How Distributors — and Sales Reps — Should Approach Tariffs
Have a plan for how to talk to customers about cost increases.
As the industrial world moved further and further away from the most dramatic after-effects of the COVID pandemic, the pricing dynamic between distributors and end-users shifted: manufacturers who were happy to find a reliable supply of, well, just about anything a few years earlier gradually saw supply chains loosen up a bit — and saw their options increase.
That, coupled with broader industrial softness, led to a more challenging year for many distributors. Although companies expressed growing optimism about 2025, a new administration in Washington has added an additional complication to the equation.
Despite an emphasis on bringing things closer to home after the chaos of 2020, manufacturing supply chains are still very much a global concern — meaning that tariffs on the U.S.’s trading partners could introduce some unexpected price increases on a range of parts and inputs. For distributors already under growing price pressures, communicating with their customers about what’s happening will be critical.
Scott Sinning, a longtime executive at Graybar and the founder of consulting firm Pricing for Distributors, joined Industrial Distribution to discuss the potential impacts of tariffs on distributors, ways to protect their margins amid cost increases, and the importance of having a plan.
Industrial Distribution: Should tariffs take effect, how should distributors – and their sales reps – address any cost increases with their customers?
Scott Sinning: Tariffs often lead to cost increases above what the market is used to, so distributors should have a plan for how to communicate with customers about possible impacts. How this is managed depends on a distributor’s sales strategy, so there’s no single right answer, but it shouldn’t be left to chance.
Confirm with suppliers to understand specifics of cost increases, including which products are affected, dates and amounts of changes. Clarify how it will be implemented — for example, via a typical cost increase notice or a line-item surcharge. Knowing this is important, because a line-item surcharge may complicate a distributor’s costing, pricing and invoicing processes.
Transparency allows customers to prepare for cost changes and builds trust. Prioritize conversations with large-volume buyers of impacted products, review open orders and quotes, and analyze contractual fixed prices or blanket orders.
Prepare your sales team how to discuss these changes with customers. Some distributors may decide to communicate via a letter from the CEO or other senior executive to broadly frame up the issue and give their sales team a consistent approach to work from for specific customer situations.
ID: What steps can companies take to improve their cost-change processes?
SS: Tariffs bring into sharp focus the importance of this process and amplify how well or poorly it’s working. Think of it from end-to-end, which combines back-office speed and accuracy with front-office sales strategy and competitive landscape.
Talk with the people that manage it and discover how the process flows from the time a supplier cost change notice is received to when cost is updated in your system. Identify bottlenecks and pain points to make sure it’s as streamlined and automated as possible. Measure what matters and track performance.
Give this team the support they need, which could mean staffing, training and proper tools. There should also be a way to communicate these changes to your sales team – especially the big ones – to keep everyone on the same page.
ID: Is cost-plus pricing enough to protect distributors’ margins? What might a better approach be?
SS: Many distributors manage a lot of pricing via a cost-plus calculation. This may lead to complacency, thinking that profits are protected because higher supplier costs will seamlessly pass through to higher selling prices. However, that relies on the sales team and customers accepting the new price. If system price overrides are high for your business, and if customers resist accepting higher prices, the more likely you’ll leak margin due to tariffs.
There are other approaches, like column discount, contractual nets and market-level pricing, and each has its own pros and cons when compared with cost-plus. The key is to know what approach you’re using and execute it well in the short-term, while considering if a longer-term change of approach is beneficial.
Fixed-price agreements like contracts or blanket orders create margin leakage when supplier costs unexpectedly rise. Review these to determine whether tariff-related costs can be passed through, or if you need to renegotiate pricing.
ID: How could tariffs impact inventory and purchasing, and what should distributors be discussing with their suppliers?
SS: Distributors should collaborate closely with suppliers to navigate these challenges. Plan for changes to inventory, customer demand, purchasing levels and lead times.
Rethink sourcing relationships to shift to more domestic production where possible. Some of this could be a longer-term play due to distribution channel relationships and switching costs.
ID: Are there any other pitfalls to look out for in this environment?
SS: Make this a team effort with strong executive visibility and leadership. The impacts across departments will be best managed with a coordinated approach. This is a chance for your pricing and cost team to shine.
Everyone understands that tariffs will be a challenge, so don’t miss the opportunity to stand out and elevate your reputation as a great partner for your customers and suppliers.
