I think we’d all agree that 2020’s word of the year was “COVID-19.” And so far, 2021’s leading candidates are words like “shortage” and “supply chain.” While COVID’s grip on the world has shown glimpses of loosening, the settling dust has only revealed new dust.
The purpose of this post is to inform our customers and potential future customers of how we’re navigating the current supply chain turbidity and the steps we're taking to stay locked in on the things that really matter. We’ll discuss:
Manufacturers in 2021 are battling delivery hurdles, materials shortages and staffing problems to name a few. The economic volatility of the last few months has proven to be far-reaching and comprehensive, sparing few, if any, industries from its effects. Demand is outpacing supply, causing friction in such areas as:
And since several of these challenges are occurring at the producer level, virtually all buyers downstream have felt the pain too. It’s the classic ripple effect/snowball effect/etc.
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A number of commodities that are critical to manufacturing have become extremely difficult to consistently secure in 2021. This had led to increased lead time for a number of metals, a notable example of which is carbon steel tube – suppliers are regularly quoting us at lead times of 10-16 weeks and longer.
And the cost of materials that are available has been extremely volatile. Aluminum, for instance, was trading at around $1,500/metric ton in April, 2020. At the time of writing this, that number was $2,510. The chart below shows the price fluctuation of metals and metal products index, which averages the price of all metal commodities.
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Source: U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: Metals and Metal Products [WPU10], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WPU10, August 4, 2021.
The shortages we’ve just outlined have led many manufacturers to seek more and more materials from overseas producers, putting more strain on an already-reeling global supply network.
Crude oil, which was trading at around $40 per barrel at the end of 2020, is currently trading at around $75 at the time of writing this. Freight costs have also jumped nearly 17% during that time partially as a result.
There’s also a global shortage of shipping containers. Moving a container from Asia to the East Coast of the US would have typically cost between $1,000 and $2,000 in 2020. As of writing this, that number is closer to $20,000. This has led to situations where buyers have successfully secured materials, but have been forced to wait on container availability for the product to actually ship.
Challenges abound right now, so we thought we’d take this opportunity to update our customers on what we’re doing about it.
Super Radiator Coils exists to solve problems, and navigating the supply chain swamp we’re all currently swimming in is just that – a challenge in search of a solution. And we’re working to combat those headwinds in a few different ways.
We maintain a robust, diversified supplier network for times like these and we’ve leaned on just about all of them over the last 18+ months.
For example, we always maintain no fewer than two suppliers of key materials like raw finstock and copper tubing. That’s our corporate policy, and all three branches have full transparency into the inventory levels of each.
We’re not letting the current market impact the rigor of our qualifying process. And while we’re paying more for materials than in the past and lead times are longer than we’re used to, quality of materials is one area we won’t compromise on.
So, as we take on new vendors and diversify further to support our customers, we’re vetting suppliers with that in mind.
For instance, certain levels of malleability and elongation are critical criteria for us when evaluating raw materials. And we typically buy a certain type of raw stock both because it has those desirable mechanical characteristics and leads to less wear on our equipment. Close adherence to such processes is even more important given the current market, because the last thing we need is equipment failure or some other avoidable pitfall.
Our purchasing people are a major strength for us as a company and they’ve been fighting to get the materials we need to support our customers. Our relationships with our suppliers are being tested like never before, many of which date back 30, 40, even 50 years.
Ultimately, our obligation is to supply our customers with the equipment they need, and these days, doing so means communicating with our vendors literally every day. Good suppliers are imperative for any manufacturer and we place a premium value on ours. We’re still going to go to bat to try to get the best prices for our customers, but succeeding in the current market requires balancing urgency and compromise, and that’s what we’re doing.
We’re leaning on internal relationships, too. Our three plants are always communicating with each other, and even more so now that the importance of that back and forth is magnified. While we can’t control our suppliers’ capacity and lead times, we are doing everything in control to make sure we’re not adding to those issues.
That means transferring orders between our sister plants when it makes sense, and capitalizing on each plant’s redundant capabilities when possible. And discussions regarding capacity are more common than they’ve ever been here, happening weekly if not more.
We feel that communication can’t be effective without being honest and transparent. We’re not going to blow smoke and tell you we can do a 5-day super cycle on 40’ stainless steel coil, because we just can’t do it right now. But what we can do is quote the job to the best of our ability and give you context for lead time and pricing.
If either number won’t work for you, our engineers can work to come up with a solution that lines up better with your needs. It might mean considering different materials or a new design. Either way, we’re committed to remaining a reliable partner.
Only time will tell when things will get closer to something resembling normal. But we’ve made investments over the last 18+ months that are designed to help us get through the current climate and ensure that we emerge stronger on the other side.
We’re investing in staffing and equipment to increase manufacturing capacity. This will not only help us weather the present storm, but will also help us gear up for what we think will be an exciting future.
The lessons we’ve learned during the pandemic and beyond will continue to serve us in the future as we strive to be the best engineering and manufacturing partner we can be. Our commitment to that mission is stronger than ever, and we don’t plan on changing our answer to “can you help me with this?” anytime soon. We’ll be there.
Don’t get left out in the cold when it comes to heat transfer information. To stay up to date on a variety of topics on the subject, subscribe to The Super Blog, our technical blog, Doctor's Orders, and follow us on LinkedIn, Twitter, and YouTube.
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