Anxiety rises over expected shortages of skilled labor
By Staff -- Purchasing, 4/23/1998 2:00:00 AM
With business generally booming and prices reasonably under control, buyers are becoming more watchful of availability issues.
For the most part, they tell our grass roots reporters that availability is not so much an immediate problem as a potential one. In fact, spot shortages and stretched leadtimes are practically non-existent in to-day's marketplace.
So why are so many purchasing executives concerned about availability? Labor shortages in many parts of the country are beginning to bite into the types of processing jobs that are handled by suppliers or jobbed out to third parties. Availability of qualified or qualifiable workers is drying up at a quick rate. Among areas where a lack of skilled labor is causing the most concern: circuit-board stuffing, order fulfillment, heat treating, mechanical component assembly, machining, and plating.
Here's a more detailed rundown of buying conditions reported recently by Purchasing's grass roots field editors around the country:
* Prices. Talk of coming price increases appears to be on the rise. Buyers in many parts of the country report an increase in price-hike warnings from major suppliers in such key product areas as paper, steel, aluminum, lumber, and chemical products. But buyers show only modest concern about most of these price warnings--especially those pertaining to paper and aluminum. Meanwhile, many buying executives appear to be well protected by long-term contracts with key suppliers. What is more, they say their discretion over inventory policy gives them plenty of room to maneuver.
* Inventories. Many purchasing executives say inventory data are deceiving. By historical standards, inventories are low. But, in many cases, the averages disguise the fact that a lot of selective inventory building has been done in recent years to stave off anticipated price hikes. Net result is that price hikes are frequently delayed or scaled back as buyers dip into inventories at the first indication of a price increase.
* Leadtimes. Buyers can pretty much get whatever they want, whenever they want it. Leadtimes on specialty metal products seem to be the exception. Some scattered leadtime stretchouts are reported, mostly on both Coasts and in the Great Lakes region.
* Delivery. Most of the problems that resulted from the Union Pacific merger are history. Buyers of bulk commodities, however, worry about labor disruptions on the Mississippi this summer. Another class of delivery problems is attributed to shortages of trainable workers (see above). Picking, packing, and addressing problems appear to be on the upswing.
* Quality. Spot quality problems are on the rise (in many cases they're caused by undertrained workers). Rise in use of imports is also being blamed for the slight rise in quality problems.
* Imports. Offshore buys seem to be on the rise. The reason is clear. The strong U.S. dollar is making imports especially attractive from a price standpoint. (Steel imports from Asia and Europe are increasing.) Most purchasing professionals readily admit they're attracted by low prices and acknowledge the need for greater vigilance over incoming inspections.
Here are the details by region:
East Coast
Slight increase in delivery problems and a scattering of quality problems. Upward price movement reported on corrugated boxes (2%-5%), composite materials (3%), dry cleaning solvents (3%-6%), lithographic supplies (3%-5%), lumber (4%-10%), glass (3%-8%), rubber sheeting, hose fittings.
Mid-Atlantic
Much talk about late-spring steel product increases--mostly sheet items. Most buyers in the area don't buy the scenario. Other price increases reported on computer papers (2%-3%), pumps and compressors (2%-3%). Reduced prices on janitorial prices (5%-7%) and on a range of PC products. Leadtimes on computer printers stretching to 4 weeks (from 3 weeks).
Midwest
Slight slowing of business tempo reported by a few purchasers, but most say business is operating at a high level. Imports are rising--especially metal products. Delivery problems on imported goods are on the rise. Leadtimes are stretching on a number of tubular metal prod-ucts. Leadtimes on some specialty steel tube products are out to 6 months (from 6-8 weeks last year). Lift-truck leadtimes also are starting to lengthen. Lower leadtimes reported on flexible packaging (down to 4-5 weeks from 8 weeks), copper sheet and strip (3-5 weeks from 5-6 weeks), copper tubing products (down to 3-4 weeks from 5-6 weeks). Higher prices reported on ferrous scrap (1%), copper, and linerboard (up $50/ton).
South
Leadtimes on pine oil continue to stretch while those on isopropyl alcohol are improving. Tight-supply problems that had plagued sodium zylene sulfonate are easing. Ditto for alpha olefin sulfonate. Pine oil prices continue to escalate as do prices on most ferrites used in high-frequency transformers and inductors. Coconut oil prices are up 15% over late-1997. Caustic soda prices were recently pushed up by $35/ton.
Southwest
A mixed pricing scene in the lumber market. Some buyers are reporting price cuts of 2%-3% while others cite increases of up to 7%. Steel prices also are moving--mostly down for the moment. A number of sheet and strip prices have fallen 2%-3% in the past two months. Most buyers are running with inventory levels on the high side. Increase in quality problems involving cast metals parts and tires. Higher prices reported on some electromechanical devices (1.5%) and corrugated (as much as 12% on some products).
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