One of the biggest ongoing challenges metal fabricators face today is the volatility of raw materials pricing. Those working in the metal fabrication industry are well aware of this issue, others who are not may not even realize this challenge exists. The rise of emerging markets has created a massive competition for the raw materials used in metal fabrication, making the financial risks associated with metals’ pricing volatility something manufacturers have to stay on top of.
At Poole Sheet Metal, we have come up with a list of effective strategies to help lessen the risks posed by volatility in the cost of raw materials:
Look for Trends
Start an initiative to track price changes as part of a raw materials informational database in order to predict where pricing is likely to go next. This will not only help give you an idea of what kind of expenses you can expect when you make your next raw materials purchase but help your company stay up to date with current and future trends.
Be Clear Upfront
When dealing with suppliers, it’s important to establish terms from the very start. These terms should detail both parties’ expectations in terms of materials’ costs, and allow for regular review of pricing in order to account for potential future price volatility.
Know What You’re Getting
It’s important to understand the basics around material pricing. Know that the raw material percentage for all products will never be a fixed price across the board. The percentage of raw material used will be the determining factor of cost, and this number can vary depending on the product or vendor.
Plan for the Future
When possible, it’s a good idea to enter a vendor agreement. An agreement generally requires long-term customer commitments which make it possible to lock in pricing which can be extremely helpful and beneficial to you in the long run.
Consider the Big Picture
Using vendors that are able to supply multiple locations can help leverage overall volume, and cost of material purchases. Do some extra research to see if there bigger and better vendors that you could be purchasing from.
With raw materials being a large percentage of your overall costs, having a plan in place to help reduce the impact of their pricing volatility will benefit the financial stability of your business. For more information about how Poole Sheet Metal can add value to your business, contact us by filling out our form online, or call 888-739-8806.