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Navigating the ever-changing supply chain (Part 1)

By |  August 18, 2021
Photo: PamElla Lee Photography

Supreme Manufacturing’s Elliot Archibald, whose company manufactures dredges, says steel prices are the No. 1 challenge his company faces. Photo: PamElla Lee Photography

The following transcript was edited from one of two concurrent discussions at this year’s Pit & Quarry Roundtable & Conference. This discussion was edited for brevity and clarity.

P&Q: The list of items that are in short supply across the U.S. this year is staggering, from steel and lumber to fuel and microchips. Pricing on these goods is up, too – and, in some cases, it’s up exorbitantly. Producers: What material shortages have you experienced of late, and what is the short supply doing to prices? Are shortages having any trickle-down effect on aggregate production? How are you working with equipment suppliers to overcome material shortages? Equipment suppliers: Are material shortages creeping into manufacturing, and what are your short-term workarounds to address shortages? What are lead times currently like?

GAGE WANDLER (L&H INDUSTRIAL): We’ve seen roughly a 370 [percent] increase in lumber, and we’re seeing a 60 percent increase in shipping or freight. We’ve seen a massive amount of change with steel, too. I don’t think it’s going to change. I think this is the new normal. [Prices] might come down a bit. Also, anything that involves manufacturing has really been about fixing and Band-Aiding. So now, you’re seeing parts with catastrophic failures, and [customers] are expecting a quick turnaround on lead times. But, they’re not going to get it. Preventative maintenance, at this point, is key to start looking at your operations and deciding what you can do to determine the future as best you can.

Photo: PamElla Lee Photography

Wandler

PAUL ROSS (DOUGLAS MANUFACTURING): We’ve had to increase our raw material stock significantly in the past three to four months, just to prevent stockouts in the manufacturing process. Our challenge is actually finding square footage so we can keep making things. Instead of keeping 30 days of raw material on hand, we might keep 90 days. There are two sides to that issue: One is getting material – mainly steel – but the second is demand is up and increasing significantly. So, we’re burning through that material a lot quicker, and it’s taking us a while to get adjusted. We think we’re in a good place, as long as the steel can continue to be supplied – and you can get it. You have to make better forecasting decisions, and the demand for different parts has fluctuated because of the supply chain.

TONY GIANNI (TRIMBLE): Our business relies heavily on microchips. There’s a bleak future potentially ahead. What it looks like is still kind of undetermined. I guess the brokerage market is kind of cutthroat, as we’re finding out, and there’s a lot of companies – automotive, manufacturing – in the U.S. that have already shut down. For us, that’s going to create a huge shortage off in the distance. That wave hasn’t crashed just yet. I’m not trying to be an alarmist or anything. You don’t have to go home and sell your kid’s Xbox 360, but it is definitely a concern that the shutdown on a lot of these plants has pushed significant lead times. Then, couple that with the huge demand for purchasing, and it kind of magnifies the situation itself.

Photo: PamElla Lee Photography

Gianni

AMY ASSELIN (JOHN DEERE): Our teams have done a tremendous job of minimizing disruption. Early on, we started expanding the supply base to build in capacity. We do still see challenges with suppliers who can’t get labor. Our teams are facing that every day and managing some of it, prioritizing right and preparing right. If we do have a shortage, where are we going to allocate that to? We’re not there yet, but these are some of the things we’re having to prepare and think through.

JEFF KUENN (ABB MOTORS & MECHANICAL): ABB is a large corporation, but Dodge bearings is headquartered in Atlanta. We’re still seeing the same pressures in capital and supply chain. We’re only as good as our forecast. We’re trying to reach out to our customers and suppliers to get a better forecast. We’re surprised by a lot of the demand, just like everyone is in the industry. We’re trying to understand that a new normal has occurred, but we’re really concerned about forecasting and, obviously, the price of steel.

Photo: PamElla Lee Photography

Kuenn

ELLIOT ARCHIBALD (SUPREME MANUFACTURING): The biggest problem we face is steel prices. If anybody’s seen our dredges they’re usually three-quarters of a million pounds, [to] 1 million pounds. I never thought I would find myself in a position where I’m having to put in a quote that I’ll honor for five days – because, right now, that’s what I’m going to do. Even then, when I go to requote – if I’m buying a crusher or something like that – I’m not going to give the customer a new purchasing order without giving our vendor partners the opportunity to also requote their equipment.

ALEX KANARIS (VDG): We have the same issue with steel supply. We had to increase our inventory by about 30 percent just to make sure we had the product so we can work with it. How we meet customer expectations is by having the inventory. The raw material we buy is offset by reducing our labor time – such as how many days it takes us to manufacture. That means we have to be more automated. Say a gear was going to take 15 minutes to manufacture: Now, we have to figure out how we’re going to do it in 12 minutes. And we’ve been successful in that.

Headshot: John Garrison, Superior Industries

Garrison

JOHN GARRISON (SUPERIOR INDUSTRIES): We run through about 900,000 pounds of steel a week. Between the equipment we build and turnkey structures, a lot of it is custom. Earlier in the year, it was mostly just pricing issues. Now, we’re managing about four different steel vendors. If you go to the first one and you can’t get it, you go to the second one and the third one. We’ve increased our inventory, as well, for the more standard products. A lot of what we do is customer design one-off structures, so you have unforeseen lead times. We’ve done as much as we can by expanding our vendor base and bringing in inventory, but it’s been a struggle. I don’t know what to do as far steel goes. We’ve had steel price increases every week for months. It was going to peak in April, then it was going to be May and now it’s like August. It just keeps getting pushed up and up. There was a big spike in steel costs in 2018, but we’re three times over where it was when it hit hard in 2018. So it’s affecting our industry a lot, but we see it with a lot others, as well.

WILL PIERCE (SCHURCO SLURRY): I’ll speak from an OEM perspective: We have bearings that go in our pumps. With every single bearing manufacturer we’ve dealt with, we’ve had two price increases this year. We deal with five major motor manufacturers. Each one of those has given us two price increases this year – we just got another one last week. Our chrome pricing has gone up. Our rubber pricing has gone up. The chemicals that go into the urethane products have gone up. Shipping has gone up. We use a foundry in South Africa. A company we own in South Africa sends 40-ft. containers our way almost weekly. It used to be that those would be about six or seven weeks, and they’d cost between $6,000 and $7,000. With the last container we booked last week, we had to bid for it – and it was $15,800. So, every single aspect of our business has had a bottom-line increase. We buffer it as much as we can, but at a certain point some of those costs do get passed along. Customers, at the end, can’t stomach all of it because of their projections. So they’ll put off things. Equilibrium will come. I just don’t know when.

Photo: PamElla Lee Photography

Swank

TONY SPAKE (VOLVO CE): On microchip supply, we have not had disruptions in the construction equipment division. We’ve seen disruptions with other Volvo companies, but not specifically with ours. Similarly, on costs and prices as they relate to the industry: We cannot pass on short-term costs like steel, so there are short-game and long-game challenges. We just announced our midyear price increase, and it was a quite modest increase. You obviously have to manage costs in a much smarter way, monitor the industry and adjust over the next year, just so we can’t pass those costs on for the short-term.

DANETTE SWANK (PHILIPPI-HAGENBUCH): We’ve been able to go back to engineering. Say, traditionally, we use ‘this’ and we’re having a hard time getting ‘this’ but we can get [something else]. They really looked at different ways we could substitute product to make our own product with what’s available.

Featured Image: PamElla Lee Photography


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