The Mheda Journal

We’re still in the process of putting our Annual Industry Forecast together, so complete results are not yet available. But I can at least report that, if nothing else, the uncertainty and “doom-and-gloom” mentality that was a staple of the material handling industry in 2009 & 2010 has dissipated.

Most of the distributors interviewed for this year’s story are expecting sales increases of anywhere from 3% to 60%. Granted, many of those same people shrug off those projections with some version of the justification that “our business was down so far that X% doesn’t even get us back to where we started.” That may be true, but we have to start somewhere. I think most everyone would agree that we’ve reached the bottom and are beginning the ascent back to respectability.

Now, of course, the rate of that ascent is what is up for debate, but it’s clear that the ascent is about to occur if it hasn’t done so already.

Mike Burskey, president of Shelving + Rack Systems (Walled Lake, MI), sums up the general feeling of most of the MHEDA Members interviewed for the forecast when he says, “I’m excited about next year. It’s up to us. We’ve got a couple of choices. We can sit back and say, oh the economy’s bad and my paycheck isn’t as big as it used to be oh what am I going to do or we can get off our duffs and go do something about it. We’re choosing to go do something about it.”

That’s great perspective and one that has served a lot of diligent members well over the past few years. What do you think? Are we on the right track?

Jeff Dietrich

Today I sat in on MHEDA’s Economic Trends Webinar. It was hosted by Jeff Dietrich, an economist with the Institute for Trend Research. He provided a lot of encouraging news about where the economy is headed for the rest of 2010 and 2011. Among the most important predictions: The United States is not heading for a double-dip recession. That bodes well for all industry, and material handlers can expect things to pick up among their customers if they haven’t seen it already.

Specific to material handling, Dietrich said that the industry is expected to be up by 6.9% year over year by the end of the fourth quarter. Granted, that’s still not back to where it was pre-recession, but it is some encouraging news.  He warned that recovery started in December 2008 and is continuing now, but do not expect linear growth. We are in an upward trend but business owners can expect some “bumps and bruises” as we continue on the path to full recovery.

The hour-long webinar was full of lots of great information about economic trends in the coming months. If you didn’t have a chance to check it out, you can call MHEDA for a CD recording. Also, The MHEDA Journal’s annual industry forecast is on tap for our January 2011 magazine, so you’ll have plenty to read about when that comes out. You may even be getting a phone call from me within the next few weeks!

Excel Storage Products, a manufacturer of pallet racks and storage systems, closed up shop on Friday, September 17. According to local sources, the closing was abrupt and employees were given no advance notice of the closure until showing up for work that day.

Since then, the company has submitted a letter to the Pennsylvania Department of Labor indicating that it is “permanently shutting down.” Union officials from Laborers Local Union 108, which represents dozens of Excel employees, succeeded in getting an injunction in federal court on Wednesday, September 22, to prevent immediate liquidation of the company into a receivership.

While many of the local newspapers and television stations I’ve been able to locate are focusing on the plight of the employees, they are not the only ones impacted. Distributors who sell Excel products, companies that supply Excel and customers who are using Excel products are all now left to bear the brunt of the fallout. At least one MHEDA member that I know of—and I’m sure there are plenty more—has spent the better part of this week scrambling to get replacement equipment from other rack manufacturers to finish existing orders. One of the newspaper articles quoted one of Excel’s suppliers as being owed $20,000.

I realize that companies close down all the time, but this instance is particularly jarring, coming on the heels of the company’s recent acquisitions of Prest Rack in South Dakota, Lodi Metal Tech in California, and W.C. Cardinal in Ohio. The W.C. Cardinal transaction just happened in June. It’s hard to believe that a company with the ambition and resources to buy three companies in just a few years can suddenly be so far behind the 8-ball that it must immediately shut down.

Is there something more going on than just another casualty of a substandard economy? Calls to Excel headquarters went unanswered, but I am curious to find out what MHEDA members have to say. If you have an opinion or any insight, please feel free leave a comment or contact me at editor@TheMhedaJournal.org.

In preparing some headlines for wikiMHEDA today, I came across an interesting story from the Chinese website peopledaily.com. It is the online home of People’s Daily Online, whose tagline says, “Launched in January 1998, People’s Daily Online is a website built by People’s Daily, the official newspaper of the Communist Party of China.” I say that to pre-emptively say that I’m not sure how reliable the information I’m about to share is. China is not known for its open journalism. 

That being said, the facts stated in the story are interesting and may have some impact on industrial truck distributors and suppliers in the United States. The lead of the article states, “Forklift sales in China more than doubled in the first half of the year and are poised for further growth in the full year, industry experts said on Monday [July 19]. China will continue to lead the global market and the gap with US, the next biggest player, is set to widen further, they said.

“During the first six months of the year, domestic forklift sales rose across the 90,000-unit barrier, up nearly 113 percent from a year earlier.”

Two things strike me about this. One, that’s a hefty boost in sales. The article says it’s “forklift sales in China,” but it’s not clear if that figure accounts for only Chinese-made forklifts or imports into China as well.  Either way, that’s a pretty quick recovery and upward trend.

Second, it says the gap between China and the U.S. is expected to widen. While that doesn’t come as much of a surprise at this point, I’m hoping that is not the case. Here’s wishing that our domestic industry can rebound quickly enough to remain competitive, at home and abroad. Any thoughts on this? I’d love to hear from someone with more knowledge on the situation.

This is the second case of material handling in China I’ve written about in the last week. Check out the newly improved website for The MHEDA Journal and an article discussing the antidumping duty saga regarding wire decks.

As I have mentioned before in this space, the next issue of The MHEDA Journal (set to publish on July 15) recognizes Top MHEDA Dealers—those distributors who were honored by their manufacturers as a top-performing partner.

Earlier this week, I spoke with Mary Lou Jacoby, owner of warehouse1 (Kansas City, MO), a distributor of storage & handling products who earned Top Dealer honors from Tri-Boro Shelving & Partition Corp. Mary Lou had an interesting thing to say about how the poor economy impacted the market for allied products.

“Everything that we sell is made out of steel. As the market went down, so did the price of steel and, in turn, the price of new products. Therefore, revenue went down. If the price of new product was off 20%, then you could certainly expect sales volume to go down 20%. That was something about the year before that most people don’t take into account. In 2008, the steel market increased in price, so our equipment increased in cost. When you say your sales volume in 2008 was up 20%, really you were just breaking even because steel was up 20%. So for us, 2009 was down, but a part of that difference in revenue is based on the cost of the material.”

Most people, myself included, have thought about the economy in terms of a lack of customers with capital to spend and that’s why sales are down. Or, prices have been reduced by the seller in an attempt to spur sales. I hadn’t given too much thought to the actual cost of the item itself. Obviously, if that goes down, the retial price goes down, which impacts a distributor’s revenue. Thanks, Mary Lou, for the perspective!

The responses continue to roll in from MHEDA Members listed on manufacturer Top Dealers list. To add to my list from last week, here’s a couple more strategies from MHEDA members who were able to achieve some success in 2009, despite the down economy.

• “Our objective was to provide exceptional service and continue to build relationships with customers. Achieving that objective involved increasing our number of repeat customers, improving customer survey results, responding to customers’ needs during the initial contact, reducing the amount of required rework and overall improving processes.”
• “We directed our sales force to specific SICs and used the entire company to become regarded as a ‘valuable’ supplier for our customers. In short, we made it our business to understand our customers’ business and respond quickly to their demands. By doing so, we exceeded pre-set objectives for 2009.”
• “We began to look for industries that had severe pressure on them, such as building supplies and automotive, and tightened credit to those customers. It caused some angst, but it helped keep our bad debt expenses in line.”

As I mentioned last week, the July issue of The MHEDA Journal is chock-full of strategies from Top Dealers. I don’t want to leave anyone out, so if you won an award from your manufacturer, send me a message at editor@themhedajournal.org or leave a comment here to inform me!

Earlier this week, I sent an e-mail to every MHEDA Member who I know earned a “Top Dealer” award from a material handling equipment manufacturer in 2009. Now is the time of year when those lists start making the rounds, and once again, they are littered with MHEDA-member distributors. (If you won an award but did not receive an e-mail from me, that means I don’t know about it! Send me a message at editor@themhedajournal.org or leave a comment here to inform me!) It is our goal in the July issue to highlight some of those dealers who were able to acheive success in 2009 despite the conditions.

In the e-mail, I asked distributors how they did it? What was their strategy going into 2009? How did they implement it? How did they meet the award criteria? A smattering of the responses so far:

• “Our strategy was to keep all our salespeople and push service and units in stock for sale. We maintained stock levels in parts and rental fleet. We made ourselves a ‘one-stop shop’ by adding additional product offerings.”
• “We changed our sales force structure to an account management basis with each sales rep being assigned a minimum of 150 customers and target accounts. For each account, they developed their strategy to support the accounts. We provided incentives to our sales staff for doing new business, including equipment and aftermarket sales. We provided special service packages to our customers to assist them during these recessionary times.”
• “We simply listened to what customers needed to have done on their projects and made sure we met their goals with our finished prducts. We were not worried about meeting any special criteria, just stayed focused and kept everyone in the company busy.”

It’s all sound advice. Congrats to the winners, and I’d love to hear from even more of you! There’s still time. Now’s your chance to be included in the “How I Did It” issue of The MHEDA Journal, coming soon to your mailbox.

With the beginning of April comes the official start of the calendar’s second quarter, and I’m curious how business really is going out there. In our January magazine, we did our annual Industry Forecast  where we interviewed 50 MHEDA distributors about their expectation for the year. At that time (interviews were completed in October and November 2009), material handling distributors were cautiously optimistic about economic recovery, with 68% of MHEDA distributors expecting sales to increase in 2010. The average gain they predicted was around 6.5%.

Now that the second quarter is underway, what is the current outlook? Has it changed from what we found in our forecast? If so, why? If not, why not? I’d love to hear from you. Leave a comment with the answer to these questions: “Will 2010 be a better year than 2009? By how much? Why or why not?” If enough people respond, this could be an article in the next issue of The MHEDA Journal.

In today’s environment, things are constantly changing…so it’s good information to have. You can also send a response via Twitter at @liftmoveandstor.

Happy Easter and Passover, everyone!

Over the weekend, we passed the official first day of Spring (March 20). In addition to the long-awaited warmer weather and longer days, that also means it’s time for the Spring issue of The MHEDA Journal. It won’t be distributed until April 15, but we’re wrapping up production in the next few days and it’s fresh in my head.

This issue takes MHEDA’s Convention theme, “The Rules Have Changed” and runs with it. Eight distributors give in-depth descriptions of things they’re doing at their companies to illustrate how the Rules Have Changed and how they’re responding.

Bill Rowan of Sunbelt Industrial Trucks (Dallas, TX) talks about the tighter credit policies he’s implemented. Ken MacDonald of M&G Materials Handling (East Providence, RI) discusses the lean initiatives he’s installed at his company. Audie Burgan of J.M. Equipment (Manteca, CA) explains why they’ve decided to move into a larger facility in this economic environment. 

These are only a few of the headlines…keep reading the blog up through publication day to find out more ways that MHEDA Distributors are changing the standard rules of business.

Today is the first official day of March Madness, the annual three-week period when the NCAA crowns its men’s basketball national champion. It’s one of my favorite times of year, as office pools (if those were legal) come into vogue for the next few days and people talk about their brackets.

One of the things that gets the casual fan, not just the rabid college basketball follower, involved in March Madness is the expectation of “upsets” by the smaller, lesser-known schools and embracing the upheaval caused when these upsets occur.

For instance, already today, in the first four games of this year’s tournament, the underdog won two games, and the other two games went to overtime before the favored team won. You never know what to expect.

In some ways, “You never know what to expect” has been the prevailing attitude in the business world for the last 18-24 months. Since the recession started back in 2008, what used to be commonplace is no longer, and vice versa. Customers that have been counted on for years may now be closing their doors. “Madness” has not only been a figurative turn of phrase for some people during the last several months, unfortunately.

The good news is, the upheaval in March Madness is usually short-lived. Eventually, many of the teams that are expected to be around at the end will survive to make it there. Let’s hope the same holds true for those in the material handling industry in particular, and the business world in general. Let’s hope those who struggled to survive the early rounds of this recession are still around at the end.