Wood-related industries chop prices

At last, some construction costs are coming down. Running full throttle, as we wrote three months ago, higher prices have flattened many a factory repair and maintenance budget. This month, finally, we see five industries in the PLANT ENGINEERING construction index that are reporting declines in manufacturing costs.


At last, some construction costs are coming down. Running full throttle, as we wrote three months ago, higher prices have flattened many a factory repair and maintenance budget. This month, finally, we see five industries in the PLANT ENGINEERING construction index that are reporting declines in manufacturing costs.

Unfortunately, these cost cuts were limited to wood and wood-related industries only. Looking at all 22 industries in our construction index, the overall numbers seem dismal. Eleven industries sport F or D grades in our analysis of industry margins. That means suppliers in those industries are well justified in requesting more price hikes.

Even industries flush with profits have market dynamics in their favor. Demand trends tend to favor suppliers, not buyers. End-market demand is growing in each and every industry in our index. Not only is demand growing, but the speed of that growth is increasing too.

That means suppliers have the market behind any aggressive pricing actions. Indeed, 20 out of 22 industries in our construction index increased their average product prices over the past 12 months. And 14 of the 20 pushed their price hikes up even higher in November than they did three months earlier.

Thanks to falling costs, cost/price escalation analysis heavily favors buyers of wood products. To bring current margins back in line with long-run norms, we calculate that prices in the softwood plywood, other millwork, and particleboard industries would have to be cut by 13%, 6.6%, and 1.1%, respectively. Persuading your supplier to share some of its cost savings is another story entirely. Until Alan Greenspan's anti-inflation policies can make headway against Iraq war-induced shortages, that task won't be easy.

Price/cost/demand roundup

Construction & maintenance supplies Average Product Prices (1) % Change Direct Manufacturing Costs (2) and Margins Grade Growth in U.S. End Markets (3) % Change During 12 Months Ending
Industry 3 months ago Current month Costs are Grade 3 months ago Current month
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: ebaatz@ice-alert.com).
Sawmill products1.424.78fallingC2.923.72
Wood windows & doors0.510.76fallingC0.652.01
Other millwork (excl. windows & doors)1.013.62fallingA+0.982.41
Hardwood plywood-2.58-2.32fallingB1.932.99
Softwood plywood17.1430.66fallingB1.932.99
Shelving & fixtures0.251.22stableB1.392.07
Flat glass0.500.17risingF6.968.06
Sewer pipe & other structural clay prod.3.832.63risingF-0.491.71
Gypsum products1.322.63risingB0.502.18
Fiberglass & other mineral wool0.230.22risingB1.583.18
Iron & steel pipes & tubes6.346.79risingA5.136.88
Metal & plastic plumbing fixture fittings0.420.53risingF-3.664.37
Metal windows & doors0.840.86stableF-3.114.42
Sheet metal work1.151.20risingF0.642.29
HVAC equipment1.091.47stableF6.437.02
Current-carrying wiring devices0.220.07stableF1.962.63
Noncurrent-carrying wiring devices-0.47-0.55risingF-5.916.30
Nonresidential electric lighting fixtures-0.541.81risingB5.916.30
Automatic environmental controls1.961.43risingD0.031.32

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.
September 2018
2018 Engineering Leaders under 40, Women in Engineering, Six ways to reduce waste in manufacturing, and Four robot implementation challenges.
GAMS preview, 2018 Mid-Year Report, EAM and Safety
June 2018
2018 Lubrication Guide, Motor and maintenance management, Control system migration
August 2018
SCADA standardization, capital expenditures, data-driven drilling and execution
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
Spring 2018
Burners for heat-treating furnaces, CHP, dryers, gas humidification, and more
August 2018
Choosing an automation controller, Lean manufacturing
September 2018
Effective process analytics; Four reasons why LTE networks are not IIoT ready

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.
Material Handling
This digital report explains how everything from conveyors and robots to automatic picking systems and digital orders have evolved to keep pace with the speed of change in the supply chain.
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.
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.
Design of Safe and Reliable Hydraulic Systems for Subsea Applications
This eGuide explains how the operation of hydraulic systems for subsea applications requires the user to consider additional aspects because of the unique conditions that apply to the setting
click me