Cost Trends

Between March and June, prices for many key commodities have been on the rebound. The result: inflation has started to rear its ugly head, creating cost control concerns for many industries that make the equipment and tools that plant engineers use. For example, with prices for steel heating up, makers of materials handling equipment are beginning to experience an upturn in manufacturing costs.

09/15/2002


Between March and June, prices for many key commodities have been on the rebound. The result: inflation has started to rear its ugly head, creating cost control concerns for many industries that make the equipment and tools that plant engineers use.

For example, with prices for steel heating up, makers of materials handling equipment are beginning to experience an upturn in manufacturing costs. Although it's unlikely higher costs translated into higher product prices over the summer months, buyers should be on guard this autumn. Since the announcement of tariffs on imported steel, materials handling industries have experienced erosion in margins that can be traced directly to increased spending on steel. In three of these industries, margin losses are approaching $1 for each $100 of product sold.

Makers of conveyors and conveying equipment (SIC 3535) face the most serious inflation challenge. Since March, per-unit spending on manufacturing has increased 0.77% while industry product prices have tumbled 0.87%. This escalation disparity has lowered margins by 96 cents for each $100 of product sold. About 4/5 of this margin loss can be attributed to an increase in raw materials costs. A roundup of 3-month cost increases for key inputs shows: carbon sheet and strip up 9.47%; carbon steel bars up 2.11%; and other carbon steel shapes up 3.67%. While all of this is clearly bad news for producers, higher costs should play a limited role in negotiations. Thinking Cap Solutions' cost model calculates that margins in SIC 3535 remain above normal. The same can be said for margins in the elevator (SIC 3534) and hoist, crane and monorail (SIC 3536) industries. Makers of industrial lift trucks (SIC 3537), on the other hand, face below-average margins.

Price/cost/demand roundup

Average Product Prices

Direct Mfg. Costs

Growth in U.S. End Markets

Industry

SIC

Mar 02

June 02

Costs are...

Grade

Mar 02

June 02


the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs.

Other Hand and Edge Tools

3423

3.58

3.32

rising

B

-2.99

-4.32

Hand Saws and Saw Blades

3425

-0.70

-0.50

rising

D

-1.96

-1.98

Other Hardware

3429

1.77

1.56

rising

B

-2.91

-3.20

Other Power Transmission Equipment

3568

1.88

1.88

rising

A

-7.14

-5.93

Conveyors and Conveying Equipment

3535

1.50

1.24

stable

B

-5.47

-6.86

Hoists, Cranes and Monorails

3536

1.32

0.92

stable

A

-2.71

-4.21

Industrial Trucks and Tractors

3537

0.89

0.20

stable

D

-5.29

-6.52

Metal-Cutting Machine Tools

3541

-3.64

-5.71

stable

F-

-8.77

-7.73

Machine Tool Accessories

3545

1.85

1.55

stable

D

-6.42

-4.79

Power Driven Hand Tools

3546

1.98

1.26

stable

D

-1.02

-1.55

Welding Apparatus

3548

1.88

1.78

rising

B

-3.94

-2.60

Pumps and Pumping Equipment

3561

2.72

3.06

stable

A

-3.73

-3.73

Air and Gas Compressors

3563

2.33

2.08

stable

A

-3.73

-3.73

Speed Changers, Drives and Gears

3566

1.79

1.57

stable

B

-7.14

-5.93

Transformers

3612

-1.56

-1.60

stable

F

-8.34

-6.97

Motors and Generators

3621

0.31

0.07

rising

F

-4.31

-3.04

Process Control Instruments

3823

1.48

1.37

stable

B

-2.99

-1.81

Fluid Meters and Counting Devices

3824

0.48

0.11

stable

C

-2.99

-1.81

Instruments to Measure Electricity

3825

0.70

0.90

stable

D

-8.48

-6.68





No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
Safer human-robot collaboration; 2017 Maintenance Survey; Digital Training; Converting your lighting system
IIoT grows up; Six ways to lower IIoT costs; Six mobile safety strategies; 2017 Salary Survey
2016 Top Plant; 2016 Best Practices on manufacturing progress, efficiency, safety
Mobility as the means to offshore innovation; Preventing another Deepwater Horizon; ROVs as subsea robots; SCADA and the radio spectrum
Future of oil and gas projects; Reservoir models; The importance of SCADA to oil and gas
Big Data and bigger solutions; Tablet technologies; SCADA developments
Automation modernization; Predictive analytics enable open connectivity; System integration success; Automation turns home brewer into brew house
Commissioning electrical systems; Designing emergency and standby generator systems; Paralleling switchgear generator systems
Natural gas for tomorrow's fleets; Colleges and universities moving to CHP; Power and steam and frozen foods

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

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Motion control advances and solutions can help with machine control, automated control on assembly lines, integration of robotics and automation, and machine safety.
Compressed air plays a vital role in most manufacturing plants, and availability of compressed air is crucial to a wide variety of operations.
Maintenance Manager; California Oils Corp.
Associate, Electrical Engineering; Wood Harbinger
Control Systems Engineer; Robert Bosch Corp.
click me