Your customers may demand that you give them firm pricing for raw materials, but here are 4 reasons that say “Ain’t gonna happen.”
BUSINESS CYCLE Business Cycle is currently in a downward phase. what savvy organizations should be doing right now is planning for budget reductions, cross training employees, evaluate vendors for sustainability. Nothing in the business Cycle justifies firming up pricing at this time.
BIAS TOWARD GROWTH Everyone expects the prices of things to grow, particularly for commodity raw materials. The Steel Benchmarker chart for hot rolled steel band shows that this is hardly ever the case…
VOLATILITY That Steel Benchmarker chart shows a price differential ranging from 4.5% in 2012 to a high of 100% in 2008. This is why your customers want firm prices, not why you should bet your business on giving them firm prices over which you have no control.
DETERMINANTS OF DEMAND What is driving demand for the raw materials? is it even North American, or is it China or emerging economies? Global demand is typically what is driving prices here in US and around the globe. US GDP growth in 2013 was estimated to be 1.6% China’s 7.5% Pick a number. Any number.
Customer’s seek firm prices to eliminate their risk, but shoving risk onto suppliers unilaterally is not eliminating risk, it is just getting it off their desk and onto yours. Our job as sustainable, competitive, quality suppliers is to intelligently manage risk. In today’s raw material environment, saying “No!” to agreeing to hold firm prices for raw materials when you have no ability to effect that price’s firming is intelligent management of risk.
Full article on why you are not the Carnack of Metals.
“If U.S. manufacturing were a country by itself, it would be the eighth largest economy in the world.” Guest post by Patrick McKenna, Vice President, Nevada Heat Treating, Inc.
It happens to me fairly often. I’ll be at a party, or out to dinner with a group of people, and after someone in the group finds out I’m employed in manufacturing they will say “it’s really a shame that nothing is made in the U.S. anymore.”
It happened to me again last weekend. So I decided to look into the topic a bit more. I know we still make “things” here in the United States. I see it on a daily basis. Just how true is their comment that manufacturing has vanished in the U.S.?
I performed a little research on the topic and found the following statements in NAM’s (National Association of Manufacturers) “The Facts about Modern Manufacturing” 8th Edition (www.nam.org). “Between 1947 and 2008, both manufacturing GDP and overall GDP rose over sevenfold. It is generally unnoticed that the quantity of manufactured goods has continued to grow, leaving many people with the incorrect notion that little domestic value is produced in the United States anymore.” “Manufacturing production is now at the highest point in its history and is keeping pace with that of the overall economy in terms of physical output.” “…the quantity of manufactured goods produced in the United States has kept pace with overall economic growth since 1947, as both GDP and manufacturing have grown by about seven times.” “Over the last ten years ending in 2008, manufacturing value added has increased 22 percent.”
“Total manufacturing activity in the United States—measured in terms of physical output—continues to grow.”
The United States still has the largest manufacturing sector in the world, and its market share (around 20 percent) has held steady for 30 years.”
“One in six private sector jobs is still in or directly tied to manufacturing.”
“Fifty-seven percent of all U.S. exports are in manufactured goods.”
“If U.S. manufacturing were a country by itself, it would be the eighth largest economy in the world.”
“U.S. manufacturing share of global manufacturing value added has barely budged from its 1980 level of 22 percent.”
Is the U.S. manufacturing sector still facing challenges? Yes
Has China gained market share of the global manufacturing sector? Yes
Does U.S. manufacturing face increased pressure from legislation? Yes
The U.S. manufacturing industry has challenges like every other business sector, but to the people who say that manufacturing has disappeared, I would offer the following quote…
“The reports of my death have been greatly exaggerated.”–Mark Twain