Demand slows and bargains grow
The slowing economy is taking its toll on manufacturers and may be creating opportunities for plant engineers to bargain for better deals. All 19 industries that make factory construction and maintenance supplies are registering slowdowns in end-market growth. Most notably, in the 12-mo period ending February 2001, end markets that use products from sawmills fell 0.1%, and end markets for the heating equipment industry declined 1.67%. Both these industries are struggling with low inflation-adjusted margins.
Four industries in our construction supplies market basket remain prime targets for price cuts because margins are strong while demand is slowing. The millwork (SIC 2431), hardwood plywood (SIC 2436), steel pipe and tubes (SIC 3317), and vitrified clay sewer and other structural clay products (SIC 3259) industries all enjoy A or A+ margin grades, according to our industry cost escalation model. Remember, an A+ grade means the combination of rising product prices and more slowly rising or falling manufacturing costs are blessing the A+ industry with record-high margins.
|Industry||SIC||Average Product Prices||Average Product Prices||Direct Mfg. Costs||Direct Mfg. Costs||Growth in U.S. End Markets||Growth in U.S. End Markets|
|General sawmills and planing mills||2421||-4.12||-8.40||Falling||D||1.72||-0.01|
|Hardwood veneer and plywood||2435||1.77||1.51||Stable||A+||3.19||1.75|
|Softwood veneer and plywood||2436||-15.17||-17.71||Falling||F||3.19||1.75|
|Metal partitions and fixtures||2542||0.48||0.61||Stable||B||5.14||3.37|
|Paints and allied products||2851||2.13||2.19||Rising||D||4.10||1.24|
|Other structural clay products||3259||3.70||5.60||Stable||A+||5.41||4.06|
|Steel pipe and tubes||3317||4.13||4.13||Stable||A||6.48||4.29|
|Plumbing fittings and brass goods||3432||2.69||2.26||Stable||B||4.63||3.25|
|Metal doors, sash, and trim||3442||1.76||1.81||Stable||C||4.29||2.89|
|Sheet metal work||3444||1.10||1.26||Stable||C||25.24||23.87|
|Refrigeration and heating equipment||3585||-0.28||-0.19||Stable||F||2.59||-1.67|
|Current-carrying wiring devices||3643||-0.69||-0.62||Stable||F||21.66||20.58|
|Noncurrent-carrying wiring devices||3644||0.85||0.84||Stable||C||21.66||20.58|
|Commercial lighting fixtures||3646||0.00||0.36||Stable||D||6.29||4.82|
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.
All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-452-6159; e-mail: firstname.lastname@example.org ).