Tariff-Proof Your Distribution Business: Four Winning Procurement Strategies

This article was originally featured in the May/June 2025 issue of American Fastener Journal (pages 46-49). Nelson Valderrama is the CEO of Intuilize, helping mid-size distributors transform data into profits with more than 25 years of experience in the industrial distribution industry. 

The Distribution Tariff Crisis

Wholesale distributors are caught in an increasingly challenging position. With tariffs of 10-25% now affecting imports from key trading partners including Canada, Mexico, and China, your business faces a critical choice: absorb costs and watch your profits erode, or implement strategic responses that can transform this challenge into a competitive advantage.

Recent industry analysis shows distributors losing up to 7.6% in margin erosion due to ineffective tariff management. For businesses operating on razor-thin margins, this is simply unsustainable.

Turn Tariff Challenges Into Your Competitive Edge

While many distributors are scrambling to respond, the most successful companies are implementing systematic approaches to protect their profits. Industry analysts predict that over 60% of distributors are woefully unprepared for the current tariff environment, creating a clear opportunity for prepared businesses to stand out.

Remember the trade tensions of 2017-2018? Companies that adapted quickly gained an average of 4.2% market share. This is your chance to shine.

Four Winning Procurement Strategies

Based on years of experience working with mid-size distributors, we've identified four proven strategies that can help tariff-proof your distribution business:

1. Strategic Inventory Management

Stocking up on popular items from countries about to get hit with tariffs before those tariffs kick in gives you a huge advantage over competitors. With lower prices locked in, you can:

• Maintain competitive pricing while preserving margins
• Meet customer demand efficiently without passing on immediate cost increases
• Balance inventory levels to avoid cash flow issues and obsolescence

2. Alternate Sourcing

Identifying suppliers in countries with low or no reciprocal tariff risk represents a sustainable long-term strategy. This approach allows you to:

• Maintain competitive pricing without sacrificing margins
• Compare supplier prices, drive better deals, and capture market share
• Identify tariff-free alternative sources in hours rather than weeks

3. Contract or Non-Contract Pricing

Contracts set prices for a period by negotiating firm agreements between distributors and specific buyers, allowing you to:

• Budget and plan more effectively for specific products
• Reduce risk and administrative costs through defined volumes
• Implement value-pricing based on the unique benefits customers derive from your products

4. Technology Tools

Manual cost updates become unsustainable in a volatile tariff environment. Implementing standard cost automation from suppliers directly to your ERP system:

• Maintains data accuracy and consistency
• Drives improved decision-making and financial planning
• Provides alerts for potential supply chain disruptions or shortages
  
  

What's At Stake?

The Brookings Institute predicts significant impacts from the current tariff situation:

• USMCA Disruption: Tariffs could reverse progress made under the USMCA, leading to substantial economic hits for all three countries.
• Economic Fallout: Expect GDP reductions, increased unemployment (177,000 to 400,000 jobs in the U.S.), and rising inflation.
• Supply Chain Chaos: Long-term disruptions will reshape relationships between distributors, manufacturers, suppliers, and customers.
  
  

Take Action Today

For wholesale distributors operating on razor-thin margins, this new reality demands exceptional agility in procurement and supply chain strategy.

Before you jump, understand your exposure by assessing these critical questions:

• Product Origin: Where are your products coming from?
• Volume Assessment: How much of your inventory is at risk?
• Model Margin Impact: What scenarios will you face with different tariff rates?
• Customer Contract Review: Are you locked into fixed prices?

An AI-assisted assessment can give you a clearer picture and guide your strategy to tariff-proof your distribution business, protecting your margins and maintaining dynamic pricing.

READ THE FULL ARTICLE ON AMERICAN FASTENERS JOURNAL HERE

Join Our Upcoming Workshop

Date: June 11, 2025
Time: 11 AM EDT
Duration: 45 minutes + Q&A
Presenters: Nelson Valderrama (CEO) and Phil Samuels (VP of Sales)