Industrial Supply Wholesalers

The US industrial supply wholesalers industry includes about 8,000 companies with combined annual revenue of $60 billion. Major companies include WW Grainger, Applied Industrial Technologies, MSC Industrial Direct, McJunkin Red Man, and Industrial Distribution Group. The industry is concentrated: the 50 largest companies generate more than 50 percent of revenue.

COMPETITIVE LANDSCAPE

Demand is closely tied to the level of US manufacturing production. Because many operating costs are fixed, profitability depends on operational efficiency, particularly inventory management. Smaller companies can compete effectively by providing specialized supplies or superior service (delivery service and product expertise). Large distributors with a network of warehouses and outlets can maintain a lower inventory/sales ratio. The industry is highly automated: average annual revenue per worker is close to $775,000.

PRODUCTS, OPERATIONS & TECHNOLOGY

Industrial supply companies sell a large number of products that industrial customers use for maintenance, repair, operations, and production (the industry refers to itself as the MRO supply or MROP supply industry). Examples include tools, pipe, and valve fittings; electrical products; fluid handling equipment; pumps, motors, fasteners, instruments; and safety and cleaning equipment and supplies. Large distributors may carry 500,000 different items (stock keeping units - SKUs). Products are grouped into product lines. Wholesalers are often referred to as either "general line," meaning they carry a mix of items from multiple product lines, or as "specialty line," meaning they carry a large variety of items from a single product line.

The ...