Industries face low margins

Plant engineers who have to buy construction and maintenance supplies are facing a veritable minefield of negotiation problems. That's because a whopping seven industries are suffering under-record or near-record-low manufacturing margins, as evidenced by the F and F- grades in our margin table. Topping the list of troubled industries, the current-carrying wiring devices (SIC 3644) industry sa...

05/06/2003


Plant engineers who have to buy construction and maintenance supplies are facing a veritable minefield of negotiation problems. That's because a whopping seven industries are suffering under-record or near-record-low manufacturing margins, as evidenced by the F and F- grades in our margin table.

Topping the list of troubled industries, the current-carrying wiring devices (SIC 3644) industry saw its average costs rise 3.3% between February 2002 and February 2003. Meanwhile, the prices charged for wiring products rose just 0.7%. This cost/price escalation mismatch lopped off $1.25 from industry margins for every $100 worth of product sold. Now, manufacturers in SIC 3644 are under pressure to hike prices anywhere between 2.2% and 4.1% in order to get margins back to year-ago or 5-yr average levels.

Producers of metal partitions and fixtures (SIC 2542) also sport an F- grade in our cost table. Margins here are at an all-time record low. Looking at the February 2003 data compared to a year ago, we see the cause for the margin meltdown: a huge 5.6% cost hike coupled with a meager 0.1% price increase. To get margins back in line with average levels, makers of metal shelving must hike tags by anywhere from 3.5% to 4.8%.

Now the question remains what leverage will suppliers in these industries have to stick it to the buyers? In the case of metal fixtures, the answer is not much. Here the end markets that buy metal fixtures continue to shrink, down 2.8% in the 12-month period ending February 2003. On the other hand, end markets for wiring devices have begun to grow again, up 1.8% in the 12-months ending February. This demand strength may embolden wire makers to try to push through price hikes.

Price/cost/demand roundup

Average Product Prices

Average Product Prices

Direct Mfg. Costs

Direct Mfg. Costs

Growth in U.S. End Markets

Growth in U.S. End Markets

Industry

SIC

Nov 02

Feb 03

Costs are...

Grade

Nov 02

Feb 03


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.

General Sawmills and Planing Mills

2421

-1.46

-1.34

rising

D

-0.60

-0.70

Millwork

2431

0.62

0.10

rising

B

-2.13

-1.81

Hardwood Veneer and Plywood

2435

0.02

-0.09

rising

C

-1.17

-0.80

Softwood Veneer and Plywood

2436

-3.17

-3.67

rising

D

-1.17

-0.80

Metal Partitions and Fixtures

2542

-0.78

-0.72

stable

F-

-1.85

-2.83

Paints and Allied Products

2851

1.50

1.43

rising

C

-0.16

0.82

Flat Glass

3211

-2.83

-1.87

rising

F

4.52

7.80

Other Structural Clay Products

3259

4.12

5.23

rising

B

-2.10

-1.80

Gypsum Products

3275

7.64

7.95

rising

D

-2.50

-2.87

Mineral Wool

3296

0.67

0.49

rising

F

-1.33

0.06

Steel Pipe and Tubes

3317

2.47

5.81

stable

A+

-1.36

0.71

Plumbing Fittings and Brass Goods

3432

-0.25

0.35

stable

D

-2.58

-2.20

Metal Doors, Sash and Trim

3442

0.59

0.62

stable

C

-2.44

-2.60

Sheet Metal Work

3444

0.74

1.54

stable

F

1.83

4.10

Refrigeration and Heating Equipment

3585

0.41

0.33

stable

F

-0.25

0.55

Current-Carrying Wiring Devices

3643

-0.65

-0.10

rising

F-

-0.19

1.81

Noncurrent-Carrying Wiring Devices

3644

1.34

1.54

rising

F

-0.19

1.81

Commercial Lighting Fixtures

3646

-0.34

-0.26

stable

D

-1.51

-1.54

Environmental Controls

3822

0.06

0.27

stable

F

-1.88

-1.74





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...
2016 Product of the Year; Diagnose bearing failures; Asset performance management; Testing dust collector performance measures
Safety for 18 years, warehouse maintenance tips, Ethernet and the IIoT, GAMS 2016 recap
2016 Engineering Leaders Under 40; Future vision: Where is manufacturing headed?; Electrical distribution, redefined
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Safety at every angle, Big Data's impact on operations, bridging the skills gap
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Applying network redundancy; Overcoming loop tuning challenges; PID control and networks
Driving motor efficiency; Preventing arc flash in mission critical facilities; Integrating alternative power and existing electrical systems
Package boilers; Natural gas infrared heating; Thermal treasure; Standby generation; Natural gas supports green efforts

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 article collection contains several articles on the vital role of plant safety and offers advice on best practices.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me