4/25/2012 12:18:00 AM
HEADLINES
MFDA Panelists: Expect Little Change Before Elections
Metropolitan Fastener Distributors Association panelists agreed that the U.S. domestic business will show little change before the November 2012 elections, as the government is intent on controlling the economy as much as possible.
• The situation in the U.S. is not a “live economy,” as Stelfast president Simmi Sakhuja put it. Expect steady, slow growth in a stable environment over the next six months, she added.
• The national debt and rising oil prices are clearly a drag on domestic growth, according to Brent Jenkins of Vulcan Steel Products. Vulcan is exploring exports to Mexico as well as South and Central America to offset the slow U.S. market.
• The niche market for Metric Multistandard Components is resuming growth, according to Roger Stillman. He pointed to stock market confidence as an indicator of recovery.
• In a report to the panel Garland Parker of St. Louis Screw & Bolt noted that his construction-oriented company is seeing growth in most areas of the country.
Another domestic factor is tighter lending standards, which are hurting growth. At the same time, banks are beginning to want to make loans. But capital remains scarce for small businesses.
Looking beyond 2012, Simmi predicted government spending will drive the domestic economy.
Panelists were in agreement on thinking positively and looking for opportunities. “We’re smarter than we think we are,” Simmi said.
International Market
With steel and freight prices going up overseas, and the probability of manufacturers in Asia experiencing rolling blackouts during the summer, Simmi expects import prices to rise.
The panelists agreed the fastener industry has to adapt to the global economy and find a way to thrive in this “new normal.”
The shift to a truly global economy has occurred, and the industry has to deal with this reality. At the same time the customer has more clout, because there are fewer customers and they are buying in greater volume. All supply-side businesses are being squeezed.
In the new normal of a global economy, the quest is to deliver value to the customer — you’ll make your dollars on ancillary items.
Stelfast strives to be proactive, Simmi noted.
Stillman said Metric focuses on customer retention. Look at your credits, he hinted, and meet customer expectations. “Help your customer not make mistakes.”
Lessons From the Recession
The economic challenges of the past few years have brought the benefit of making distributors hold themselves accountable, panelists agreed.
Simmi observed that growth is possible in any environment and said her company is staying focused on return on investment (ROI) with a goal of sustainable growth.
Jenkins called tough times a “refiner’s fire” and said “we’ve learned to think smarter. Hard times lead to leaner businesses that are more focused.”
Inventory
Vulcan boosted its inventory prior to winning an antidumping suit, preparing to fill customers’ needs, but it has been holding more of that inventory than it wanted the past few years, Jenkins said. Vulcan’s inventory levels are finally down toward normal levels.
While it’s clear that bankers don’t like inventory, Marty Schneider of Continental-Aero pointed out that in fasteners “inventory is our strength.”
Consequently deeper inventory is necessary. “We can give longer terms to customers’ credit, but at the same time we need to deepen inventory.”
Fasteners as a Growth Industry
Jenkins mentioned that there is demand for domestic fasteners due to the 2009 U.S. Stimulus Act, and Vulcan subsequently is balancing its sourcing.
Good customer relations require supplying the right fit for the right purpose, Simmi maintained. “Otherwise your product will end up costing you more than it’s worth.”
Specialty items make the difference for many: “It’s hard to make money on a gallon of milk or a loaf of bread,” noted Stillman.
Leading Indicators
Construction starts are often put forth as an economic indicator, but panelists agreed that such statistics are skewed. And so much has changed since 2008. There is no comparison when the world has so fundamentally changed. Stelfast management looks internally for indicators, but Simmi knows the company’s own historical statistics are skewed. In five years the situation could be better, she suggested.
Jenkins said his company finds customer feedback more meaningful than stats. He will go by word of mouth in the marketplace.
Schneider suggested looking at restaurant revenues as a stat: “They’re now up, and that means people are feeling confident and are willing to spend.”
Skill Sets and Technology
In today’s world we have to be flexible, resilient and willing to take calculated risks, Stillman said.
The business requires a focus on servicing the customer, noted Jenkins.
The skill set is the same as always, but in this global economy we have no time anymore, and that means we need more endurance and a thicker skin, according to Simmi.
Everyone agreed that we’re now working 24 hours a day — no one blows a whistle to signal the end of the workday.
Everyone also agreed the customer can go to anyone and buy product for about the same price; success now comes with retaining the customer through value-added services. That makes relationships the key. ©2012 GlobalFastenerNews.com
Related Stories:
Share: