Industrial Machinery and Equipment

SIC 5084

Companies in this industry

Industry report:

This industry comprises establishments involved in the wholesale distribution of industrial machinery and equipment, not elsewhere classified. Products in the industry include chainsaws, citrus processing machinery, conveyor systems, industrial cranes, derricks, industrial diesel engines, elevators, ladders, lift trucks, machine and machinists' tools, oil refining machines, packing machinery, industrial paint spray equipment, wood pulp manufacturing machinery, industrial pumps and pumping equipment, industrial sewing machines, shoe manufacturing and repairing machinery, smelting machinery, welding machinery, and winches.

The U.S. Census Bureau reported 29,221 establishments in the industrial machinery and equipment industry in 2009. Together these firms employed 337,051 people who earned a total payroll of almost $19 billion. Total sales for the industrial machinery and equipment wholesalers industry in 2010 were around $166 billion. The top segments within the industry in terms of sales were general purpose industrial machinery; other industrial machinery and parts; and oil well, oil refinery, and pipeline machinery. The top states, based on number of establishments and sales volume, included Texas, California, Illinois, and Ohio. Together, these four states generated more than 30 percent of all industry sales.

Industrial equipment sales suffered downturns during the early 1990s as lean fiscal performances stalled new plant investment in many sectors served by this industry. Recovery began in 1993, and the industry posted healthy sales growth and modest profits in the mid-1990s. The wholesale distribution of all machinery, equipment, and supplies, including this category, made up 15 percent of the durable goods market for 1997, which totaled $193 billion. In 2006 this industry segment represented 34 percent of the market for $33.8 billion.

Trying to post higher returns, many in the industry reconfigured the way their companies distributed industrial machinery. Other industry strategies aimed at further increasing market strength included reducing costs, outsourcing distribution-related services, and seeking new business, especially through the exploration of foreign markets. Strong prospects for export growth included Canada, Mexico, South America, the United Kingdom, France, Germany, Australia, Japan, China, and Africa.

By 2004 the machinery and components manufacturing sector had emerged from its downward trend of more than three years, and the value of machinery shipments rose. However, as with most segments of the manufacturing industry, higher profits came at least in part from increased productivity and fewer employees. Both wage and salary employees decreased more than 13 percent in the middle of the first decade of the 2000s.

The manufacturing sector in general shed 2 million jobs during the economic recession at the end of the first decade of the 2000s, moving many of these jobs overseas. Some companies were relocating their facilities to China, and the Pacific Rim, and some were even considering moves to Africa, where labor costs were lower.

The state of the industry was more positive in 2011 than it had been since the middle of the first decade of the twenty-first century. According to a report by IBISWorld, "After being hit by declines in downstream demand from food manufacturers and oil and mining companies [at the end of the first decade of the 2000s], the industry will begin to experience growth again, as the economy gears up for a revival." However, the trend to more automation and streamlining of services was expected to make the industry smaller, and an average annual decline of 0.7 percent annually in value added through 2017 would further plague wholesalers. IBISWorld predicted that the industry was "in the decline stage of its life cycle."

The industry was highly fragmented, and the top 50 firms accounted for 25 percent of industry revenues in 2011. Top firms in the United States in the early 2010s included W.W. Grainger Inc. of Lake Forest, Illinois, with sales of $7.1 billion and 18,5000 employees; Dresser Inc. of Addison, Texas, with 2011 sales of $2 billion and 6,300 employees; and MSC Industrial Direct Co. Inc. of Melville, New York, with $2 billion in revenues and 4,644 employees. Following the integrated supply trend in the wholesaling industry, Grainger established an alliance with VWR Scientific Products in 1997 to service consolidated customer orders. In 2002 Grainger announced plans for a huge expansion over the course of five years, and by 2011 it was serving 2 million customers. Dresser, on the other hand, was acquired by General Electric for approximately $3 billion in 2011. Industrial Direct remained one of the largest direct suppliers of industrial products in the United States.

Another leading company was Unisource Worldwide Inc. of Norcross, Georgia, with 2011 sales of $619 million and 6,400 employees. Larger companies in the industry that also dealt in gas and oil services included Airgas Inc. of Radnor, Pennsylvania, with sales of $4.2 billion and 14,000 employees in 2011, and National Oilwell Varco Inc. of Houston, Texas, with sales of $12.1 billion and 41,000 employees. Mergers and acquisitions were on the rise, as small companies folded or were sold to large, diversified firms.

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