Windfalls for pallets and bearings
Two industries in our factory operating materials and supplies report are enjoying A+ margin grades. This means the combination of rising product prices and falling manufacturing costs has created an inflation windfall for producers of wooden pallets (SIC 2448), as well as ball and roller bearings (SIC 3562).
Two industries in our factory operating materials and supplies report are enjoying A+ margin grades. This means the combination of rising product prices and falling manufacturing costs has created an inflation windfall for producers of wooden pallets (SIC 2448), as well as ball and roller bearings (SIC 3562). Effective negotiations could help plant managers to garner their share of the windfall.
In the wood pallets and skids industry, average manufacturing costs fell 5.6% between January 2001 and January 2000, while prices increased less than 1%. The cost/ price mismatch resulted in a profit margin windfall of $4.43 for every $100 worth of pallets sold on average. That is money that buyers of pallets can attack and perhaps win, especially with end-market demand for wood pallets on the decline.
In January 2001, industry prices for bearings rose another 0.36% despite a 0.20% drop in the cost of making a typical unit of industry output. With January’s price and cost trends diverging, ball and roller bearing manufacturers stand to gain $0.29 in margins for each $100 of product sold.
|Industry||SIC||Average Product Prices1 Change, %, During 12-Mo Ending… Oct 00||Average Product Prices1 Change, %, During 12-Mo Ending… Jan 01||Direct Mfg. Costs2 and Margins Grade Costs are…||Direct Mfg. Costs2 and Margins Grade, Grade||Growth in U.S. End Markets3 Change, % During 12-Mo Ending…Oct 00||Growth in U.S. End Markets3 Change, % During 12-Mo Ending… Jan 01|
|Wood pallets and skids||2448||0.02||0.08||Falling||A+||3.33||1.83|
|Polishes and sanitation goods||2842||1.83||2.33||Stable||F||3.91||3.20|
|Surface active agents||2843||0.23||1.58||Stable||F||1.52||0.07|
|Adhesives and sealants||2891||0.64||1.50||Stable||D||14.87||14.98|
|Lubricating oils and greases||2992||5.79||7.63||Stable||D||10.90||10.72|
|Rubber and plastics hose and belting||3052||-0.15||0.43||Stable||C||7.86||6.29|
|Steel wire and related products||3315||-0.66||-0.46||Falling||D||5.91||4.33|
|Copper rolling and drawing||3351||7.58||6.24||Falling||D||37.41||40.41|
|Nonferrous wire drawing and insulating||3357||5.22||6.10||Falling||C||37.42||39.53|
|Heating equipment, except electric||3433||1.07||1.16||Stable||B||4.27||2.65|
|Fabricated plate work, boiler shops||3443||1.16||1.17||Stable||B||6.42||6.15|
|Bolts, nuts, rivets, and washers||3452||-0.27||-0.16||Falling||D||6.08||4.51|
|Fluid power valves and hose fittings||3492||1.72||1.55||Stable||B||5.07||4.15|
|Other valves and pipe fittings||3494||0.87||1.17||Stable||A||5.07||4.15|
|Miscellaneous fabricated wire products||3496||0.24||-0.03||Stable||C||12.36||11.18|
|Fabricated pipe and fittings||3498||2.81||2.96||Stable||D||5.07||4.15|
|Ball and roller bearings||3562||1.09||1.40||Stable||A+||9.50||8.34|
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.
2 Analyses of each industry’s direct manufacturing cost changes are from Thinking Cap Solutions, Inc.’s proprietary Industry Cost Escalation (ICE) model. The “grade” indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for 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.
3 Growth in U.S. end markets data are from the ICE model and are estimates of output for the domestic end markets which purchase a given industry’s products.
All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-452-6159; e-mail: firstname.lastname@example.org).