Walk through the appliance section of any big box store these days and you’re likely to see customers looking dazed and confused. That’s because they’ve just learned their new stainless steel refrigerator, range or dishwasher won’t be delivered for months.
As you may know, stainless, in common with many other metals, is in short supply. Demand is up and there’s less of it available. That’s left appliance manufacturers, and anyone else who needs metal, scrambling to secure supplies and wincing at the eye-watering prices they’re being asked to pay.
Here at Wiley, we’re not immune to these problems, and we know they can cause trouble for our customers too. We’ve given some thought to what we can do to help, and we’ve come up with two programs. We’ll share details down the page, but first, it might be helpful to have some background on the problem.
What’s With the Metal Shortage?
We follow industry news and talk to others in the fabrication world and it seems several things are at work.
As we’ve said for some time, there’s a skills shortage. Boomers are retiring from manufacturing and there aren’t many younger people choosing it for their careers. Complicating this, the pandemic has left factories and shipping/transport companies shorthanded, so there just aren’t enough people to do the work.
Another pandemic-related impact is on the supply side. Some industries, automotive is a good example, expected steep drops in sales, which happened, but they didn’t foresee the rapid rebound. So when they shared their forecasts with their metal suppliers capacity was scaled back. Now, these companies are scrambling for supplies.
In parallel, there’s been dramatic something of an explosion in home remodeling. Lots of people have been out appliance shopping, which is good news for the manufacturers of washers, driers, and so on, but it’s left them competing for materials.
To illustrate how this has impacted metal prices, in August 2020 the price of hot-rolled coil steel was under $500/ton. Today it’s around $1,800/ton and moving up. Other metals, like stainless and aluminum, have seen the same thing.
The Manufacturing Impact
The result of these supply and demand problems is that everyone who uses metal parts, assemblies, and fabrications is struggling to get what they need, and is paying dearly for them. That leads us to the two programs we’ve put together to help. These are the:
- Safety Stock Program
- Surcharge Program
Here’s the low-down on both.
The Wiley Safety Stock Program
Signing up for this free service means we agree to hold in inventory some of the parts we make for you. That way, we can ship them to you within one business day. The benefit for you is that when your supply is running low, or if you get new orders coming in, you can keep producing. There will be no need to worry about parts shortages affecting your ability to build and ship.
Of course, we’re not being entirely altruistic. There’s a benefit for us too. In this case, it means we’ll produce a larger quantity than you’ve ordered, on the basis that some parts go into that safety stock. Our batch sizes increase and we spend less time per part on machine changeovers and set up. And yes, there’s some small print to the effect that you will at some point take everything we’ve made for you.
The Wiley Surcharge Program
Surcharges have been a way of life in the steel industry for a long time. The way they work is that the buyer agrees on a price for the metal they need, but if raw material prices go up the seller can pass this additional cost along. It’s a way of reducing risk and uncertainty in the supply chain.
With our surcharge program, we’re offering something similar, but also, we think, better. When we price our fabrication work we’ll base it off the cost of performing the operations needed – shearing, bending, welding, and so on – which we know and can control. Then we’ll add in what we think the material is going to cost. However, as those prices can move up or down with little warning we include a proviso that we can add a surcharge.
This again is not unusual, but we think the next part is. If the price of the metal in the fabrications we make for you goes up you’ll see that reflected in a surcharge. In addition, if the price of metal comes down, and we all hope it does, you’ll get money back.
What that means is you shouldn’t be concerned about costs ratcheting steadily upwards. When supply and demand come back into balance and metal prices get more sensible, you’ll see the benefit.
We know buyers are scrambling to obtain the parts they need and are worried about price increases. With our safety stock and surcharge programs, we’re aiming to remove some of that uncertainty and risk. If that’s something you’d like to do, let’s talk. We’ll explain all the details so you can figure out if these programs are right for you. And if they’re not we’re still more than happy to continue supplying you with high-quality fabricated metal parts and weldments.