Getting Better Prices On Materials

For fabricators a simple and direct path to boosting profitability is to stop overpaying for material.  But how do you know with certainty if the price you are paying is fair? Today, thanks to the Internet and, surprisingly enough, your competitors, the answer is just a click away.

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When we buy a car, most of us go online to check the Kelly Blue Book or Auto Trader to find out what other people in our region are paying, up-to-the-minute, for the make and model we want. Now we can do the same when buying material for fabricating. With price variability, if not volatility, in metals markets, fast-shifting supply/demand forces can result in paying more than you should for sheet, plate, and other materials. In fact, it’s more likely than not that you are.

No one has to tell you that those stacks of sheet, plate, and other shapes of metal in your shop represent a lot of dollars in inventory. Studies continue to show that material costs can account for up to 60% of total product costs, and, if you’re overpaying by even a small percentage, that can knock a painful slice off of your profit margins. Facing this fact, fabricators of all types and sizes are looking for tools to help them get raw material costs under control.

The dilemma

Historically, raw material purchasers often act as if they were shopping for a television or laptop.Scan the Internet, make a couple of quick calls, conclude that it’s more trouble than its worth, ask the supplier to knock a few bucks off the price, and then move on to other things. After all, what’s the value of the time it takes to make the sharpest possible purchase?

So, maybe you are paying a little more than you should be.Or maybe you’re paying a lot more than you should be.How do you know for sure and, most important, what can you do about it?Knowing the actual, best price of raw material can be a real challenge. Most buyers understand that “catalog pricing” is merely the starting point for negotiations. You would have more leverage as a purchaser if you knew what others are actually paying for that same material.Fortunately, that information is now just a few clicks of the keyboard away.Even better, it’s available at no cost.

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Price Dynamics users know immediately if they have been quoted a fair market, above market, or below market price for a raw materials order. Likewise, the site also provides users with the option to access a list of alternate materials providers.”

Getting leverage

The key lies in leveraging the buying information of your peers. On your own you can’t be certain that you are paying a fair market price for raw materials; but as a “community,” fabricators can now leverage market price insights to secure optimum pricing, make better sourcing decisions, and identify alternative sources of supply.Supply Dynamics (Loveland, OH) has launched a better way to accurately benchmark the prices you pay or have been quoted for many common ferrous and nonferrous metals.The idea is to leverage a vast community of metals buyers and their pricing history to bring price transparency to the marketplace. 

Their service is called Price Dynamics. It’s an anonymous gathering place where hundreds of metals buyers from dozens of industries can privately and securely compare metals prices and evaluate all known sources of supply.“Think about this in terms of how most people buy a car,” explains Supply Dynamics Founder & President, Trevor Stansbury.“Everyone knows that the Manufacturers Suggested Retail Price is just that – a suggestion.Similarly, catalog prices for metals are not necessarily a good measure of fair market price which, as we all know, is a moving target subject to lots of variables.”

Like those online car-price sources, Price Dynamics provides reliable statistics about what others are paying for the raw material you are buying – taking into account things like form, grade, specification, transaction size or quantity.Stansbury adds, “A community of actual buyers, and not the sellers, are probably a better judge of what a fair market price is.” 

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The service provides users with a history of their benchmarks (black dots) in terms of date and price. The size of the dot represents how many benchmarks a user had at that time. Information is also displayed in relationship to benchmarks of other users (top gold line).

How it Works

Buyers get free access to basic benchmarking functionality.After registering, they are prompted to submit information about what they are buying, and more importantly, what they are paying or have been quoted for materials.In “crowd sourcing” applications such as this one, content is generated by soliciting contributions from a large group of buyers just like you. Prices are combined to identify useful insights that are then made available to the community.

Once your information is submitted, an animated dial appears that clearly displays how your pricing measures up to similar purchases by others. Various stats reveal things like high, low, mean and average transaction price.Accessible through desktop, laptop, and soon for tablet, or mobile device, the service can benchmark against a wide range of material forms, alloys and grades, including alloy and tool steels, carbon steel, aluminum, brass, bronze, cobalt, nickel, stainless, and titanium.

“There is no charge for basic membership,” says Bruce Washington, a senior metals price analyst with Supply Dynamics.“Our goal is to simply provide the most complete and accurate resource for the metals purchasing community.”One thing he is eager to point out is that PDX also displays alternative sources of supply, if a user discovers their metals prices don’t quite measure up.

In addition to the Basic (free) subscription, Premium and Enterprise level memberships are also available for a nominal fee. A Premium level subscription provides advanced reports and filters with which to parse results, save purchasing histories.An Enterprise level subscription allows large OEMs to integrate PDX with their own ERP systems and, in some cases, to connect other players in their extended supply chains. 

Robert Farrell is a freelance fabrication industry reporter and owner of Farrell MarCom Services, LLC (www.farrellmarcom.com) 513-284-2618.

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