Inflation mismatch could lead to higher prices

In November 2002, prices for plant construction and maintenance supplies fell 0.1%, while costs to manufacture those supplies rose 0.7%. This inflation mismatch means suppliers are facing tighter margins now and buyers could face higher prices ahead. Consider the sheet metal work (SIC 3444) industry.


In November 2002, prices for plant construction and maintenance supplies fell 0.1%, while costs to manufacture those supplies rose 0.7%. This inflation mismatch means suppliers are facing tighter margins now and buyers could face higher prices ahead.

Consider the sheet metal work (SIC 3444) industry. Higher raw materials and labor spending pushed the cost of manufacturing a unit of output in the sheet metal work industry up 0.7% in November. The rise marks the fourth increase of more than 0.5% in the last 5 months and it had a significant bottom-line impact. Since midsummer, margins in SIC 3444 have shed $1.92 per $100 of product sold.

Cost control problems in SIC 3444 stem from the imposition of steel tariffs earlier this year. Over the last 9 months, per-unit spending on raw materials has increased 5.3% while industry product prices have been limited to a gain of just 1.4%. The single biggest bottom-line squeeze has come from steel sheet and strip where per-unit costs are up a whopping 17.9%.

Meanwhile, deflation continues to hold sway over the pricing habits of sawmill operators. Here industry tags fell for the sixth time in 7 months, down 0.8% in November. Fortunately for producers, a 0.4% drop in per-unit manufacturing costs helped limit the bottom-line damage from weak prices.

Thinking Cap Solutions projects prices for products made in SIC 2421 will rise an average of 3.40% in 2003. All of this will fall to the bottom line thanks to a 0.40% dip in the cost of making a unit of industry output. By 2003:Q4, industry margins will be $4.30 (per $100 of product sold) above their 2002:Q4 level. In 2004, prices will be better behaved, gaining just 0.20%.

Price/cost/demand roundup

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

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 Mills2421-1.80-1.60stableF-1.49-0.52
Hardwood Veneer and Plywood24350.370.05stableC-2.38-1.25
Softwood Veneer and Plywood2436-2.40-3.16fallingD-2.38-1.25
Metal Partitions and Fixtures2542-0.59-0.73stableF--1.01-1.91
Paints and Allied Products28511.641.59risingC-2.14-0.27
Flat Glass3211-2.37-2.57stableF-1.244.44
Other Structural Clay Products32593.964.12stableA-2.89-2.29
Gypsum Products32753.497.53stableD-2.72-2.41
Mineral Wool32961.400.85stableD-3.58-1.51
Steel Pipe and Tubes3317-0.622.41risingBnana
Plumbing Fittings and Brass Goods3432-0.79-0.26stableD-3.37-2.70
Metal Doors, Sash and Trim34420.720.58risingC-2.80-2.56
Sheet Metal Work34440.040.74risingF-1.001.78
Refrigeration and Heating Equipment35850.460.43stableF-2.05-0.39
Current-Carrying Wiring Devices3643-1.13-0.60stableF--2.24-0.27
Noncurrent-Carrying Wiring Devices36441.681.34stableD-2.24-0.27
Commercial Lighting Fixtures3646-0.23-0.32stableF--1.95-1.62
Environmental Controls38220.050.06stableD-2.44-2.01

Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America.
Product of the Year
The Product of the Year program recognizes products newly released in the manufacturing industries.
System Integrator of the Year
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
June 2018
2018 Lubrication Guide, Motor and maintenance management, Control system migration
May 2018
Electrical standards, robots and Lean manufacturing, and how an aluminum packaging plant is helping community growth.
April 2018
2017 Product of the Year winners, retrofitting a press, IMTS and Hannover Messe preview, natural refrigerants, testing steam traps
June 2018
Machine learning, produced water benefits, programming cavity pumps
April 2018
ROVs, rigs, and the real time; wellsite valve manifolds; AI on a chip; analytics use for pipelines
February 2018
Focus on power systems, process safety, electrical and power systems, edge computing in the oil & gas industry
Spring 2018
Burners for heat-treating furnaces, CHP, dryers, gas humidification, and more
April 2018
Implementing a DCS, stepper motors, intelligent motion control, remote monitoring of irrigation systems
February 2018
Setting internal automation standards

Annual Salary Survey

After two years of economic concerns, manufacturing leaders once again have homed in on the single biggest issue facing their operations:

It's the workers—or more specifically, the lack of workers.

The 2017 Plant Engineering Salary Survey looks at not just what plant managers make, but what they think. As they look across their plants today, plant managers say they don’t have the operational depth to take on the new technologies and new challenges of global manufacturing.

Read more: 2017 Salary Survey

The Maintenance and Reliability Coach's blog
Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
One Voice for Manufacturing
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 Maintenance and Reliability Professionals Blog
The Society for Maintenance and Reliability Professionals an organization devoted...
Machine Safety
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
Research Analyst Blog
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Marshall on Maintenance
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
Lachance on CMMS
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Electrical Safety Update
This digital report explains how plant engineers need to take greater care when it comes to electrical safety incidents on the plant floor.
Maintenance & Safety
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
IIoT: Machines, Equipment, & Asset Management
Articles in this digital report highlight technologies that enable Industrial Internet of Things, IIoT-related products and strategies.
Randy Steele
Maintenance Manager; California Oils Corp.
Matthew J. Woo, PE, RCDD, LEED AP BD+C
Associate, Electrical Engineering; Wood Harbinger
Randy Oliver
Control Systems Engineer; Robert Bosch Corp.
Data Centers: Impacts of Climate and Cooling Technology
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
Safety First: Arc Flash 101
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
Critical Power: Hospital Electrical Systems
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me