THE 2014 DISTRIBUTION INDUSTRY OUTLOOK

Transcription

1 Download handouts (PDF) : or info@mdm.com THE 2014 DISTRIBUTION INDUSTRY OUTLOOK Featuring: Andrew Duguay, Lindsay Konzak and Ranga Bodla January 16, 2014 Produced by: Event Sponsor: 1

2 Download handouts (PDF) : or info@mdm.com Speakers: Andrew Duguay Senior Economist Institute for Trend Research Lindsay Konzak Editor Modern Distribution Management Ranga Bodla Director of Industry Marketing Netsuite Tom Gale - Moderating Publisher Modern Distribution Management Event Sponsor:

3 Download handouts (PDF) : or info@mdm.com Agenda: Introduction Tom Gale (5 Minutes) Presentation Andrew Duguay (40-45 Minutes) Presentation Lindsay Konzak & Ranga Bodla (20-30 Minutes) Q&A Everyone (10-15 Minutes) Close Tom Gale (2 Minutes) Event Sponsor:

4 MDM Webcast January Economic Outlook Andrew Duguay ITR Economics

5 Real Gross Domestic Product '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 12 Trillions of $

6 Four Phases

7 Four Phases 7 Expansion 0 0

8 Four Phases 8 Expansion 0 0 Recession

9 Four Phases 9 Expansion 0 0 A A Recession

10 Four Phases 10 Expansion B B 0 0 A A Recession

11 Four Phases 11 Expansion B C B C 0 0 A A Recession

12 Four Phases 12 Expansion B C B C 0 0 A D A D Recession

13 Delinquency Rates on Consumer Loans 13 Percentage Consumer Loan Delinquency Rate Consumer Credit Card Delinquency Rate Percentage Year Average 10 Year Average Lenders are increasing the amount of credit available for consumer installment loans Consumer demand for loans is rising MMA Data Trends

14 Commodity Price Index Steel: $361 per Gross Ton 200 Oil: $95.84 per Barrel '05 '06 '07 '08 '09 '10 '11 '12 '13 3MMA Index Dec 2009=300 Copper: $3.32 per Pound

15 Commodity Price Index Steel: $361 per Gross Ton 200 Oil: $95.84 per Barrel '05 '06 '07 '08 '09 '10 '11 '12 '13 3MMA Index Dec 2009=300 Copper: $3.32 per Pound

16 Commodity Price Index Steel: $361 per Gross Ton 200 Oil: $95.84 per Barrel '05 '06 '07 '08 '09 '10 '11 '12 '13 3MMA Index Dec 2009=300 Copper: $3.32 per Pound

17 World Countries Industrial Production 17 Year-Over-Year Growth Rates %

18 Europe Imports and Exports Export Volume Import Volume '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

19 Total Retail Sales (deflated) R-O-C 14 MMT /12 12/ $ MMT MMT -28 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 ' Trillions of 82-84$

20 Retail Sales 20 Computer & Software-1.9 Furniture Stores Automotive Parts Stores Health and Personal Care Stores Grocery Stores Sporting Goods Stores Clothing Stores General Merchandise Stores Bldg Materials, Garden, Supplies US Light Vehicle Retail Sales Beer, Wine & Alcoholic Beverage Jewelry Stores Electronic Shopping

21 Nondefense Capital Goods New Orders w/o Aircraft 21 R-O-C MMT /12 12/ MMT $ MMT '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 ' Billions of $

22 Wholesale Trade Durable Goods R-O-C MMT /12 12/ $ MMT 12MMT 2-80 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 1 Trillions of $

23 Wholesale Trade Electrical & Electronic Goods 23 R-O-C 30 MMT 730 3/ / $ MMT 12MMT '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Billions of $ Source: US Census Bureau

24 Wholesale Trade Hardware, Plumbing, HVAC Equipment & Supplies ROC 40 MMT /12 12/ $ MMT 12MMT -80 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 50 Billions of $

25 Wholesale Trade of Lumber & Other Construction Materials R-O-C MMT 275 3/12 12/ MMT 12MMT $ '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 50 Billions of $

26 Housing Starts R-O-C 60 MMT /12 12/12 Mar MMT 12MMT '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 ' Millions of Units

27 Private Nonresidential Construction 27 R-O-C 60 MMT 700 3/12 12/ MMT 12MMT $ '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 ' Billions of $

28 Wholesale Trade Nondurable Goods R-O-C 30 MMT /12 12/ $ MMT 12MMT Trillions of $ '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 0

29 Mortgage Rates to Federal Funds Mortgage Rates Federal Funds Raw Data

30 FOMC Member Interest Rate Projections 30 3 participants project 0.25% at year-end Source: Federal Reserve

31 Consumer Price Index All Items '06 '07 '08 '09 '10 '11 '12 ' /12 rate-of-change

32 Cost of Healthcare Reform 32 Increase as % of GDP Source: Ezra Klein, Washington Post

33 Costs by Age Categories 33

34 One (or many) bright spot(s): the shale gale 34 Source: EIA Annual Energy Outlook, 2008 to 2011

35 US Manufacturing as a % of GDP (Value Added) % MMA 11.0% '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 ' MMA

36 What to do in this business cycle? Stay realistic beware of linear budgets Make sure growth is organic and leveraged Build in efficiencies to maintain margins Look for countercyclical and developing markets Cross-train key staff Assess capacity with an eye for the business cycle upturn in 2015 Lock in costs ahead of rising interest rates and inflation

37 ITR Economics Continue Your Quest in Seeing Tomorrow Today to learn more about: 37 ITR Advisor Monthly Newsletter Twitter Feed ITR Outlook contact or visit

38 5 Predictions for Distribution in 2014 MDM Editor Lindsay Konzak with Ranga Bodla of NetSuite

39 MDM Research Team Sources Interviews with distributors & industry consultants Ongoing MDM reader surveys Public distributor reports 2014 Wholesale Distribution Industry Outlook Report from MDM and NetSuite

40 2014 Revenue Outlook Down less than 5% Down 5%- 10% Flat Up more than 10% Up less than 5% Up 5%-10% Source: MDM-NetSuite 2014 Industry Outlook Survey

41 2014 Revenue Outlook Source: MDM-NetSuite 2014 Industry Outlook Survey

42 #1 Distributors will continue to expand product portfolios and geographic reach.

43 Plans for Building Revenue in 2014 Source: MDM-NetSuite 2014 Industry Outlook Survey

44 #1 Product expansion is facilitated by shifts in the channel E-commerce & master distributors allow broader reach and expands drop-ship capabilities There are a lot of folks focusing on product expansion, this concept of endless aisle, different supply chain linkages so they can offer more through online portals. Interline Brands President Ken Sweder

45 #1 Safety & jan-san still big targets With a flat market, more nationals will continue to add adjacent product categories, and safety has seemed like the most prime category. Mallory Safety & Supply President Tim Loy Interline Brands big push into jan-san: Jan-san is a consumable and stable business It complements end-markets distributor already serves It offers opportunity to cross-sell to more customers

46 #1 Strategic acquisitions

47 #1 Customer-driven Customers understand that it costs them money to have multiple suppliers in different areas. If, for example, a company can buy their mechanical products and their electrical products from one distributor, it will be more cost effective for them. Van Meter Inc. Chief Growth Officer Mike Gassman

48 #2 Gap will widen between those who implement inventory management services well and those who don t.

49 #2 Defining inventory management services

50 #2 Fastenal, MSC, Grainger are all targeting vending and inventory management services as key growth drivers.

51 #2 35,000 32,248 30,000 25,000 20,000 Cumulative Vending Machines Installed 1Q11-3Q13 15,000 10,000 5,000 2, Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Source: MDM analysis; Fastenal 3Q13 earnings report

52 #2 Distributors need to ask: Which solution is best? Will vending solve the customer s problem? Get more on industrial vending in the MDM Special Report: The Industrial Vending Boom

53 #2 All the data and research that we have done, the customer cares most about having the right product when and where they need it, and there are some products that they want to understand who is using what so they can reduce it or they can limit the amount of products that they re taking. Brian Norris, Grainger s vice president for inventory management

54 #2 Internal drive to more aggressively manage inventory better in 2014

55 #3 Competitive lines will continue to blur between channels.

56 #3 Four walls and the local market are no longer limits Drivers Technology Global competition Entrepreneurs Converging channels Retail outlets: Home Depot, Lowes, Staples

57 AmazonSupply #3 Aggressive push to grow number of SKUs & product categories When scale is achieved, what happens next?

58 September 2013 January 2014

59

60 #4 Customers will continue to demand multichannel capabilities from suppliers.

61 The Amazonization of Customer Expectations Functionality Ease of ordering Technical infrastructure Speed of delivery #4

62 Generational shift #4

63 #4 Multichannel is Grainger s priority Web platform that can handle customer interactions across: Mobile, website & inventory management solutions Start transaction on one and finish on another

64 #4 MSC Industrial Supply VP of E-Commerce: Many of its customers use two or three different channels in a single transaction Requires consistent information across platforms

65 #4 Most small to mid-sized distributors do not yet do multichannel well A seamless customer service experience is about more than just having a functional e- commerce website

66 Technology Plans in 2014

67

68 #5 Data management will become more practical.

69 #5 Clean and standardized data Impact of the Web Big Data vs. Little Data Accessing data remotely

70 Interest in Cloud Computing

71 Devices Used in Business

72 #5 Mobile devices facilitating data and cloud trend

73 #5 Distributors want to get data into the hands of their salespeople people Inventory availability Pricing Video/literature on product application

74 Moving Forward MDM s Distribution Trends for 2014 Your market impact 1 (Low) to 4 (high) Your competitive position 1 (ignoring it) to 4 (Leading it) Table Source: Distributor Innovation in 2013 Mike Marks

75 Get more Ongoing trend analysis in MDM Premium If you re not a subscriber, join us at Look for the 2014 Distribution Trends Report, released with the 2014 MDM Market Leaders lists in June.

76 Who is NetSuite Background Founded 1998 Publicly traded on NYSE: N Offices in 10 countries 2,300+ employees Performance Used by 16,000+ global organizations World s most deployed cloud ERP Top 10 highest growth ERP solution according to Gartner and IDC NetSuite runs NetSuite #1 Cloud ERP Suite Powers Distribution

77 THE 2014 DISTRIBUTION INDUSTRY OUTLOOK Questions? Download handouts (PDF) : or contact info@mdm.com Produced by: Event Sponsor: 77