MDM Report highlights
slower economic trends
Modern Distribution Management's (MDM) 14th annual economic benchmarks for wholesalers report examines sales, inventory levels, gross margin, productivity and other critical benchmark data trends for 19 sectors in the distribution industry. We benchmark best practices in business supplies.....Updated
In our annual Mid-Year Economic Outlook webcast on July 11, MDM research partner and report author Brian Lewandowski (pic right) will review report highlights, provide a snapshot of current economic conditions and forecast the rest of 2019 and 2020 for key distribution end market segments.
Lewandowski expects 2019’s rate of growth for all distribution sectors to be approximately 2.4%. By comparison, the overall rate of growth for 2018 was 6.8%. “What we're seeing is growing but slowing in the industry,” says Lewandowski.
Total revenues of wholesale distributors reached $5.9 trillion in 2018. Overall, industry inflation for the 19 wholesale trade sectors exceeded the Consumer Price Index and the Producer Price Index. Real (inflation-adjusted) revenue increased 1.4% in 2018, and correcting for price changes, real industry output for the year grew in 11 of the 19 sectors. Only one sector recorded price declines in 2018 — the Computer Equipment and Software Wholesale Distributors, a sector that has recorded price declines for 20 years.
Of the 19 major wholesale sectors, 17 are projected to record revenue growth in 2019 and 16 in 2020 (in nominal terms).
Quarterly Forecasts by Distribution Sector
New this year are quarterly revenue forecasts for each of the 19 wholesale distribution sectors profiled int he 2019 report through 2020. In addition to a baseline forecast for each quarter, the report also includes alternate optimistic and pessimistic forecast projections to help distributors develop strategic planning scenarios.
“Our expectation when we completed the report in May was that wholesale trade should grow by 2.4% in 2019 and accelerate in 2020 to 4.4%. But if the economy does even better, we can see a lot stronger growth come out of wholesale trade — we're talking 3.4% and 8.2% in 2019 and 2020 respectively. However, if we do in fact move to more of a recession scenario, we do see a decline in wholesale trade revenue this year and next year,” Lewandowski explains.
The sectors included in the report and available for individual purchase are:
- Industrial (See Grainger pic right)
- Hardware, Plumbing & Heating Equipment/Supplies
- Grocery & Foodservice
- Building Material & Construction
- Oil & Gas Products
- Motor Vehicles & Motor Vehicle Parts
- Other Consumer Products
- Miscellaneous Durable Goods
- Commercial Equipment & Supplies
- Computer Equipment & Software
- Agricultural Products
- Apparel & Piece Goods
- Beer, Wine & Liquor
- Chemicals & Plastics
- Office Products
- Furniture & Home Furnishings
- Metal Service Centers
Business Supply Market Analysi/Comment
The $250Bn US Business Supply market may be analysed by category as follows:
- Office Supplies 15% mix - declining at -8% pa
- Office Furniture 10% mix - growing at +3% pa
- IT supplies 25% mix - growing at +3% pa
- FM supplies inc. hygiene, refreshments, safety & security 30% mix - growing at +3%
- Packaging & foodservice 15% mix - growing at +4%
- Print, workwear, ad spec 5% mix - flat
- TOTAL Market 100% growing +1.35%
The Proficiency Index - Key Benchmarks determining success are as follows:
- Productivity - Sales per employee (8 hour equivalent) - Best Practice at $500k+/ee
- Average Order Value - Best Practice at $200+ (Wholesaler rate) $150+ (Dealer rate)
- Revenue % Growth Rate - Best practice above market rate at 2%+
- Cost to Serve %/sales - Best Practice 12-15% (wholesaler rate); 18-21% (dealer rate)
- Warehouse productivity rate - Best Practice 30+ lines/hour (Total day's line picked/total warehouse team hours input)
- Delivery productivity - Best Practice Region (rural/urban) 50 - 70 drops/day; Urban/City 80-100 drops/day