NAW National Association of Wholesaler-Distributors

State of the Wholesale Distribution Industry

The wholesale distribution industry remains an important force in all major sectors of the U.S. economy, ranging from basic commodities to advanced technology components. Sales of all wholesaler-distributors reached $4.2 trillion in 2007, a 8.6% increase versus the previous year. (See Exhibit 1.) Nearly all major sectors of the industry grew in 2007.

The industry supports an impressive diversity of companies. The vast majority of the nation’s 250,000 wholesaler-distributors are entrepreneurial family-run business with fewer than 500 employees. The largest wholesaler-distributors are multi-billion dollar publicly traded powerhouses that employ thousands of people.

Growth

The wholesale distribution industry continues to grow faster than the overall U.S. economy during the recent economic expansion. In 2007, revenues of wholesaler-distributors increased 3.7 percentage points more than U.S. Gross Domestic Product (GDP). (See Exhibit 2.) Profitability has kept pace with this growth, further testimony to wholesaler-distributors’ value to their customers.

The industry retains its vitality because wholesaler-distributors perform supply chain functions more effectively and efficiently than either manufacturers or customers. Manufacturers rely on distributors to communicate with their customers because wholesaler-distributors offer flexibility, fast response to customer needs, consistency of service, and local presence. Thus, wholesale distribution remains the most significant channel to market for manufacturers and the most important supply chain for customers, particularly when there are many small customers and a wide variety of manufacturers.

Employment and Productivity

The wholesale distribution industry employs 1 out of 20 private sector U.S. workers, but is helping to grow the nation’s productivity far in excess of the industry’s actual size. Multiple economic studies estimate that wholesale distribution has contributed more than 25% of the entire U.S. economy’s total productivity gains over the past 15 years.

Wholesaler-distributors are leaders in using technology to reduce low value-added labor activities such as order processing, billing, inventory control, delivery-route scheduling, and warehouse management. As a result, productivity growth in wholesale distribution has consistently exceeded the overall business sector over the past 10 years. (See Exhibit 3.)

The wholesale distribution industry’s gains are critical for U.S. global competitiveness given the importance of labor productivity to long-term economic growth. Total employment in wholesale distribution grew for the fourth consecutive year in 2007 to 5.2 million people. Average weekly earnings in wholesale distribution are now 28% higher than average earnings in all private U.S. industries.

Prepared by Adam J. Fein, Ph.D., President of Pembroke Consulting, Inc. He serves as a Fellow of the NAW Institute for Distribution Excellence and is the author of Facing the Forces of Change®: Lead the Way in the Supply Chain.