Currie & Warner are a high volume brass turned part supplier who produce precision components to specific drawing tolerances. Due to sound engineering and innovative flair, we can solve manufacturing requirements of the most technically demanding parts.
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High commodity prices16.11.2010

For the past few weeks we have seen volatile movements in the material markets. While investors find alternative commodities to make money, it is to the detriment of the manufacturing industry. The brass basis recently hit an all time high at £5.81 / Kg mid November. The question is what impact are high material prices having on the sub-contract manufacturing industry?

Delays in placing new orders

Currie & Warner have observed customers holding off as long as possible before ordering new product. The intention is to avoid the inflated material basis. However a decline in material price has not yet materialized; in fact prices have stayed high or even gone upwards. After a period of time buyers are forced to place new manufacturing orders to replenish stocks, but at a higher cost.

A knock on effect is that customer stocks are depleted. Due to delays in placing new orders, ultimately this equates to longer lead times. Currie & Warner are now receiving urgent orders from numerous customers, but some customers will unfortunately be given very long lead times. To avoid line stoppages we are now seeing customer’s paying premiums to expedite goods or paying vastly increased prices to find alternative temporary solutions.

Peak demand on suppliers cascades down to raw material

Suppliers are now caught in the middle whereby customers are demanding product ASAP. Lead times are increasing for raw material, fuelling the cycle which keeps raw material prices high as demand is pushing supply.

Smaller ordering quantities

In an attempt to order parts at low prices, customers are only ordering 2 – 3 months stock in order to just get by, hoping to place much larger orders at a lower material price. If customers can get the timing right for the bulk order prices may be reduced but the interim order will be much higher. By ordering smaller production quantities all set up costs have to be amortized over a small production run, increasing the component price. Looking at the cost saving on bulk orders the interim higher orders have to be taken into account. Sometimes it pays dividends to take the hit on higher material prices because the overall cost is beneficial, it also guarantees product will be in stock as and when required.

Alternative materials

Assuming components can be manufactured from an alternative material, R&D departments are inevitably looking at reducing cost.  Although R&D itself is a costly exercise, it can save company’s thousands of pounds. This will become more prevalent if the raw material prices increase. The shortsightedness of traders dealing in brass (grossly inflating prices) means in the long run fewer items will be manufactured from these materials.

We advise customers to not get too caught up in trying to play the material market saving a small amount when they could run into much more cost when product can’t be delivered in time. 

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