Buyers: Supply starvation for resins, metals and others
Jason Seigel -- Purchasing, 7/15/2004 2:00:00 AM
Seven out of 10 buyers polled by Purchasing magazine continued to complain about raw material supply shortages in June. Their concerns are not new; they have cited supply concerns in five consecutive surveys now. This time, shortage reports centered on steel, copper and aluminum products; packaging materials (PET film, linerboard, corrugated boxes); construction materials (framing lumber, particleboard, fiberboard) and electronic components.
Interestingly, the longest leadtimes were reported for chemicals and resins, which have been rising in demand—and price—in recent weeks. An Ohio purchasing manager says some oxides and resins have jumped from two-week deliveries to 10-week-plus leadtimes. "Orders worldwide to our plastic parts suppliers have increased to the point that we have been pushed back in the queue," says the operations director of a medical equipment company in Arizona. "Good for them, bad for us. We are trying to maintain just-in-time manufacturing."
The global supply chain manager for a Texas chemical producer says, "the reliability of supplier deliveries has sunk to an all-time low." Reason: "Globally, bulk chemical ship availability is limited." Atop that, a chemicals buyer in California notes: "Availability of trucks has been awful."
"High order fluctuations out of normal leadtimes have caused the majority of shortages in many different commodities," explains the purchasing manager for an Indiana metal tube producer. "And it isn't just the raw materials that are running slow," says the purchasing manager of a packaging products firm in Florida. "For example, parts and components manufactured from carbon and stainless steel" also are in short supply. Another purchasing manager, at an Illinois consumer products firm, says: "Plastic products have become difficult to source with short leads."
Steel still a big problem area
Buyers of all kinds of steel—plain and coated sheet, plate, bars and tubing-continue to be plagued with low supply, long leadtimes and volatile upward pricing. The purchasing manager at an Indiana plastics producer adds: "Any part I buy made of steel is a constant headache." A majority of buyers agrees with the materials control manager of a Georgia outdoor products manufacturer, who says: "Steel is the major item causing concerns in pricing and supply."
Note that June's average leadtime for hot and cold rolled steel is 5.8 weeks; June 2003 saw the same steel delivered in less than half that time (2.6 week average). Steel availability is, however, improving from April's seven-week leadtime high. "Leadtimes and pricing on bar-stock and tubing appear to be opportunistic," says the purchasing manager for a Minnesota motion controls manufacturer.
Nonetheless, "huge leadtimes from the steel mills for delivery, along with volatile pricing and surcharges," are still hampering production, explains the purchasing agent for an Illinois hard chrome manufacturer. "Our product leadtimes continue to shrink," adds the purchasing manager for an Indiana water furnace manufacturer, "but supplier leadtimes are stretching, making inventories tight."
"All mills are on allocation," gripes a purchaser for an Illinois pipe and tubing manufacturer. "Mills are going out to 16 to 18 week leadtimes, so we look to commercial product as an alternative," explains a senior buyer for a Wisconsin electronics firm. Price volatility only further destabilizes the steel market: "Prices are unrealistically high and going higher for flat roll steel products," says a purchaser for a power transmission parts manufacturer of Michigan, "This is a bad situation, and it's getting worse."
More than half (54%) of survey respondents who buy directly from producers complain in June about tight supply. Mills simply don't produce enough steel to meet demand. "If steel prices don't come down, we will be in trouble," says the purchasing manager of an Alabama wire fabricator. "Suppliers' shipping quantities fail to meet order quantities," complains the contract manager for an Arizona electronics producer.
Further "buying headaches have to do with suppliers switching to different inventory control systems; they are no longer able to ship on-time or complete orders," says the buyer for a North Carolina textiles manufacturer. "The price per metric ton of cold-rolled sheet is still wreaking havoc," says the materials and purchasing manager for a garden maintenance product manufacturer in California. "Right now the steel industry is having a huge impact on our bottom line," says the purchasing manager for an Ohio car parts manufacturer, and purchasers cannot escape steel's short supply.
Other materials also are tight
Nonferrous metals are growing as tight in supply as steel. Survey respondents complain of short supply in nickel, zirconium, zinc, titanium, and especially aluminum and copper. Copper sheet and strip averages one-third longer leadtime now (6.3 weeks) than in June 2003, and aluminum sheet and strip now averages almost 60% longer (5.1 weeks) than last June. "Prices for steel, aluminum, and copper are up 35 to 60% of what we were paying last year," says the senior vice president of a Maryland heat transfer products manufacturer.
Fabricated metals' short supply is equally problematic. The "economy is growing rapidly, but the metals market is hurting manufacturing," explains the procurement director for a Minnesota fluid handling equipment firm. A purchasing agent for a metals parts stamper in Wisconsin says, "Leadtimes have been extended to our customers due to difficulty obtaining metallic raw materials." That's why deliveries of fabricated metals (8.1 weeks) are now 2.2 weeks longer than the June 2003 average (5.9 weeks). "Overall conditions are good," says the purchasing manager for a North Carolina woodworking machinery firm, "but good conditions are being negatively impacted by metals."
Short supply in the metals market is even giving distributors negative feedback: "As an electrical distributor for the utility industry, we have been hit with price increases due to the metals market increases," says a utilities materials buyer from Mississippi. "The whole metals industry is in a state of flux," says the purchasing manager for a Minnesota screen systems manufacturer.
Wood products suffer from spotty supply tightness as well, now that de-mand is finally catching up with production. "Particleboard and fiberboard short supply limit our ability to respond to increased business," says the senior buyer for a New York furniture maker. Leadtimes for wood products, however, are a negligible 0.38 weeks longer now than in June 2003. Decent leadtimes are not improving scarcity: "Low-grade lumber is on allocation, and cheap pallet quality lumber is at a premium when you are allowed to purchase it," says the commodities manager for a California automation products firm.
A product marketing manager in New York explains that "some electronic components and printed circuit board material are short, and we are having to assist our providers of electronics manufacturing services in approving more second sources and/or assisting in locating goods through various producers or distributors. "Overall, however, June's average electronics leadtimes of 6.5 weeks is significantly lower (58%) than April's electronics leadtime average of 11.2 weeks.
Still, "electronic components have long leadtimes and no availability," complains the buyer for a Florida-based audio-speaker manufacturer. Frequently mentioned in June for tight supply are integrated circuits, liquid crystal display panels, connectors, surface mount capacitors, resistors and memory chips. According to a California-based purchasing agent, "the audio-visual connector industry in general" has all been in short supply."
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