The master distribution silo of the PHCP-PVF supply chain performed well in 2017, so say executives who took part in Supply House Times’ annual trends outlook.
But, wait. There’s more where that came from. Executives feel that while 2017 was positive, this year will take things a step further. First, let’s look at 2017.
“For us, 2017 showed significant growth in all markets,” says Tim Williamson, president of St. Louis-based Service Metal, a master distributor of industrial PVF products. “We experienced rapid growth in our Houston location and the surrounding territory as our newest branch gained traction for our unique service-driven approach to distribution. It was great to see our customers have more business and be a part of their success.”
Rob Raban, president of Rancho Dominguez, California-based industrial PVF master Industrial Valco, says “2017 certainly was better than 2016!”
“Things started improving in February and held pretty steady with modest increases throughout the year,” he explains. “I believe with oil prices stabilizing in the $50s it gave oil markets a chance to recover along with the goods and services that supply them. With oil touching the $60s, business accelerated in November and December, which are traditionally slow months for PVF.”
Cause and effect
For Sara Alford, general manager at Stafford, Texas-based industrial PVF master Newmans Valve, success in 2017 can be traced to its continued master-distributorship for Newco products, as well as signing an exclusive master-distributor agreement with Powell for its pressure-seal valves. “It is vital that master distributors are successful in the oil and gas market to cater to the small- and mid-size companies that cannot go directly to a manufacturer,” she says.
Paul Neustadt, president of Downers Grove, Illinois-based HVAC master Neuco, notes the company’s growth last year was attributed to two key points, one being inventory-related. “We made a conscious decision to increase our overall inventory, but with a higher emphasis on our A and B items, which we feel had a positive effect on our results,” he says.
Neuco also reaped the rewards of a recently revamped website. “It has been a really big success,” Neustadt says. “The site has many new features and tools that help our wholesale customers in their everyday sales process, which in turn has made us a more valuable partner to them. We continue to innovate and think of new ways we can contribute to increasing our customers’ bottom lines.”
The Stock Market, a master distributor of plumbing and lighting supplies, also is placing an emphasis on the eCommerce aspect. “Because of constant advances in technology, our customers demand a simplified, seamless approach to making purchases and managing their accounts,” The Stock Market Senior Vice President Chip Devine says. “We continue to evolve and expand our eCommerce solutions. The internet retail business grows rapidly and ultimately affects the way we transact through traditional retail or wholesale channels.
“Like last year and probably for years to come, large eCommerce businesses will raise the bar in terms of ease of purchasing products, delivery speed and an ever-expanding product offering. Consumers have that level of expectation for many of the purchases they make and they’ll constantly look for new and different places to buy what they need. As a master distributor, we must see this as an opportunity and continue to be the broadest, deepest and most efficient company in the product categories we support.”
Down the river
While master distributors who participated in this trends story agree 2018 is shaping up to be a strong year (more on that in a second), they are cognizant of forces in the marketplace that do require attention. Raban cites the recent anti-dumping actions as one prime example.
“The landscape has changed dramatically, to say the least,” he says. “With the recent dumping actions affecting the flange and forged steel fitting markets and to a smaller degree with the weld-fitting market, foreign material prices have skyrocketed and lead times have lengthened. It’s tough to keep some commodity items on the shelf due to slow deliveries. It can be frustrating when you are out of bread-and-butter items.”
Williamson adds: “The various trade suits have forced masters to actively source materially from new regions and manufacturers. We are actively monitoring the various trade suits that our domestic manufacturers are filing to keep foreign competition from bending the rules. These suits are necessary for American jobs and the development of a fair global market where all players are on an even playing field, but they do create supply-chain disruptions for distributors. In 2017, we expanded our offering of carbon steel flanges to include domestic flanges as the anti-dumping/countervailing duties suits caused delivery delays and we recently have started stocking domestic forged steel fittings to minimize the impending stock-outs from the ADD suit for that commodity.”
Gerald Merfish, CEO of Houston, Texas-based industrial PVF master Merfish Pipe & Supply has watched as many supply houses, as he explains, have moved to a model he sees prevalent in the steel service center industry — buying as needed and seeking inventory turns in excess of six times a year.
“To adapt to this change we have substantially increased our local footprint by growing our dedicated weekly delivery route network to 22 dedicated dispatches, which help our customers to best-manage their inventory of standard carbon steel pipe,” says Merfish, who adds its Houston location has a Merfish Express Loading program that currently achieves an average load time of under nine minutes for will calls of 10,000 pounds, which he believes is unmatched in the industry.
But overall, 2018 looks to be another year of increased sales and opportunities for those in the master-distribution space. Raban says Industrial Valco is predicting sales improvement of at least 20% over 2017.
“We expect 2018 to be a great year,” Newmans Valve’s Alford says. “We already have seen an increase in business since the first of the year and with the new tax changes, we feel the industry will bounce back at a much faster rate than originally anticipated. When this happens and customers cannot wait for factory lead times on those hard-to-find items, master distributors like ourselves are able to meet those immediate valve needs off the shelf.”
This article was originally titled “Bullish on 2018” in the February 2018 print edition of Supply House Times.