Cost savings difficult to find
Trying to find ways to save money in your budget for operating materials and supplies may be like searching for a needle in a haystack. A look at the latest round of price and cost data for the industries that make factory supplies shows margin conditions deteriorated among 10 of 19 industries. Now, 13 industries show direct manufacturing margins at record or near-record lows (see industries wi...
Trying to find ways to save money in your budget for operating materials and supplies may be like searching for a needle in a haystack. A look at the latest round of price and cost data for the industries that make factory supplies shows margin conditions deteriorated among 10 of 19 industries. Now, 13 industries show direct manufacturing margins at record or near-record lows (see industries with a D to F-minus margin grade).
Savvy plant engineers who are willing to invest some research into their supplier's cost conditions will find only three industries worth investigating. These are lubricating oils and greases (SIC 2992), industrial valves (SIC 3491), and other valves and pipe fittings (SIC 3494). The last one is the industry that makes metal fittings and flanges for piping systems. All three have a margin grade of B.
To restore manufacturing margins to average levels typical of the past five years, makers of lubricating oils could decrease their product prices 3.6%. Industrial valves producers could cut tags 0.7%. And manufacturers of metal pipe fittings could withstand a 2.1% average price cut. But to make a case for price cuts, buyers will have to delve into the materials budgets of their suppliers. The bill of materials for industrial valves, for example, shows a wide range of possible attacks. Costs for steel castings, extruded copper, iron and steel forgings, and miscellaneous other nonferrous metals all declined from April 2002 to April 2003. The cost for steel mill products, however, increased 8.6% over that time period. Pulling too hard on the materials trigger could backfire.
The tricky nature of negotiating price cuts, plus a forecast that shows end-market demand growing again next year, explains why price inflation remains alive and well. Our forecast for industrial valves calls for average valve prices to rise 1.8% in 2003 and 1.4% in 2004.
Average Product Prices1 Change, %, During 12-Mo Ending...
Direct Mfg. Costs2 and Margins Grade
Growth in U.S. End Markets3 Change, %, During 12-Mo Ending...
1 Average product price changes are calculated from the producer price index for each 4-digit SIC (standard industrial classification) industry from the U.S. Bureau of Labor Statistics.
Wood Pallets and Skids
Polishes and Sanitation Goods
Surface Active Agents
Adhesives and Sealants
Lubricating Oils and Greases
Rubber and Plastics Hose and Belting
Steel Wire and Related Products
Copper Rolling and Drawing
Nonferrous Wire Drawing and Insulating
Heating Equipment, except Electric
Fabricated Plate Work, Boiler Shops
Bolts, Nuts, Rivets and Washers
Fluid Power Valves and Hose Fittings
Other Valves and Pipe Fittings
Miscellaneous Fabricated Wire Products
Fabricated Pipe and Fittings
Ball and Roller Bearings
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Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey