Such anxiety is widespread, even among otherwise financially secure Americans. “Because buying a home is such a big financial decision, a person doesn’t have to be unemployed [to let that affect a home purchase]; a person just has to worry about being unemployed.”

For those who have the money, job, credit, and nerve to buy, mortgage rates are at historic lows: 4.96 percent for a conforming, 30-year, fixed-rate loan. “That’s about the only good news about the mortgage market these days,” Nothaft quipped.

As a result of these factors and others, Crowe predicts builders will sell just 420,000 homes this year, with the low point for sale activity coming in the first quarter of 2009, when NAHB’s forecast estimates new-home sales to fall to a seasonally adjusted annual rate of 380,000. Residential construction is likely to hit its bottom in 2009’s second quarter, when starts dive to a level of 620,000 for overall housing and 430,000 for single-family.

NAHB IBS Show - Economic Outlook for 2009
Total housing starts: 649,000
Single-family starts: 461,000
New-home sales: 420,000
Unemployment rate: 8.2%
30-year fixed-rate mortgage: 4.63%
FHFA home price index: -7.4%
Source: NAHB

Source: Hanley-Wood
www.builderonline.com
Alison Rice is senior editor, online, at BUILDER magazine.

Lumber Quality Workshops

Lumber Quality Institute announced two February workshops to be held in the Atlanta, GA area at Learning Tree International. The first will be held February 23-24 and is a must for sawmills seeking to maximize board foot and grade recovery. This workshop is designed for first line supervisors, graders, QC personnel, maintenance and filing supervisors.

The second workshop will be February 25-26 and will be the Annual Lumber Quality Leadership Workshop. This workshop describes new concepts in quality control and management. Attendees will have the opportunity to go beyond the basics and focus on concepts and ideas that will propel QC programs to the next level. The Leadership Workshop is designed for managers, superintendents, QC personnel and first-line supervisors.

Contact the Lumber Quality Institute, Corvallis, OR at 541-231-8628 or email assistance@lumberquality.com.

Stock Building Supply laid off 9,000 workers in the United States since the fall of 2006, president Joe Appelmann told Charlotte’s News & Observer.

The cuts, part of British parent Wolseley plc’s plan to slash its American building materials distribution division’s workforce, come in response to a national housing crunch that has hit building materials suppliers particularly hard.

“When housing is talked about, I think people strictly think about homebuilders,” Appelmann said during a conference call. “There's an exact trickle-down effect when their business is impacted.”

Stock, which eliminated 1,000 jobs in North Carolina as part of the layoffs during the last 14 months, now employs about 2,100 people in its home state, including 1,100 in its Raleigh-area base, according to the newspaper.

In North Carolina over the last 14 months, the company shuttered 10 facilities in addition to the layoffs, which amounts to 35 percent of its workforce in the Tarheel State.

Nationwide, Stock let 9,000 workers go—52 percent of its total work force, Appelmann said, adding that the company’s $225 million restructuring is “pretty much behind us.”

Even so, without a federal bailout of the housing industry, he said, more cuts could lie in the future.

“If a stimulus package doesn't hit the industry, and if we continue to see the industry move further down, we will have to adjust our business,” Appelmann said.

Source: Industrial Distribution

Joe Robson, a builder and developer from Tulsa, Oklahoma was elected as the 2009 chairman of the board of the National Association of Home Builders (NAHB).

Robson, a leader in the Tulsa area home-building and development industries for more than 25 years, is founder and president of the Robson Cos., developers of residential communities and commercial properties.

Robson has been leading NAHB’s efforts to strengthen the housing industry, working with federal lawmakers and regulators to find ways to shore up the housing market and renew confidence in the American economy.

“We look forward to working with the Obama administration and the new Congress to develop policies that will help families facing foreclosure, stabilize home prices and put America's home builders back to work as the engine of the economy,” Robson said. “NAHB will be pushing very hard for an economic stimulus package that recognizes the important role that residential construction plays in generating economic activity and jobs.”

Robson has long been associated with the NAHB. At the state and local levels, Robson has served on the board of directors of the Oklahoma State Home Builders Association since 1990 and was the association's president in 1993. He was honored as Oklahoma Builder of the Year in 1994.

Join us in Las Vegas where we will be Stacking the Deck for Your Business Success at the 2009 NAWLA Executive Conference – April 26-28 to be held at the Loews Lake Las Vegas Resort. Given current market conditions, we have wisely recast the Annual Spring Meeting as a bona fide “business meeting,” still with lots of opportunities to network, educate yourself and visit with friends. Exhibitors have an opportunity to make contact with company owners and managers. What better time than a slow economy to “huddle up” with industry colleagues to learn the latest “survival strategies” and to reposition your company for better days ahead.

You will experience a “NAWLA-first” by joining us in the “Neon City,” fabulous Las Vegas. This remarkable desert playground has countless entertainment and leisure opportunities – first-class restaurants, lavish stage shows, championship golf, the dazzling “Fremont Experience,” Lake Mead, Hoover Dam and more!

Visit the NAWLA Website at www.nawla.org for additional conference details, updates, exhibit forms and registration forms.

We look forward to seeing you in Las Vegas this Spring!

NAWLA Executive Conference Preliminary Schedule

Sunday, April 26
10:00 a.m. * Golf Tee Times – Individual Sign-up
Consecutive times starting at 10:00 a.m.


1:00 p.m. – 6:00 p.m. Registration Open

2:00 p.m. – 5:00 p.m. Exhibitor Showcase Exhibitor Set-up      

Monday, April 27
7:30 a.m. – 9:00 a.m. “Meeting Place” – Exhibitor Showcase & Continental Breakfast     

9:00 a.m. – Noon NAWLA Committee Meetings
(Check with staff liaison for specific times for each committee).

Noon – 1:00 p.m.

1:00 p.m. – 5:00 p.m. NAWLA Board of Directors’ Meeting
6:30 p.m. – 8:30 p.m. NAWLA Chairwoman’s Reception, Exhibitor Showcase & Banquet
(Chairwoman’s Welcome, Annual Report, Mulrooney Award, Membership Plaques)

Tuesday, April 28
7:30 a.m. – 9:00 a.m. “Meeting Place” – Exhibitor Showcase & Continental Breakfast

9:00 a.m. – Noon 10 Group Meetings

Noon – 1:30 p.m. Lunch on own

1:30 p.m. – 5:00 p.m. NAWLA Educational / Business Session
Adam Fein, Pembroke Consulting
"Strategy for Surviving the Recession"

1:30 p.m. – 3:30 p.m. “Meeting Place” – Exhibitor Showcase & Refreshments

2:30 p.m. – 2:45 p.m.  Refreshment Break – “Meeting Place”

6:00 p.m. – 7:00 p.m. NAWLA Farewell Reception

7:15 p.m. – 9:15 p.m. * Dine-arounds – “NAWLA-style”

Registration Fees
Member $695 / person
Non-member $1095 / person
Spouse / Companion $150 / person

Registration for all categories includes Chairwoman’s Reception & Banquet on Monday, April 27, Farewell Reception on April 28, all refreshment breaks, attendance at the Exhibitor Showcase and Educational / Business Program.

The NAWLA Regional Meeting in Birmingham, Alabama will be held February 19 and will include a jam-packed program boasting six valuable speakers.

This meeting comes on the heels of our February 10 meeting in Statesville, North Carolina.

The program put together by meeting chairmen Mark Junkins and Jim McGinnis will provide quite a valuable afternoon of sessions. Subjects include: Playing to Win in This Economy; Container Ports; Green Building; Trucking and Logistics; Economic Outlook for the Southeast and a Credit Discussion with Blue Book Services, Inc.

The meeting will include the above speakers, networking, cocktails and dinner all for only $89.00.
Click Here for more information on speakers and subjects and registration form
Sponsored in-part by DMSi
Phone: (403) 330-6620 Website: www.dmsi.com

Schedule of Events:

• 1:00 p.m. Welcome & Introductions Buck Hutchison, Hutchison Lumber & Building Materials & NAWLA 1st Vice Chairman
  Mark Palmer, NAWLA Executive Director
• 1:15 p.m. Playing to Win in this Ecomony – Rick Grandinetti, Vision Planning, Inc.
• 2:30 p.m. Container Ports Smitty Thorne, Alabama State Port Authority
• 3:00 p.m. Green Building Emmit Stallworth, Alpha Home Builders
• 3:45 p.m. Trucking/Logistics Charles Sox, University of Alabama SCOM
• 4:15 p.m. Economic Outlook – Michael Chriszt, Federal Reserve Bank of Atlanta
• 5:15 p.m. Cocktails
• 6:00 p.m. Dinner
• 7:00 p.m. Tools to Help Manage Credit Risk Jim Bartelson, Blue Book Services, Inc.

NAWLA Webinars: Three New Offerings

Timing is everything, and there is no better time than now to sharpen your skills. Webinars offer an opportunity to learn, become educated and discuss specific topics of interest without leaving your office.  NAWLA Webinars typically last about an hour including questions and answers.  Sign up today for one or more NAWLA Webinars.  Click Here to learn more or to obtain registration materials.

Human Capital - How your organization can be so good it cannot be ignored (NAWLA Webinar)

Past and future presenter at NAWLA Regional Meetings and back-by-popular demand, Rick Grandinetti, Vision Planning, Inc. will educate you with common sense tools to enhance your company's performance with the human capital you already have. Navigating in business requires teamwork and a sense of purpose. This webinar will be February 24th at 11:00 a.m. Central time. Learn some basic skills to make your company more effective.

• Employees are not your most valuable asset. The right employees are.
• Do not worry that the people you educate will leave. Worry that the people you do not educate will stay.
• All products look alike. Elite people and organizations prosper by differentiating themselves from the competition.
• People "train" dogs. Organizations "educate" humans.
• To inspire your work force, do not attempt to motivate them. Instead, discover what de-motivates them. From there you can progress toward success.

In 60-minutes, Rick will teach you the following:

• How to take human capital and dominate your market and industry.
• How to create behavior change to benefit your company.
• How to understand different types of teams and team cultures.
• How to be efficient with things and effective with employees.
• What are the best business practices and what are the worst business practices?

For more information about Vision Planning, Inc. visit http://www.visionplanninginc.net/ Click Here for Registration Form.

Selling in a Down Market (NAWLA Webinar)

Are you frustrated by current market conditions? Are sales down? If you are looking for techniques and attitudes that will help you and your team get orders in this market tomorrow as well as grow your sales over the long term, then "Selling in a Down Market" is the NAWLA Webinar for you! The Webinar will be held March 5th at 11:00 a.m. Central time. James Olsen of Reality Sales Training spent twenty years selling in the volatile lumber industry and currently works with companies in our industry to increase their sales - even in this market! He works nationwide with all types of sellers in the lumber industry: industrial suppliers, wholesale distributors, office wholesalers and multi-family specialist. He understands the buyers and sellers within our industry and brings high energy value to his presentation. You will learn something, and you won't fall asleep at your computer!

To learn more about Reality Sales Training, Inc. visit : http://www.reality-salestraining.com/.
Click Here for Registration Form.

North American Lumber Industry – an Economic Outlook (NAWLA Webinar)

The wood products industry is facing the worst market conditions in decades: consumption, capacity and prices are all falling. While we are certainly already near the seasonal bottom, the question is whether we are approaching a cyclical bottom as well. This webinar will examine that question by analyzing the following:

• Lumber demand, operating rates and prices –will we see stronger demand and/or inventory building in 2009?
• The US housing markets – has the bottom of the downturn been reached, and if so, how long before things begin to improve?
• End use markets – will we continue to see sharp declines through the end of this year?
• Lumber prices – how low can prices go?

Paul Jannke is Senior Vice President, Wood Products and Timber at RISI. The organization’s mission is to create the highest quality information for and about the global forest products industry and deliver it to customers as part of value-added solutions.  Paul specializes in the analysis and forecasting of the wood products industry.  His specific area of expertise is the econometric modeling and forecasting of the North American lumber and panel markets. 

Paul authors the quarterly North American Lumber Forecast and the monthly Lumber Commentary, which regularly update RISI’s analysis and forecast for North American lumber markets.  Paul has also co-authored many studies on the international lumber, timber, and panel industries.

For further information on RISI, please visit www.risiinfo.com

Last Chance to Sign-up for NAWLA University of Industrial Distribution (UID)

…Powerful and Popular

NAWLA is offering The University of Industrial Distribution (UID) which has sold out for the past five years!  The NAWLA UID will be held at Indiana University / Purdue University, March 8-11, 2009. With over 500 participants from more than 40 distribution associations, you will want to reserve your place at this signature program by registering now!

Through NAWLA's partnership with a consortium of more than 40 distribution associations, the UID is available to NAWLA members.  

• Choice of 36 different concentrated educational sessions focused on the unique needs of wholesale distribution industry
• 23 professional instructors from distribution, sales management, personnel productivity, leadership, negotiation, purchasing, finance and more

Who should attend:
Branch Managers
General Managers
Sales Managers
Marketing Managers
Purchasing Managers
Human Resources Managers
Senior Executives
UID
The University Place Conference Center & Hotel
Indianapolis, IN
March 8-11, 2009
Tuition: NAWLA Members $995
SPACE IS LIMITED!  REGISTER NOW
This program has sold out the last 5 years!
Click Here for Registration Information and Brochure

2009 NAWLA Traders Market^®  Update

During these trying economic times, your NAWLA Traders Market^® Committee is working hard to offer you the very best value in the trade show industry in 2009. We are pleased to announce the following $100 bonus offerings for the November 5-7, 2009 NAWLA Traders Market^®:

$100 Discount on Registration Fees
It’s simple. If you attended the 2008 event last fall, you are eligible for a $100 discount on your registration fee for 2009. Completed registration forms with payment must be received by NAWLA by Tuesday, March 10, 2009. For further details regarding the discount, please contact NAWLA at (847) 870-7470.

NAWLA Spotlight on Exhibitors
It’s a steal at only $100. NAWLA Exhibitors will have the chance to “take the stage” at the 2009 NAWLA Traders Market^®. During a 30-minute session, spotlight participants are encouraged to share more detailed information regarding their company, reveal a “new product,” offer a “live demonstration” of a product or conduct a Q&A Session regarding an industry topic that is specific to your company. Look for registration information and qualification terms in early March 2009.

During the next few weeks, your NAWLA Traders Market^® Committee is strategically honing the “schedule of events” to include a high-billing general session speaker, two days of educational programming and the signature NAWLA Magellan Club Program and NAWLA Grand Opening Luncheon. Watch for future updates on THE highest value industry event of the year.

Thank you for your support of the industry and of NAWLA events.

Welcome NAWLA’s newest members for the month of January

Service Affiliate Company
RSI Logistics Inc.
Contact: David Riddell
P.O. Box 1396           
Okemos, MI  48805   
Phone: 517-349-7713 ext 25
Fax: 517-349-7154
Verifier:
Mike Mordell    Universal Forest Products

RSI Logistics, Inc. (RSI) specializes in rail transportation of bulk materials throughout North America.  RSI's products and services make it simpler, more efficient, and more cost effective for organizations to ship by rail.  RSI was founded in 1985 and serves clients from nine locations in North America.

Vancouver, B.C.-based forest products company Ainsworth Lumber has announced that its board of directors has appointed Richard Huff as the new president and CEO.

“We are very pleased to have Rick Huff joining Ainsworth Lumber Co.,” said Jay Gurandiano, chairman of the board of directors. “We look forward to the benefit of his extensive experience in senior management positions in the energy and forest industries, including most recently as CEO of the Sinclar Group, a privately owned diversified forest products group with mills in the British Columbia interior and before that as the head of OSB operations for Tolko.”

Huff will join the company on Jan. 19 at its head office in Vancouver, B.C. Robert Allen will step down as interim-CEO and resume responsibilities as chief financial officer.

All-Coast Forest Products Inc. announces the addition of the LP SolidStart Engineered Wood Products line to their Distribution Center in Denver, CO. All-Coast is now stocking LP I-Joists, LVL, LSL, & Rim Board.

Weston Forest Group, Mississauga, ON is proud to have been once again named as one of Canada’s 50 Best Managed Companies. A winner of the 2007 Canada’s Best Managed Companies award, re-qualifying means they are still one of the best!

This award is sponsored by Deloitte, CIBC Commercial Banking, Queen’s School of Business and the National Post. It recognizes companies that succeed by focusing on their vision, creating stakeholder value and excelling in the global economy.

“We are honoured to receive recognition as one of Canada’s Best Managed Companies for the second year in a row,” said Rick Ekstein, President. “It speaks of our commitment to our customers, our employees, and our industry and we’re working hard to remain one of Canada’s 50 Best Managed Companies in 2009. One way we’ll get there is with a company-wide attitude that acknowledges the challenges of the recession, but refuses to participate in the hype.”

About Weston Forest Group

Market studies suggest that interest in green homes—from pros and buyers alike—continues to climb.

Can green be the lifeboat the home building industry needs? During a presentation at the International Builders’ Show, Harvey M. Bernstein, vice president of industry analytics, alliances, and strategic initiatives for McGraw-Hill Construction, suggests that eco-friendly design and products are proving to be a market differentiator for builders and an in-demand feature for home buyers.

Utilizing data from McGraw-Hill Construction’s 2006 and 2008 Smart Market Reports on green building, as well as a few other studies, Bernstein offered the following conclusions:

• Green is a market differentiator: Builders are finding it easier to market green homes and homeowners are much more interested in buying them, even in a down economy. Bernstein called green building a “savior,” and said that while the residential market overall has plummeted, the green residential market is climbing at a steady pace, increasing fivefold between 2005 and 2008 and expected to triple by 2013. The total residential green opportunity in 2013 will be $40 billion to $70 billion.


• Involvement in green building is on the rise: In addition to a growing number of local and national green building certification programs, green policies have jumped from 57 local governments in 2005 to 156 in 2008. The new presidential administration also has demonstrated a commitment to green policies and stimulus programs. At the builder level, in 2007 32% of builders reported being “significantly dedicated” to green building. In 2008 that number climbed to 52% and is expected to reach 69% in 2009.


• Interest in green homes spans all income levels: While the greatest percentage of demand for green homes (27%) is within the $50,000 to $74,000 income range, 30% of the demand falls into the two lower income brackets.


• Younger generations will expect green options: “They can’t imagine building anything that isn’t sustainable,” Bernstein said.


• Green-home buyers are driven by operational cost savings and improved health. Associating green with quality will be a strong selling point in the down market.


• As a builder’s green building experience increases, perceived costs decrease.


• Energy Star is the most well-known product standard.


• When remodeling, homeowners will spend the most on features that make their homes greener, versus those that increase comfort or improve the appearance.

For those pros still wary of the trend, it’s worth noting what Bernstein calls one of green building’s biggest obstacles for homeowners: In some markets, there just aren’t enough builders doing it.

Source: ECOHOME 2009
Hanley-Wood Builder Online
By: Katy Tomasulo

ANSI unveils National Green Building Standard

The American National Standards Institute (ANSI) approved a National Green Building Standard for all residential construction work including single-family homes, apartments and condos, land development and remodeling. [NAHB developed this standard through ANSI]

The consensus committee deliberated the content of the standard for more than a year, held four public hearings and evaluated more than 3,000 public comments in the development of the standard. The work of the consensus committee was administered by the NAHB Research Center, an ANSI Accredited Standards Developer.

"The National Green Building Standard is now the first and only green building rating system approved by ANSI, making it the benchmark for green homes," said Ron Jones, who chaired the consensus committee charged with developing the standard.

"The standard provides home builders and remodelers with a much more expansive third-party rating system that they can use to achieve green certification under NAHBGreen and the National Green Building Certification Program," said Mike Luzier, CEO of the NAHB Research Center.

The Research Center provides certification for NAHBGreen projects, which until now have only included single-family homes. "Consumers are looking for authentic, verifiable green building practices, and now they'll find them with a true industry consensus standard for residential green building," Luzier said.

The standard defines what green practices can be incorporated into residential development and construction and how homeowners can operate and maintain their green homes.

The National Green Building Standard also provides for flexibility -- allowing home builders and home buyers to make green choices based on climate and geography as well as style preferences and budget.

Source: Home Channel News
Website: www.homechannelnews.com

Truck purchases will continue to drop throughout 2009 due to overcapacity, and the first and second quarter will be incredibly difficult on fleets’ bottom lines, trucking industry analysts said during a recent webinar.

“This recession, from a freight standpoint, started almost three years ago,” said Noel Perry, managing director of FTR Consulting.  “There is a free fall right now, but it is also the effect of cumulative stress on the industry…We have such low capacity, as low as we’ve had since the 1970s—nobody working in the industry right now has experienced these levels.”

While some carriers did not see the effects of the recession on their fourth-quarter earnings-- partially due to a cash boost thanks to diesel prices dropping so quickly--Perry said that the negative effects will show up in 2009 first-quarter earnings and even more so in the second quarter, with a disproportionate number of small- and medium-fleets continuing to go bankrupt. 

“The gap between low- and high-risk fleets is huge,” Perry said. “In downturns, large fleets tend to do better than small fleets because they have cash reserves, and most large fleets entered this recession with a lot in reserve.”

According to Bill Witte, economist and co-director of the Center for Econometric Model Research, there is no sign that the housing market is about to hit bottom. And while he projected in October that unemployment would peak at 7.2% and 2 million jobs lost, we’ve already reached 2.6-million unemployed. “If you look at the last three months, it’s hard to find much to be joyous about,” he said.

Eric Starks, president of FTR Associates, said that there is currently a significant overbuy in both Class 8 and trailer purchases, which will lead to some kind of payback in 2011 and 2012. FTR projects monthly Class 8 sales in 2009 to be about 135,000—although Starks thinks more recent data indicates that may be too high—and trailers at 87,500 and dropping. Medium-duty is also incredibly weak, he said.

Starks said that under FTR’s worst case scenario, Class 8 sales would average about 95,000 a month in 2009, although he could conceive it going even lower. There was only a monthly average of 119,000 Class 8 vehicles sold in the fourth quarter, with 104,000 in December, so it’s very conceivable it could continue to drop, he said.

According to Starks, this is a result of several factors:

• Imports have dropped substantially, with orders from Mexico basically disappearing completely.
• Average age of vehicles is increasing, and could overtake its all-time high from 1992 sometime between 2010 and 2012.
• The size of fleets is shrinking, down 8% in 2008, so some old trucks are just not being replaced at all.
• Backlogs fell 18% in the U.S. in 2008, with non-U.S. backlogs down 62%.

However, all this doesn’t mean the freight that is available is going to another mode of transportation. “A lot of people were predicting a strong move from truck to rail, and to date we have no evidence of any move to either side,” Perry said. “There has been some movement from truckload to intermodal, but those gains disappeared when diesel prices dropped.”

Source: Fleet Owners
Website: www.fleetowner.com
By Justin Carretta, online news editor

Cross-Border Trucking with Mexico May End

Senator Byron Dorgan (D-ND), an outspoken opponent of the Bush Administration’s cross border trucking agreement with Mexico, has placed a two-month cap on the life if the program, according to an Owner-Operator Independent Drivers Association (OOIDA) account of the Transportation Secretary Ray LaHood’s confirmation hearing.

OOIDA reported that Dorgan not only called for an end of the program, but asked LaHood to do it within two months. “I want to see an end to this program within two months,” Dorgan said in opening remarks prepared for the confirmation hearing. The OOIDA account did not provide LaHood’s response.

Dorgan sponsored a 2008 bill that passed the Senate and House and was signed into law to end the program, but the Transportation Department has kept it running.

Source: NITL Notice

Atlanta’s BlueLinx warns of bigger loss than expected

BlueLinx Holdings warned recently it will likely take a per-share loss of 76 cents to 84 cents in the fourth quarter, signaling continued softness in the building industry.

The expected loss — on anticipated revenue of $500 million — is much wider than Wall Street has been expecting. Analysts have forecast a 37-cent loss in the quarter.

The Atlanta-based company, which distributes building supplies such as plywood and oriented strand board, blamed the anticipated loss on the decline of the housing sector and falling prices for its products.

“We remain focused on the areas we can control, including the aggressive management of both our operating costs and working capital,” said George Judd, BlueLinx’s chief executive, in a statement.

He said the company generated about $82 million in operating cash during the fourth quarter and ended it with about $151 million in cash on hand. Debt was about $285 million, vs. $463 million a year earlier, he said.

The company said it will recognize most of the $8.3 million gain from the sale and cessation of some of its operations in the 2009 fiscal year.

Judd said he’s confident BlueLinx “will emerge from this unprecedented downturn in a much stronger competitive position than when the downturn began over two years ago.”

Source: The Atlanta Journal-Constitution
By:  Peralte C. Paul

Wolseley plc is in talks with investors and buyout firms to raise up to $925 million in cash to bolster its ailing balance sheet, the Sunday Telegraph reported.

The British building materials distribution giant, which has about 5,000 locations in 27 countries, is looking to pay down its roughly $5 billion in debts, according to the newspaper, with CEO Chip Hornsby talking to private equity firms about raising the cash.
Wolseley has slashed about 18 percent of its workforce—14,500 jobs—since August of 2007, including 9,000 since the fall of 2006 at its American Stock Building Supply division.

Wolseley ranked first on INDUSTRIAL DISTRIBUTION's 2008 Big 50 list of distributors, with 2007 sales of $31.6 billion.

Source: Industrial Distribution
Website: www.inddist.com

Buyers want ‘Wii-sized’ rooms, a home office, and energy efficiency in their next house, according to research done by the NAHB and Better Homes & Gardens magazine.

The American consumer is starting to think that bigger is not always better, at least where houses are concerned, according to experts presenting at the International Builders’ Show in Las Vegas on Wednesday.

“Either by necessity or choice, they are ready to take a step back from the McMansions or trophy homes,” said Gayle Butler, editor-in-chief of Better Homes & Gardens magazine, who was joined by Gopal Ahluwalia, staff vice president of research for the NAHB in their annual session on consumer home-buying preferences.

Consumers in 2009 want to live in a home that is cozier, more organized, and more economical in terms of operating costs than perhaps they would have wanted in the past, according to Butler. That includes “Wii-sized” and media-centric family gathering rooms with enough floor space for playing the popular and physically interactive Nintendo video games. Consumers also want more storage to keep clutter under control in these supposedly smaller homes, which could include anything from built-in shelving to a pantry that allows families to save money on groceries by stocking up on food staples.

Concerned about unpredictable and often-rising energy costs, today’s buyers also want homes that are more economical to operate. Ninety-one percent of respondents to a Better Homes & Gardens online survey of readers anticipating a move to a new home said they wanted an energy-efficient heating and air-conditioning system in their next home. An NAHB survey received similar results, with 91 percent of respondents preferring an energy-efficient home with lower utility bills versus a cheaper home (with a sales price 2% to 3% lower) without energy-efficient features.

Even more significant, Americans are starting to actually be willing to spend money to live in a greener home. According to Ahluwalia’s research, home buyers said they would pay an average of $6,000 more for their new home to save $1,000 annually on energy costs. “More and more consumer realize it’s in their long-term interests” to invest in energy-efficiency features, explained Butler, who also thinks that federal tax incentives for homeowners who upgrade their homes to be more energy-efficient are having an impact.

Other things are also growing in importance to today’s home buyers, according to both the NAHB’s and Better Homes & Gardens’ research. “There is tremendous interest in outdoor features,” Ahluwalia said, who found that 65% of buyers said they wanted a front porch. A home office proved to be another top priority, with 71 percent of all buyers saying a home office was “desirable” or “essential,” in the NAHB’s survey. That trend emerged as well in the shelter magazine’s data, with three-fifths of its reader-respondents saying they wanted a home office in their next home. Within that group, two-thirds wanted a dedicated home office, which Butler said reflects the increasingly common scenario of women, often with children, choosing to work at home. 

Such information could become critically important to builders as the housing market eventually begins to recover. “Every time we come through a cycle, the consumer is looking for something different,” building consultant Chuck Shinn told attendees during the session. “This time, it’s going to be a double whammy” because of this housing recession’s length and the demographic power shift from the baby boomers to Generation Y. “That means that there probably will be fairly substantial chance in what builders will need to do to satisfy customers’ needs.”

Source: Hanley-Wood

www.builderonline.com
Alison Rice is senior editor, online, at BUILDER magazine.

Distributors Can Use Key Financial Metrics During Recession

Nearly 70 percent of distributors expect the current recession to last at least six more months, according to an exclusive survey conducted by INDUSTRIAL DISTRIBUTION in December. To cope with the downturn, nearly 60 percent of distributors said they have cut travel expenses, reduced inventory or instituted hiring freezes. A third said they have frozen salaries, while 21 percent have reduced workers’ hours and 8 percent have slashed 401k or similar contributions. Thirty-seven percent said they have been forced to lay off employees.

Those are just some of the results of the survey, to which nearly 650 distributors from across the country and Canada responded.

Some respondents said they have taken extraordinary steps to deal with the recession, including discontinuing or slashing health insurance coverage, cutting bonuses, reducing salaries and closing branches. Others said they have cut capital spending and eliminated “reward and recognition” programs.

“We are prepared to do more if our sales drop off,” one respondent said.

Not all distributors are pessimistic, however. Positive comments from some respondents included: “We have not seen any slowdown with this recession”…”We’re actually hiring salespeople”…”We’re continuing business as usual”…”We’ve hired two salespeople from our competition”…”We are staying the course and continue to be aggressive in pursuit of business.”

George Carson, director of sales and marketing for Anchor-Bolt, a manufacturer/master distributor is one of those looking forward to doing business in 2009.

“We’re actually optimistic about the year because of our re-focus and our becoming more aggressive in the areas we can compete and win,” he said. “The key for us has been a real soul-searching on where we can win and then putting all our energies there. We’re already seeing some nice payback from that effort. Had we just stayed on course, we would have had a pretty tough outlook.”

The fast decline in business that sent the economy into recession caught many by surprise.

“In talking with our customers, we expected some declines, but I think some of the declines were significantly more than some customers expected,” said Carson. “The distributors we sell to have, in many cases, seen more significant declines than they originally expected, some pretty dramatic. The distributors that were focused on single industries have seen some drastic reductions.”

Anchor-Bolt is now focused on custom-manufactured products, making it less susceptible to import competition, which has been significant in the fastener business recently.
“We find that we’re actually much more successful and our business is actually growing in that segment,” Carson said.

Our survey also showed that some manufacturers are partnering more with distributors to help them get through these turbulent economic times.

“Some suppliers have increased our terms and discounts,” one distributor told us.

He added that one of his key manufacturers had extended payment to 45 days and beyond and is working on various new sales promotions. Another said manufacturers are offering price reductions and are becoming more pro-active in their approach to marketing their products.

“They’re also looking at creative marketing techniques to get the brand out in the market,” said another respondent.

Other distributors said suppliers were offering seminars and training, reducing freight costs, spending more time with salespeople on joint calls, offering special pricing and becoming involved in strategic planning.

One distributor said he will remember those who worked with him when the recession finally ends.
“Many [suppliers] have reduced their prices, but some are still trying to hit us with steel and fuel surcharges even though we know steel and raw materials are at rock-bottom prices,” he said. “This will hurt those manufacturers when everything calms down. If you can’t be there for me when I am down, I do not want you there when I am up.”

Sales decline
Nearly two-thirds of respondents said sales had dropped in the last quarter of 2008 compared to the same quarter in 2007. More than half said sales had dropped more than eight percent during those comparable quarters.

Most distributors are not optimistic about sales growth this year. Half of the respondents said they expect sales to drop in 2009 by more than eight percent. About 25 percent said they expect no change in sales compared to 2008, while an equal number expect sales to increase, albeit by a small percentage.

To try and drive growth, distributor salespeople are looking to find new customers, increase their sales call volume, spend more time with existing customers and undergo training on new products and services. More than half of these salespeople are developing new value-added services or programs.

Distributor management said their salespeople are following up faster on quotations, developing more private-label accounts and working harder to “solve their customer’s pain.”

Despite all the upheaval in the marketplace, 95 percent of distributors said it is “not at all likely” or “not very likely” they will sell their company in the year ahead. Only four percent said it was likely or very likely they would sell their business.

Overall, distributors report that they’re coping with the recession on a day-to-day basis without panicking.

“We’ve been through recessions before. We’ll survive this one as well,” said one respondent.

Source: Industrial Distribution – Through NAW SmartBrief
By: Jack Keough

In an extended family, relationships between members can be close and cooperative, or distant and dysfunctional, with dynamics that ebb and flow. But one thing is certain in just about every family…when faced with an external threat or challenging times, families put aside their disparate desires and pull together as a team to face the challenge.

This is apparently what is finally happening between two organizational family members that are not always close, either in function or relationship: Procurement and Finance.

According to the lead article in Purchasing magazine (online copy here), leaders in both organizations are beginning to focus more than ever on the health of their financial supply chain. Faced with stark evidence of the risks to their overall business that the credit crisis is creating in their supply chains, Finance and Procurement are coming together to combat that threat and bring stability to their supplier…and thus themselves.

And make no mistake, the evidence keeps pouring in that the barbarians are at the gate. According to the article:

• One company discovered a weak link in their supply base only after “the supplier-facing severe cash-flow problems-closed shop, without warning, in the middle of a project.”
• “In its recent Economic and Risk Outlook Report, Dun & Bradstreet says that despite emergency actions of the U.S. Treasury and the Federal Reserve, there will be more business failures and an increase in late payments.“
• And according to the administrative office of the U.S. courts, part of the federal judiciary, “business-bankruptcy filings in the U.S. for the 12 months ending September 30, 2008 were up by 49% over the year-previous period.”

According to Robert A. Rudzki, president of consultancy Greybeard Advisors and former chief procurement officer at Bayer:

“[Procurement] ha[s] to partner with the finance and treasury officers in their companies to work out strategies such as the best payment terms for supporting corporate financial objectives, including the amount of working capital they’ll maintain. Analyzing suppliers’ financial stability has always been an important part of strategic sourcing processes, but paying attention to suppliers’ finances is especially critical in a time when credit is hard to come by.”

So what can the tag-team of Procurement and Finance do to combat the threat to their financial supply chain and thus to their business:

• Work together to understand your suppliers and the impact different approaches to internal working capital optimization (Finance) will have on suppliers (Procurement), and collaborate on how your business can both mitigate supply chain risk AND benefit by utilizing 3rd party financing to extend DPO or providing early payment to suppliers from your own cash. As one CPO puts it, “These are tough times for suppliers, so paying attention to supply chain finance is important. There are some companies that actually act like banks for their suppliers.” …AMEN, brother!


• Beware a short-term approach like just extending terms without offering a relief valve to suppliers. According to Aberdeen latest study, many business are focused on the short term benefit of paying late and extending DPO and are “squeezing suppliers on payment terms.” Given the recent news stories about supplier failure and supply chain disruption, such an approach may be gaining working capital at the expense of delivering your core business!


• Work together to identify working capital needs and DPO targets, and then offer 3rd party Supply Chain Financing to your suppliers. This gives suppliers the ability to accelerate their cash flow as they need it (and leverage your better cost of capital to do so), while still allowing you to increase your average DPO without risking supplier failure.


• Utilize a Working Capital Management solutions portal that gives you the flexibility to change tactics and utilize the best strategy for your company, even as it changes. According to one source in the article: “Procurement may be looking for discounts, but corporate may want to extend payments, depending on how finance wants to use its cash.” Having a solution suite that enables both objectives to be met in tandem, or at different times as priorities dictate, gives a company critical flexibility to meet its financial supply chain needs.


• Finally, offer the suppliers the ability to self-service their accelerated cash flow, lest you end up finding out about their need only after the fact, as in the true story above.

Clearly, the credit crisis is continuing, and will continue for some time, to have an adverse effect on supply chains in every industry. But by banding together with Finance, Procurement executives can minimize the risk and position their companies (and their supply chains) to not only survive, but thrive.

As Purchasing magazine states: “Financial supply chain management is about to become one of the most important tasks of procurement professionals; and to effectively manage it purchasing will have to work a lot closer with finance.”

Drew Hofler is the Senior Manager responsible for Ariba’s Financial Solutions suite of products. In addition to extensive experience in banking and financial services, Drew is ACH Accredited and held Series 7 & 63 NASD certifications.

Source: Supply Excellence, Next  Generation Strategies for Supply Management
Website: www.supplyexcellence.com. By: Drew Hofler

In a recent International Association for Contract and Commercial Management  (IACCM) Survey of Supply Chain Management's Response to the Economic Downturn sent to over 10000 of their members, a remarkable 25% of the responses declared that they had already initiated the review and re negotiation of contract terms for mutual sharing of risks and rewards.

While the responses clearly point out the imminent trend, they also hint at the challenge it is to realize re negotiation of contracts with suppliers. Especially considering the sharp increases suppliers were forced to endure during 2008. It also indicates that relatively few companies welcomed attempts to open re - pricing discussions and fewer lent their ears when suppliers faced big price increases from their sub contractors.
But as IACCM advocates, it is never too late to begin changing ones approach and capitalizing on the opportunity in the era of ever volatile commodity prices.

According to Mike Petro,Senior Category Manager for Metals in Ariba’s Global Services Organization, last week, Ariba's Top 5 Categories to Source Now webinar had a huge attendance, showing that buyers are hungry to capitalize on the opportunities the current market provides. But the intention to seek costs savings and actually executing on that were two different things, especially when it came to revisiting existing contracts with current suppliers.

In this article, he tries to address the same issue by answering two related questions

• How are suppliers reacting to re-opening contract rates half way through the contract life?
• Any tips on how to engage and encourage vendors to re-open contracts to re-negotiate rates?

Supplier Reactions
As expected, suppliers are somewhat reluctant to participate in conversations with buyers about reducing prices considering the sharp increases they were forced to endure during 2008. Given the unprecedented volatility we’ve seen in the last couple years with commodity pricing, most suppliers are willing to at least participate in those conversations more than they would if pricing were flat in previous quarters. In fact, many buyers I am talking to have established a regularly scheduled review or “touch-base” with suppliers on a monthly or quarterly basis to discuss issues in such a turbulent market. I have not heard of suppliers that are outright refusing to discuss pre-existing contracts.

Tips to Re-Open or Re-Negotiate Contracts
Different strategies should be utilized depending on the specifics of the buyer/supplier relationship. For example, an aggressive strategy may work if the buying company represents a large % of a supplier’s business versus a small one. That being said, the following are some of the strategies that I’ve heard buyers utilize in the recent market shift:

• First and foremost, come to the discussions well armed with raw material and market data. Being able to quantify the appropriate price reductions being requested to the suppliers is the only way the suppliers will consider a change at all. Showing the specific data and the calculated new price request justifies your request and gives you a fighting chance.
• Approach the conversations from the angle that the buyer is trying to build a lasting relationship rather than simply save costs. The argument here is that you are trying to allow for a longer term relationship rather than just move business to the lowest bidder.
• Some buyers are resorting to the “survival argument”, in saying that sharing any cost savings would ultimately result in better financial health and more likelihood for mutual growth in orders in the future. This is obviously used by buyers in companies that are currently under financial distress.
• Make the argument that prices have typically been increasing more gradually than this most recent decline, so there has been time for suppliers to adjust their prices upward over the last year or two. Again, it is key to document the history of recent price changes (likely upward) and to be able to quantify the difference between current contract prices and the current true market price.
• If dealing with a longer-term fixed price contract that is currently unfavorable, some buyers are re-negotiating to a lower price in exchange for an increased contract length (for example, extending it from a 1 year to a 2 year deal in exchange for a 15% drop in price). This also is a good chance to add in a price adjustment clause if one does not exist presently.
• In addition to just discussing price decreases, some buyers are using this as an opportunity for the supplier to suggest some changes the buyer can make to help the supplier costs. For example, making a minor change to a specification, release quantities, packaging, etc. may not be a significant change for the buyer, but it may allow the supplier to cut costs. This can also be used as a good bargaining chip to offer in exchange for a re-negotiated contract price.

Again, you do need to approach each supplier relationship differently, but hopefully some of these ideas will fit with your situations.

Mike Petro is the Senior Category Manager for Metals in Ariba’s Global Services Organization. Previously, Mike analyzed supply chain options and competitive pricing for US Steel and Timken Latrobe Steel.