Since July of 2000, the U.S. manufacturing industry lost more than 2.7 million manufacturing jobs. For the past year and a half, manufacturing production has increased only one percent, compared with an average of 13 percent in the last five economic upturns. The National Association of Manufacturers (NAM) calls this the slowest manufacturing recovery from recession in modern history.

Industrial distributors have been especially hard hit by the manufacturing downturn. A new study by Progressive Distributor and Benfield Consulting shows that distributors recorded an average of between $250,000 and $400,000 in lost sales when their manufacturing customers moved production out of the U.S. to Mexico, China and other countries with low-cost labor. The average margin on lost sales was more than 21 percent.

The report serves as a guide to help distributors gain a better understanding of how to cope with the manufacturing exodus. Called “The China Syndrome and the Effects on Wholesale Distribution,” the study pinned down the types of companies ready to make the move to another country. For example, divisions of public companies with sales of more than $100 million were the most likely to move.

“The exodus of U.S. manufacturers is the biggest problem facing industrial distributors today,” says Scott Benfield, the study’s primary author. “A careful reading of this report will provide distributors with practical advice on how to prepare for the future as the manufacturing base contracts further.”

Read more about “The China Syndrome and the Effects on Wholesale Distribution."

This editorial appeared in the November/December 2003 issue of Progressive Distributor magazine. Copyright 2003.