Prices hold steady despite record demand
Prices for racks and shelving won't be affected, at least through the second quarter of 1999.
By Agatha Ciancarelli -- Purchasing, 2/11/1999 2:00:00 AM
Though demand is strong, prices for racks and shelving won't be affected, at least through the second quarter of 1999. In fact, says Harry Popolow, senior products manager with Penco Products, "Even though capacities are being taxed by high demand, prices in the rack industry are still depressed."
Prices have remained consistently low, and sources agree they will continue to be stable for the next six months. Frank Migacz, vice president of sales with Jarke Corporation, agrees: "We have held our prices and will hold them through 1999."
One source argues that the reason prices of racks are low is because people view the product as a commodity. "The problem with racks is that it has such widespread use which has generated so many suppliers that customers look at it as a commodity. They don't look at the quality differential," says Popolow.
Low costs of material is another factor contributing to price stability. For instance, steel and plastic composite tags are steady.
However, says Migacz, "A restriction against foreign steel may begin to surface in six months and would allow U.S. producers to raise costs of material, which would affect industry prices." The only factor that may nudge prices upward is if production costs escalate. Migacz adds, "Higher costs for labor and the increasing number of personnel in each department could raise prices."
Strong demand taxes suppliers
With demand reaching record highs, the industry is struggling to keep up with orders. The consequence of such strong demand is that delivery times in both racks and shelving have lengthened. Says Popolow, "Business has never been so good. Delivery in both racks and shelving is longer than historically expected at the turn of the year." In fact, sources agree that the usual leadtime of 4-6 weeks is now 6-10 weeks.
If demand persists, one way to reduce leadtimes is to increase the work force. In fact, the booming business is forcing suppliers to hire more employees. Says Migacz, "We will continue to add shifts." But other sources warn that finding the needed supervision is more difficult.
Business is not expected to slow much in 1999. Says Migacz, "We don't expect any great leaps and bounds in our industry. However, business should continue at a pace that's as good or a little better than last year." Popolow agrees: "As long as the economy stays healthy, business is not really going to change. The industry has a certain capacity, and demand now exceeds that level."
Rack codes tighten
In the past, there have been five or six different building codes, but as of January 2000, only one universal building code for racks will be implemented. "The implementation of the code has not affected us yet, but," says Popolow, "it will have a major impact on the industry."
The new universal building code to be used across the U.S. is causing the RMI, Rack Manufacturing Institute, to rework certain products in order to meet specifications. There are 25 rack manufacturers included in the RMI. The building code is forcing the whole industry to retest their products to meet the required specifications. Says Popolow, "We are changing specifications on our beams and frames throughout the industry."
"The building code on racks is severe," says Popolow. "We are going to have to meet strong qualifications. The code may eventually be extended to include shelving in 2004, when it is reviewed." However, a rating system for different products and specifications will enable customers to differentiate product capabilities.
Stacking rack is hot
There has not been significant redesign in existing products or new product development for racks and shelving. Says Popolow, "The designs of the products are not changing." In fact, the preferred product, the stacking rack, has been around for 45 years. Says Migacz, "The segment of our business doing the best right now is our stacking rack mainly because warehouses are increasing use of the product." Stacking racks are a modular-type system and can provide more space than traditional selective or pallet-type racks. "You can only put one pallet four high or five high, but you need a 15-foot forklift aisle. With stacking racks you can store them five or six deep from the wall to the working aisle. Also, when they are emptied, the pull-out post allows them to be stored easily," says Migacz.
Market at a glance
Demand: At record high. Business should remain as strong or a even a little better in 1999.
Supply: Relatively tight. Buyers are waiting longer for products and are experiencing backlogs of orders.
Prices: Stable and will hold steady for 1999 unless a restriction is issued against foreign steel.
Leadtimes: Extended between 6-10 weeks from the usual 4-6 weeks.
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