Suppliers of steel fabrication and metal working equipment and technology are looking forward to a significant rise in demand from the region’s resurgent construction sector, one of the key demand drivers for the fabrication industry. There’s been a lot of progress made in the steel industry in general and here are some of the tips and tricks to expect from the steel fabrication industry for 2015:
All metal fabricators realize that they have to do some analyses before the company purchases equipment or hires new people, but now there seems to be a new intensity about the process. Every detail of the business seems to matter so much more, because it’s no longer about making a huge profit, but about making a reasonable profit while the sales volume stays the same.
The U.S. has become a major oil and gas producer, which has been to the advantage of fabricators that serve not only drilling and extraction, but also heavy transportation.
Custom fabricators have to cope with highly varying demand cycles from many different steel sales customers, and to do that effectively they need capacity. They’re building that capacity with more equipment.
Specifically, fabricators are expecting to spend a good deal less on consumables and supplies (down almost 30 percent) and more on capacity-building machinery, especially in cutting and forming.
Preparing for the Unexpected
Look for the steel fabrication industry to want to add capacity to gear up for the unexpected. Custom fabricators are very familiar with demand variability, and demand has become even more so in the past several years. Experienced fabricators have become quite good at predicting what the future holds, but still sometimes they don’t foresee what the future holds.
Still in all most fabricators have seen steel sales rise and customer demands and inventory requirements increase over the past several years. This has sent some of them to vendor showrooms seeking new, capacity-building equipment. Shops that don’t have the ability to respond quickly are going to have a difficult road ahead. The keyword here is fast. Fabricators now are trying to be fast enough to meet any and all customer needs whenever they crop up.
Now is the Time for Manufacturing to Look at Logistics Efficiency
By adopting a logistics efficiency management approach, logistics related costs as a percentage of sales drops to 4% to 7% depending on industry sector. That’s a delta of 5% to 7%. For a company with sales of $10,000,000, that’s a contribution to corporate profitability of $500,000 to $700,000. How many widgets do you have to sell to net that kind of return?
As manufacturers continue to increase profitability and increase their share of the overall GDP, in order to sustain and survive long-term, they need to focus on these key areas for logistics efficiency:
- Use Readily and Easily Deployed Transportation and Freight Technology: A survey by ARC revealed that 23 percent of respondents using a transportation management system would see a 10 percent increase in total freight costs if they stopped using the system, the source reported. The source pointed to several trends that are encouraging the adoption of TMS, including better control of data, more comprehensive analysis and the need to support omni-channel supply chains.
- Employ Freight Accounting: Freight accounting includes such functions as freight bill auditing, freight payment, freight invoice consolidation (where you receive only 1 invoice per week no matter how many shipments you make), will not only allow you to uncover all the areas where you can easily recover money, such as in variances between what the shipping quote was versus the actual freight bill, but also time spent on accounting around freight and transportation, and the ability to speed up cash flow. By employing proper freight accounting, through freight payment, auditing, and consolidation services, within a TMS solution, a shipper can go from paying $11 per freight invoice, all the way down to only 5 to 10% of the $11, according to Inbound Logistics magazine. Additionally, by employing an outsourced provide of freight accounting services, a company can save 2 percent to 5 percent of their total freight bill by catching inaccurate charges or duplicate payments.
- Use a Third Party Logistics Company: A prominent report supports the rising using of 3PLs as a way for shippers to take a competitive advantage. Inform yourself on these trends by downloading the Capgemini/Penn State/Panalpnia 2013 18th Annual 3PL Study. And we have also written acomprehensive guide to why you should outsource to a third party logistics company. But, the bottom line is that when you outsource to an expert logistics provider, you will realize logistics efficiency, and thus total costs savings. This includes both soft costs savings such as labor as you grow as a company, to better visibility into your transportation activity and spend so you can make better future business decisions based on data, and not guess work. These total costs also include hard costs such as the freight rates negotiated with carriers at an expert level through the 3PLs carrier relations team.
The general consensus has it that if you have the speed then you’re in luck. Manufacturing seems heading for a long awaited comeback.
Jake Hyet is considered an expert in metro steel fabrication Brisbane and metro steel sales, having worked for 10 years in the steel industry. He writes articles about the industry on a frequent basis.