Manufacturing sector grows, but at a slower rate
Construction spending estimate passes $1 trillion
Metalformers report stable business climate
Airgas adds five members to distributor advisory council
Prophet 21 forms fastener advisory council
Grainger details technology and supply chain investments
Pentair tools group sale gets regulatory clearance
Precision Industries opens facility to supply Maytag
Global Fastener & Supply achieves quality certification
UASI adds DuPont personal protection line
Rockwell Automation helps manufacturers maximize RFID
Walter completes Werner Schmitt acquisition
Durable goods orders retreat in August

Manufacturing sector grows, but at slower rate
Economic activity in the manufacturing sector grew in September for the 16th consecutive month, while the overall economy grew for the 35th consecutive month, according to the Institute for Supply Management's (ISM) Manufacturing Report On Business.

ISM's PMI registered 58.5 percent in September, a decrease of 0.5 percentage point compared to 59 percent in August. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

"The manufacturing sector continued to grow during September, but at a slightly slower rate," said Norbert J. Ore, chair of ISM's Manufacturing Business Survey Committee. "Both new orders and production remain strong, and employment growth accelerated."

The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (61.5 percent) corresponds to a 6.8 percent increase in real gross domestic product (GDP). In addition, if the PMI for September (58.5 percent) is annualized, this corresponds to a 5.7 percent increase in GDP.

"September was surprisingly strong given the recent slowing of growth in new orders. Production and employment were particularly encouraging as both indexes increased when compared to August. Any concern over inventory growth would seem to be offset by the decline in customer inventories," said Ore.

Comments from respondents this month were typical of a growing manufacturing sector. Concerns ranged from problems with product launches to seasonal issues and strikes. The hurricanes caused problems for some businesses while others saw a pickup in demand. The employment picture is improving, according to respondents who mention blue-collar and white-collar new hires. The growth in inventories appears to be voluntary as companies build inventories for "stocking of finished goods for resale," for "hedging against price increases," and, as one member responded simply, "more business, more inventory."

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Construction spending estimate increases
Construction spending increased 0.8 percent in August to a seasonally adjusted annual rate of $1 trillion, according to the Commerce Department. The August figure is 10.1 percent above the August 2003 estimate of $922 billion.

During the first eight months of 2004, construction spending amounted to $646.8 billion, 9.4 percent above the $591.2 billion for the same period in 2003.

Commercial construction spending increased 0.7 percent in August to a seasonally adjusted annual rate of $69.4 billion, up from $68 billion in July. The August figure is 6.5 percent above the August 2003 estimate of $65.2 billion.

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Metalformers report stable business climate
Metalforming companies reported little change in current and near-term business conditions, according to the Sept. 1 Precision Metalforming Association (PMA) Business Conditions Report.

Conducted monthly, the report is an economic indicator for manufacturing, sampling 183 metalforming companies in the U.S. and Canada.

When asked whether they anticipated general economic activity would increase, decrease or remain the same over the next three months, 38 percent of respondents reported they expect business conditions to improve, a slight increase from 36 percent in August. Forty-seven percent said activity would remain the same, and 15 percent thought it would decrease, up from 13 percent last month.

According to the report, expectations for incoming orders for the next three months were nearly identical to the expectations reported in August, with 42 percent expecting orders to rise, up from 41 percent; 37 percent predicting no change, down from 38 percent; and 21 percent indicating orders would decrease, the same percentage reported in August.

Fifteen percent of responding companies currently have a portion of their workforce on short time or layoff, up slightly from 14 percent in August, but much improved from September 2003, at which time 21 percent reported workforce on short time or layoff.

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Airgas adds five members to distributor advisory council
Airgas Inc. added five new members to its Distributor Advisory Council (DAC) following the company's acquisition of The BOC Group's U.S. packaged gas business and the subsequent addition of an added distributor channel. 

At its recent third annual meeting in Newport, R.I., the DAC recognized its new members:
• John Zak of Airweld Inc. in Farmingdale, N.Y.;
• John DeHoust of Baker’s Gas & Welding Supply in Lincoln Park, Mich.;
• Larry Jones of Jones Welding and Industrial Supply in Albany, Ga.;
• Dave Melo of Melo’s Gas & Gear Inc. in Bakersfield, Calif.; and,
• Roger Yackey of WISCO Industrial Supply in Chicago.

The DAC formally meets with Airgas senior executives to discuss the Airgas Value-Added Distributor Program and issues that will enhance the services provided to distributors and resellers through Airgas’ regional companies.

“With the recent BOC acquisition, the distributor channel now represents more than $100 million in annual revenues. In the last two years, Airgas has created the Airgas Value-Added Distributor program (AVAD) to ensure a consistent, yet locally driven approach to supporting distributor business within each Airgas regional company,” said Pat Visintainer, senior vice president of sales.

The DAC meeting also recognized continuing members:
• Mark Davidson of Best Welders Supply Inc. in Tulsa, Okla.;
• Bob Ames and Mary Shanaman of Commonwealth Supply in York, Pa.;
• Jim Earlbeck of Earlbeck Gases & Technologies in Baltimore;
• David L. Fischer of General Welding Supply Co. in Denver;
• Perry Johnson of Hohenschild Welders Supply in Kansas City, Mo.;
• John Small of Pooch Welding Supply in Benton Harbor, Mich.;
• Jim Weiler of Weiler Welding Co. Inc. in Dayton, Ohio; and,
• Paul Greiling Jr. of Welding & Therapy Services in Louisville, Ky.

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Prophet 21 forms fastener advisory council
In an effort to further develop technology that will help fastener distributors succeed, Prophet 21 organized an advisory council consisting of top industry executives.

The Prophet 21 Fastener Advisory Council will meet with Prophet 21 management several times each year to discuss industry trends and business processes. The council will also offer feedback and guidance to help Prophet 21 develop stronger solutions and services.

“The best way to help our customers increase sales, improve customer service and reduce operating costs is to listen and learn about their day-to-day business issues firsthand,” said Chuck Boyle, Prophet 21 president and CEO.

Don Nowak, vice president of the North Carolina-based Falcon Metal Corp., attended the recent advisory council kick-off meeting at Prophet 21 headquarters in Yardley, Pa.

“The open dialog with Prophet 21 management is excellent,” he said. “Bringing us together to discuss what technology can help us accomplish is a win-win situation.”

Other members of the Prophet 21 Fastener Advisory Council include: Jim Derry of Field Fastener Supply; Hugh Watson of Tropic Fastener; Roger Taylor of ACS SIMCO; Kevin Queenin of Specialty Bolt and Screw; Dick Schwind of ACS SIMCO; and Steve Jones of Specialty Bolt and Screw.

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Grainger details technology and supply chain investments
At an analyst meeting held at Grainger's newest distribution center in Robbinsville, N.J., Grainger chairman and CEO Richard L. Keyser provided an update on the company's technology investments, including its SAP installation and telephony program.

These two initiatives are designed to help the company become more efficient at saving customers time and money when purchasing facilities maintenance products.

"For us, technology is not a mere indulgence or a nice to have. It is at the very heart of our business and helps us drive our multi-channel strategy," said Keyser. "Providing customers access to our broad product line through several channels has been a competitive weapon for us because it spells speed and convenience for our customers."

Grainger expects to continue installing SAP across the U.S. branch-based organization by the middle of 2005. To date, the company completed the design and is currently refining the system to maximize capabilities. One third of the development effort is devoted to such testing and refinement. For 2004, the company continues to forecast $45 million to $55 million in operating expense and $50 million to $55 million in capital expenditures related to the SAP program. These estimates are consistent with those provided at Grainger's analyst conference in Boston in December 2003.

Keyser also detailed Grainger's telephony program designed to improve communication among Grainger's 400 U.S. branches by providing customers with just one local number to access everything the company offers.

"About 60 percent of our orders come in on the telephone," he said. "Given our focus on service, we are updating our telecommunication systems to provide a seamless customer experience."

To date, more than 100 branches transitioned to the new communication system. Grainger is stepping up its conversion plan and intends to complete the remaining branches by the end of this year. The company estimates $15 million to $20 million in capital expenditures this year for the project. That still keeps Grainger within its range of $150 million to $175 million for 2004 total company capital expenditures announced in July 2004.

Senior vice president of Supply Chain Y.C. Chen also delivered an update on supply chain operations, detailing the results of the recently completed logistics network program. Under the program, the company added more than 1 million additional square feet in capacity and new automation to increase accuracy, speed and efficiency through the supply chain. Grainger's nine distribution centers replenish branches daily and ship product to customers same day for next-day delivery.

"The service and productivity improvements we've gained throughout our program are an important factor in our strong year-to-date results," said Chen, who noted that overall cycle time improved by nearly 20 percent due to these enhancements. "Going forward, we have a state-of-the-art distribution system that can serve as a strong foundation for growth. We've already seen a $115 million reduction in inventory and more than a 25 percent improvement in productivity. We expect to see a 50 percent total improvement for the project overall. Cumulative cash flows from the project are expected to be positive in 2005 and our redesigned logistics network is on schedule to contribute $10 million to operating earnings this year."

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Pentair tools group sale gets regulatory clearance
The sale of Pentair Inc.'s tools group to The Black & Decker Corp. will go through, the company reported. Mandatory regulatory clearance was received or antitrust waiting periods expired.

Pentair expects to complete the $775 million transaction to Towson, Md.-based Black & Decker in early October.

"Black & Decker is a recognized leader in the power tool industry and we are very confident that we are placing our tools group in the hands of a company that can further build the business to benefit its customers, suppliers and employees," said Randall J. Hogan, Pentair chairman and CEO.

Pentair said the proceeds from the sale will be used to pay down debt associated with Pentair's July 31 acquisition of WICOR Industries. The WICOR acquisition transformed the $2.7 billion Pentair into a diversified manufacturer led by a $2 billion water business. Although the water group will be Pentair's largest business, the company says it will increase its diverse business mix by growing its enclosures group.

Pentair's tools group consisted of the brands Porter-Cable, Delta, DeVilbiss Air Power, Oldham Saw and FLEX, among others. The group employs about 4,200 people at facilities in North America, Europe and Asia.

The tools group's sales and operating profit for 2003 were $1.1 billion and $82 million, respectively.

"We are pleased to have received regulatory clearance," said Nolan D. Archibald, Black & Decker chairman and CEO. "By adding the tools group's well-respected brands and products, we expand our offerings where we have relatively low market share. Further, we are enhancing our distribution network, particularly in the industrial and construction channel. The acquisition of Pentair's tools group is a great strategic fit with our DeWalt division and will nearly double our North American professional business."

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Precision Industries opens facility to supply Maytag
Industrial distributor Precision Industries opened a facility in Cleveland, Tenn., as part of its supply chain management agreement with Maytag Corp.

The Cleveland Cooking Products facility manufactures gas and electric cooking products. Precision's supply chain management program supplies all MRO and non-MRO indirect materials for Maytag manufacturing operations.

This is the fourth Maytag location opened by Precision this year. Other locations include Jackson, Tenn.; Florence, S.C.; and Searcy, Ark.

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Global Fastener & Supply achieves quality certification
Global Fastener & Supply Inc.’s production and distribution operations were certified to the ISO 9001:2000 Without Design, International Quality System Standard.

The company’s entire quality system was audited and certified by Smithers Quality Assessments Inc. (SQA), a independent accredited registrar.

Global Fastener & Supply specializes in the distribution of fasteners and related items, assembly of fasteners and other parts into hardware kits, and packaging of parts such as fasteners and related items. 

Smithers is fully accredited both by the Dutch Council for Accreditation (RvA) and the Registrar Accreditation Board (RAB) and is a member of the Independent Association of Accredited Registrars.

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UASI adds DuPont personal protection line
The long line of industrial safety products distributed by United American Sales Inc.(UASI) grew significantly longer with the addition of personal protection clothing and related products from DuPont.

“The addition of DuPont to our catalog increases the level of protection we offer our customers both in terms of breadth and depth,” says Joe Sodini, president of United American Sales. “DuPont offers protective clothing in a variety of specialized fabrics for a number of applications as well as a broad selection of accessories.”

Among the areas for which United American Sales offers DuPont protective clothing are industrial and agricultural applications, hazardous materials, petrochemical operations, cleanroom and contamination control, fire and electric arc protection, health care, and domestic preparedness. DuPont’s line of protective fabrics includes Tyvek® for dirty jobs and demanding environments, and Tychem® for the highest level of protection against toxic chemicals.

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Rockwell Automation helps manufacturers maximize RFID
Rockwell Automation is offering a white paper that educates manufacturers on how to maximize their investment in RFID technology throughout their enterprise and supply chains.

The paper, "RFID in Manufacturing," provides a practical guide to extracting measurable value from RFID implementations in plant and warehousing operations and may be downloaded free at www.rockwellautomation.com/services.

"When manufacturers view RFID simply in terms of compliance, they are overlooking the opportunity to tap into a wealth of information that can be used to make better business decisions," said Sujeet Chand, vice president of advanced technology and chief technical officer for Rockwell Automation. "As RFID moves upstream from the supply chain to manufacturing operations, there is great value that can be gained from integrating RFID technology into existing automation controls and information systems."

The paper outlines a four-step methodology that guides manufacturers from piloting to full-scale implementation of RFID in their plants.

Employing the methodology can help manufacturers design and execute a sound strategy that provides sustainable value over the life of their RFID investment.

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Walter completes Werner Schmitt acquisition
Walter AG completed the acquisition of Werner Schmitt PKD-Werkzeug AG on Sept. 14. Anti-trust authorities approved the acquisition agreement, which was signed by both companies Aug. 5.

With a workforce of about 70, Werner Schmitt PKD-Werkzeug AG generates sales in the double-digit million Euro range. They develop and manufacture PCD (polycristalline diamond) and PCB (cubic boron nitride) tools, which helps Walter further extend its tool range. 

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Durable goods orders retreat in August
New orders for manufacturing durable goods decreased $900 million, or 0.5 percent, in August to $195.4 billion, according to preliminary data from the Commerce Department. This followed a 1.8 percent increase in July.

Excluding transportation, new orders increased 2.3 percent. Excluding defense, new order decreased 0.6 percent. Year-to-date, new orders for 2004 were 12.4 percent above the same period a year ago.

“The August advanced report on durable goods orders shows that the manufacturing expansion is progressing, but not without high volatility in individual sectors,” said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. “Aerospace orders surged in July and retreated in August, motor vehicles and parts fell sharply in July and rebounded in August, and in most non-transportation industries, except machinery, orders were strong in August.

“Despite the month-to-month volatility, the industrial expansion is generally progressing at a brisk pace,” he said. “In the three months ending in August 2004, durable goods orders are 12 percent above the same period one year ago. Manufacturing continues to grow faster than the general economy.”

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