Whether you’re an OEM or job shop, sheet metal pricing can be a challenging market to predict – especially following the unprecedented circumstances of the past two years. Many often turn to buying in bulk as a strategy, while others prefer just-in-time (JIT) purchases. But which is better? And more specifically, which is best for you?
Here is a closer look at the current trends driving sheet metal price volatility and the pros and cons of a bulk-buying strategy.
Current Trends: Pricing Rollercoaster – Hold Onto Your Budgets
According to Business Wire, the global sheet metal market is expected to attract more than $61 billion in spending by 2024, registering a CAGR of 3.76%. While this might seem to suggest the prices are due to remain high and that you should start buying sheet metal in bulk now, we must first consider the broader context that includes past predictions and how they panned out.
Analyzing Past Predictions
In 2018, World Steel Association (WSA) had estimated that the demand for steel would increase by 1.4% globally. The demand did jump, but much higher – by as much as 3.9%.
The Production-Demand Gap
With COVID-19 hitting the industry in 2020, global metal production dropped. This has contributed to a noticeable gap between the production capacity and the demand for metal sheets, which in turn led to an overall increase in prices.
Pros and Cons of Buying in Bulk
Bulk-buying sheet metal comes with its own advantages and disadvantages, all of which are unique to your operation and will also vary depending on the specifics of your industry, product mix, and process.
Pros
Guaranteed Inventory & Short Lead Times
Bulk sheet metal buys ensure you never run out of inventory, keep a steady flow in your process, and avoid long lead times. If your demand is outpacing your capacity, you simply do not have the luxury of waiting on material to arrive from vendors.
Single Source & Low Cost Per Sheet
Buying sheet metal in bulk also allows you to reduce the number of vendors you purchase from, improving your buying power with a single vendor. Typically, bulk buys come with a discounted price, allowing your margins to increase and creating more profit for your bottom line.
Decreased Freight Cost
Buying sheet metal in truckloads also allows you to get more material on a single truck, often reducing the total freight cost for your sheet metal. This freight cost often goes unmanaged as a “cost of doing business” and is not included in most raw material pricing comparisons. Consolidating three trucks into one every month, quarter, or year saves a significant amount.
Cons
Possibility of Damage
Buying in bulk does increase the probability your sheet metal inventory will be damaged. Investing in the right sheet metal racks and material-handling equipment is a key first step in eliminating damage risks. Big Steel Rack sheet metal racks provide you with added protection by securing your sheet metal and preventing waste caused by damaged material.
Cost of Storage Space
Bulk-buying may offer a price advantage, but you should also take a look at the cost of sheet metal storage and material handling. If you do not have the space for a bulk buy of sheet metal, you have two options: Going vertical or just-in-time (JIT) buys. Going vertical with Big Steel Rack sheet metal racks allows you to consolidate your storage in a much smaller area, increasing your storage density. JIT allows you to manage inventory on hand.
Need for Organization
To eliminate wasted time spent searching your increased inventory, it’s crucial to invest in the right sheet metal rack storage solution. It may come with some additional upfront cost, but it will help you better organize your sheet metal inventory and save your team countless hours on what we like to call The Sheet Metal Search & Rescue.
Is Bulk-Buying Sheet Metal the Way to Go?
Buying raw sheet metal does require you to base your decisions on the current trends and predictions put out by globally reputed organizations. The industry is volatile in nature, which can make those informed choices a bit of a gamble – but that gamble can certainly pay off BIG if executed the right way. Monitoring the volatility of sheet metal prices can create opportunities to take advantage of periodic lows to help counter unforeseen price spikes.
On the other hand, just-in-time purchases can reduce the need for large sheet metal material investment and the risk of demand changes and waste from damages. But the purchase costs are also significantly higher and are subject to the volatility of sheet metal prices, causing a pricing headache every time material prices surge.
Every business and its needs are different. Bulk-buying at the right time and with the right strategy in place to store and organize your sheet metal can pay serious dividends in the future.
Eliminate the Cons of Bulk-Buying With Big Steel Rack
We know because we’ve been there. We have spent years optimizing our buying strategies to best suit our business needs. Big Steel Rack is here to help your team eliminate potential roadblocks to increasing sheet metal inventory help your team continue to be successful.
Big Steel Rack is the most innovative high-density storage solution for organizing and storing your sheet metal safely and efficiently. Our sheet metal storage racks and metal tubing and bar stock racks are made in the U.S. to help OEMs, job shops, sheet metal fabricators, and manufacturing companies in general increase floor space, streamline organization, and improve safety, so you can spend more time focusing on production and less time searching for the product you need.
We offer high-quality, expertly manufactured, and fully customized sheet metal racks and tube and steel storage systems. Contact us today to get started building the perfect storage solution for your business.
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