How producers, manufacturers are managing inflation

The following transcript was edited from a concurrent Pit & Quarry Roundtable & Conference discussion.

TOMASO VENEROSO (AMCAST): There is an inflation spike [and] externalities we are facing such as energy prices. For manufacturers, these are huge. Of course, if you are able to produce a product that lasts – let’s say three or four times the life [of another] – then I think that product will offset the externalities.
From a manufacturing perspective, the future is not going to be any better. We’ll have many other externalities, so we better get used to navigating through this.

DAVE MCCRACKEN (ASTEC): We have had inflation affect some of our businesses in the past. We attack that through close relationships with our supply chain partners in leveraging our global footprint. If we can manufacture our key components in multiple locations, we can meet more of the lead times and keep our operations running. That’s been very important to us.

MICHAEL KELLY (MASTER POWER TRANSMISSION): As a manufacturer, it’s about productivity and efficiency during this time. When you’ve got subcontractors that are no longer willing to make the part or if it’s much more expensive, that is a big deal for all of us. That’s what we’re focused on.

SHELDON SHEPHERD (TECWEIGH): We don’t see the cost of materials and components going down. So you have to buy more of them. Of course, that creates a higher cost of inventory to hold that material with more money tied up.
The other thing in working with customers is trying to provide budgetary information for future planning for them. One of the channels we sell through [says] all quotes are good for seven days. We’re not that bad. But this is a major supplier. That’s for some equipment – that’s what we’re getting to.

SCOTT ALEXANDER (KILGORE COMPANIES): Because we’re in an environment where demand is so great, you’re not getting a lot of pushback from the ability to raise the price on your products. From my perspective, it hasn’t really been a negative impact as long as we continue to be able to get more for our product – and that gets passed along. At some point in time that may stop. But we’ve been fortunate to be able to do that.

KIRK RAINBOLT (KIMBALL EQUIPMENT): I think that’s exactly right, Scott. The impact is negligible if you’re able to increase your pricing at the same rate.

When I talk about inflation – and everybody’s talking about this manufacturing cost inflation – I think about our own internal operating cost and what it takes to run our business in the inflation [environment] that we’re experiencing.

Wages are rising exponentially. There’s not a day that somebody doesn’t come into the office and say: ‘Listen, I’m struggling. I’m having a hard time personally keeping up with inflation.’ And so that has to be passed on.

We’re talking about working from home. I don’t think we’re going to have a choice until the cost of fuel goes down. If you have employees who can work from home and you can mitigate some of their labor cost in the short term by letting them do that, you’re going to have to do that if it makes sense for your business. You’re not going to have a choice.

CHRIS KIMBALL (BELT-TECH INDUSTRIAL): Inventory is key right now, and that is probably our biggest concern from an inflation standpoint. We are able to raise our prices because people need the products, but what about when inflation turns to deflation? Then, prices are going down. What do we do with this high-priced inventory? What do we do with this high labor cost that now is too much for us to handle? So it’s just trying to hedge that and looking ahead to how we are going to be able to protect ourselves in the long term when, eventually, prices stabilize.

ALEX KANARIS (VDG): We have overstock with inventory. The best way to sustain what is going on with the system as a standard business is to not jump up and down every time something rises. We have reasonable price increases, but we’ve had to sacrifice some of our profit. We’ve tried to keep it level in the industry because we don’t know where the industry is going to be next year.

On work from home: We’ve had that argument that gas is too expensive and I cannot afford to drive. But in our business, if a customer pulls in and he wants a service and that service advisor needs to be in touch with the engineer or a manufacturing manager, he cannot do that at home. He has to be at work to do that. This is why our goal is to make sure the customer gets his product on time – a high-quality product as well as the service he needs. If that means we’re going to lose a few of our employees, so be it.

SHEPHERD: I’m sure all of us in this room have heard people talk about the stress on the home life. When you have stress on the home life, that undoubtedly means stress to the work life, which could affect safety [and] productivity. It might mean looking for higher-paying jobs – not necessarily because they want to leave. But there’s a general increased stress level, I think, that we’ll be seeing until this slows down.

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