Industrial Supply Distributors NAICS 423840

Dec 8, 2025 - 2026 Challenges

• Pricing and supply chain pressures, customer satisfaction, labor shortages, and an unpredictable tariff environment, are among the major challenges industrial distributors will face in 2026, according to the industry newsletter Industrial Distribution. With tariffs significantly increasing distributors’ import costs and their reluctance to pass those costs along to customers all at once, firms are in the uncomfortable position of having to manage some of the cost increases themselves, according to ID. As they gradually begin to raise prices to protect margins, distributors will need to be sensitive to blowback from their customers, ID warns. Meanwhile, the nation’s skilled labor shortage, which affects distributors and manufacturers alike, isn’t resolving anytime soon, meaning firms are likely to have trouble finding the right people for the right roles. Lastly, distributors and their customers can anticipate ongoing uncertainty due to President Trump’s unpredictable tariff policies, at least in the near term.
• US factory activity, which drives demand for industrial supplies, shrank in October for an eighth consecutive month, driven by a pullback in production and tepid demand, The Wall Street Journal reported in November citing the latest data from the Institute for Supply Management (ISM). In October, ISM’s Purchasing Managers’ Index (PMI) fell to 48.7 from 49.1 in September (a reading under 50 indicated contraction), with production, new orders, and employment all contracting, reversing short-lived gains seen in previous months. Six manufacturing industries reported growth in October with Primary Metals, Food, Beverage & Tobacco Products, and Transportation Equipment topping the list. Twelve industries reported contraction for the month including Textile Mills, Apparel, Leather & Allied Products, Furniture & Related Products, and Machinery. WSJ noted that tariffs and their impact on prices and demand featured highly in respondents’ answers to the ISM survey.

• The Trump administration’s on-again, off-again tariff strategy is sending ripples through the industrial sector, significantly impacting production costs, supply chains, and overall competitiveness in the machinery and industrial equipment sector, Manufacturing.Net reports. The implementation of an additional 10% tariff on Chinese imports, suspension of de minimis exemptions for Chinese shipments, and newly announced (and since delayed) 25% tariffs on goods from Mexico and Canada, are causing confusion and requiring manufacturers to quickly adapt to mitigate potential cost spikes and avoid supply disruptions. Manufacturers looking to reshore operations to avoid tariffs and shorten their supply chains are an opportunity for domestic industrial supply distributors. However, rising recessionary fears could cause existing and potential customers to delay or cancel new orders. In March, Goldman Sachs raised the probability of a US recession to 35% from 20%, amid tariff turmoil and economic uncertainty.
• Producer prices for machinery and supply wholesalers, a measure of input costs including supplies and labor, rose 2.9% in August compared to a year ago, after falling 1.3% in the previous August-versus-August annual comparison, according to the latest US Bureau of Labor Statistics data. The inventory-to-sales ratio for machinery and equipment wholesalers, a measure of the amount of inventory on hand compared to the number of orders being fulfilled, was 2.9 in July, down 4.9% from a year earlier but up 2.8% from June. Employment by industrial supplies merchant wholesalers shrank 3.5% year over year in July, while the average industry wage rose 15.4% over the same period to a new high of $32.87 per hour, BLS data show.