Industrial Supply Distributors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 5,800 industrial supply distributors in the US purchase maintenance, repair, operating, and production (MROP) supplies in bulk and resell them to customers in smaller quantities. Product categories include abrasives, strapping, tape, and inks; mechanical power transmission supplies; industrial containers and supplies; industrial valves and fittings; and welding supplies. Distributors may offer technical support, repair, or assembly services.

Offshore Production

Offshoring of manufacturing production to low-wage countries reduced demand for domestic industrial supply distributors.

Growth in Green

Growing interest in the environment and energy-efficiency has created demand for “green” products and expertise.

Industry size & Structure

A typical industrial supply distributor operates out of a single location, employs 18 workers, and generates $11-12 million annually.

    • The industrial supply distributor industry consists of about 5,800 companies that employ 102,000 workers and generate $60 billion annually.
    • Customer categories include manufacturers (OEMs), institutions, government, utilities, construction, and mining.
    • Large domestic companies include Grainger, HD Supply, and Airgas.
                                      Industry Forecast
                                      Industrial Supply Distributors Industry Growth
                                      Source: Vertical IQ and Inforum

                                      Recent Developments

                                      Apr 8, 2024 - Payroll Costs Rose in 2023
                                      • According to the US Bureau of Labor Statistics, employment by industrial supply distributors grew 1.1% in December compared to a year ago after rising 3.4% in the previous annual comparison. Meanwhile, average industry wages were $28.44 per hour in December, a 7.8% year-over-year change and an all-time high for industrial supply distributors. Payroll costs rose last year amid declining machinery and supply wholesalers prices, putting pressure on distributors’ margins.
                                      • More than two-thirds of US manufacturers have a positive economic outlook for 2024, according to the Q4 2023 Manufacturers Outlook Survey of member companies by the National Association of Manufacturers (NAM). Still, opinions are mixed about whether there will be a recession. Large manufacturers are the most optimistic, with 77.5% positive about their company’s outlook, while medium-sized manufacturers are the least optimistic, with 63% feeling positive. While fewer respondents expect a recession in 2024 than three months ago, nearly 41% said they feel uncertain. Over 34% of manufacturers believed the US economy would experience a recession in 2024. This year's top challenge for the manufacturing sector will be the workforce, with the labor market cooling substantially but remaining tight. Notably, NAM reported manufacturing construction spending is at a record high of $210 billion thanks to the production of semiconductors, electric vehicles and batteries, and general reshoring.
                                      • The US manufacturing sector is undergoing a paradigm shift in payment practices, with real-time payments poised to replace traditional methods, according to PYMNTS Intelligence. Real-time payments (RTPs) – instant payments that are processed immediately and continuously, 24/7– are poised to replace checks, ACH (automated clearing house), and other traditional forms of payment, changing how businesses conduct financial transactions. A study by PYMNTS Intelligence and banking association and payments company The Cleaning House finds that 96% of manufacturers expect RTPs to replace traditional checks when making payments, while 87% anticipate the same for receiving payments. Similarly, 81% of firms forecast RTPs replacing standard ACH payments for making payments, while 84% predict the same for receiving payments. However, traditional payment methods will still have a role to play, according to PYMNTS Intelligence, with payment by cash and credit cards expected to remain relatively common.
                                      • The US manufacturing sector – a demand driver for industrial supplies – will continue to face headwinds this year, according to Deloitte’s 2024 Manufacturing Industry Outlook. While federal legislation (the Infrastructure Investment and Jobs Act, CHIPS Act, and the Inflation Reduction Act) has spurred record private sector investment in the manufacturing industry, economic uncertainty, the stubborn skilled labor shortage, and targeted supply chain disruptions, among other factors, will challenge the industry in 2024, according to the report. Still, the surge in annual construction spending in manufacturing, up 70% year over year as of July 2023, is setting the stage for further industry growth in the coming year. Technology, notably digital transformation and smart factory solutions, is poised to play a significant role in helping manufacturers take on the challenges they may face, according to Deloitte.
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