How to Hedge Against Rising Prices & Extended Lead Times
For several months now, the steel market has experienced unprecedented volatility. Prices have tripled, demand is sky-high, supply is relatively low, and the result is striking the warehousing industry by causing delays and sticker shock on new warehouse equipment and construction projects.
As a real-world example, companies placing new steel orders could traditionally expect prices around $35 per hundred pounds of steel, with a lead time around six to eight weeks. That same steel order may now cost over $80 per hundred pounds of steel with a 24-week lead time in today’s environment. Part of the lead time delays are caused by the economy booming, and most facilities are busy, but the steel market has limited capacity to supply additional material to be available. On some of the larger projects underway, the prices have jumped by the millions of dollars, putting decision-makers in an untenable situation.
In some respects, this condition can be easily understood in an “Economics 101” sense: Supply is low, demand is high, so prices rise. We have seen that all before as part of a normal business cycle. However, the unique element in today’s economic situation is how long the prices have been high and how high they have reached.
Hindsight is always 20/20 and, while this level of volatility could not entirely be anticipated, it does beg the question: what are you doing to protect yourself from being at the mercy of a volatile market? How can you protect your operations from having to react to rising prices and extended lead times?
What Can Be Done to Hedge Against Rising Prices and Extended Lead Times?
Find a Partner with the Right Partners. When sourcing new warehouse equipment, we strategically partner with multiple different pallet rack and shelving manufacturers and conduct a sizeable business with each. Because we are among the largest purchasers of new warehouse equipment in the United States, we have developed several relationships, sources, and options to leverage our ability to help customers find the best fit for their needs. This approach can help skirt those lead times, issues with higher prices, and – in some cases – both.
Find a Partner Who Can Leverage Unmatched Manufacturer Partnerships. Because we have built long-term, mutually beneficial relationships with some of the largest pallet rack, shelving & mezzanine manufacturers in the USA, we have established foundational relationships that give us a dedicated production capacity to help fill the volume of orders we place each month.
In the current environment, almost every rack supplier is looking at 12-to-14 weeks or longer on any new equipment order (when, in regular times, typical wait times are around 6-to-8 weeks). In the right situation, we can leverage our orders to fit as quickly as a 5-to-6-week lead time, expediting that timeline by nearly half.
Find a Partner That Stores New Warehouse Equipment On-Hand. Besides sourcing new material for our customers, we have a 330,000 square foot warehouse based out of central Indiana that houses a good amount of new warehouse equipment. We typically stock uprights, beams, wire decking, and plenty of other options that work great for our partners when lead times don’t match our customers’ project timelines.
Find a Partner That Sources Used Material as Well. Not only do we store new warehouse equipment at our facility, but we also store and actively source quality preowned warehouse equipment as well. We have a Used Package portion of our website dedicated to larger orders of compatible equipment that showcases a good array of the products we source and store, which typically includes many popular manufacturer styles. If you are looking to sell your used equipment, you should know that we’re always looking to buy! (link to Buy Back form).
Find a Partner That Can Develop Creative Warehouse Solutions. Because of the current state of the steel market, the Storage Solutions team has been especially creative in terms of solving our clients’ challenges. Customers are more interested in holding onto their current material and re-using what they already have, so we are routinely developing project plans to keep them operational while re-applying as much material as possible. Even with companies conducting multiple facility moves, we can figure out a program from a logistics or planning perspective.
What is the Next Step?
If you are experiencing a situation where your project is beset by overwhelmingly high prices or equally challenging lead times, give us a call. We can learn about the challenges that face your business and develop solutions that support your short-term needs during times like this.
If you deal with extended lead times and do not have the luxury to push out the completion date or make massive budget adjustments, we can step in as a potential project partner. We have experts on our staff that can provide more material sourcing options and create a more dynamic project plan or design project initiatives to keep your operations running while the installation occurs.