With a “keep the bins full” mentality, producers aim to position themselves to never run out of materials their customers need. Unfortunately, this isn’t as simple as it sounds.
In the US, a finite supply of concrete sits on one end of a seesaw while demand has bounced upward. But unlike a seesaw, an emerging cement scarcity continues to lift demand — with price tags closely following.
To prevent their pockets from bleeding dry, producers must be extra cautious in how they spend their valuable time. When it comes to managing inventory, we can start by eliminating mundane tasks like manually entering spreadsheet data, tracking down paper tickets, and answering endless phone calls.
Hand-me-down costs?
Cement itself may come at an inelastic price, as there are few substitutions that bind materials together. However, inflated fuel and importing costs have remained high in recent months. If materials companies are to keep pace, they may be raising prices, forcing construction groups to write bigger checks.
We recently sat with Ken Cook, VP of Finance – Ready Mix at Ozinga and Chairman of the NRMCA’s Financial Performance Improvement Group, to discuss the state of the industry and take aim at the next three-to-five years.
“You have to lean on paying attention to what your costs are and making sure you’re aware of them, and that, as a business owner, you are passing those costs along too,” said Cook. “Inflation is here for the foreseeable future; with margins tightening and everything becoming more expensive, I predict we could see some M&A activity for the businesses that are not as prepared as others.”
The demand for imported cement has risen largely due to the country’s stagnant number of new cement plants. Plant construction is expensive and permit requirements safeguard environmental initiatives. And of course, a cement plant isn’t exactly neighborhood friendly. Suppliers who are increasingly relying on partners overseas will have to open their wallets a bit wider.
Your supply chain has entered the chat
According to the Washington Post, imported cement covers about a fifth of American consumption — up from 7% just a decade ago. Turkey stands as the largest overseas contributor. However, because of a monstrous earthquake earlier this year, the nation may have to prioritize rebuilding domestically.
At home, US producers continue to work around local supply disruptions. Cement and concrete are typically produced close to where they’d be used because of expensive transportation. Despite the close distance, a nation-wide truck driver shortage has made nearby delivery commitments difficult. As a result, it’s becoming more common to see sign-on bonuses reach up to $5,000.
In addition, plant maintenance shutdowns have slowed shipping down as well as flooding on the Mississippi River — a heavily-relied-on barge route. This has been another factor adding into cement companies dealing with allocation because of the cement shortage. Overbuying, because of that “keep the bins full” mentality, can lead to a “drain the pockets empty” situation. If the silo and pig are both full, the ready mix producer eat the cost of hauling and time spent to either wait until enough cement is out of the silo to blow off the truck, or to sell it to another supplier.
Taking control of what we can
Long hours, days even, of making sure nothing slips through the cracks keeps us away from larger supply issues. Tedious, manual work is the last thing producers should have to spend time on. How often do you hear conversations like this in your own production facility?
“Were any paper tickets lost today? Can you make out what this handwriting says? It’s not exactly calligraphy.”
“I haven’t heard how that one delivery is going — I better call and see where it’s at. Oh, hold on, the phone’s already ringing. It turned out to be a status of a separate order. There goes the phone again. Where was I?”
We don’t have to tell you time is valuable. Instead, we’re working to give you more of it with automation.
There’s a flood of automation options out there, and simply researching what works best can feel like you’re sinking. Sure, eliminating laborious data entries and unnecessary phone calls means more time left in our day. But what happens if you spend just as much time interpreting a dashboard as you would a spreadsheet? Let’s back it up and recap what we know:
- Dispatch, batching, silo management, and vehicle monitoring can all be digitized — drastically reducing room for error. On top of that though, connecting all those pieces would create a single source of truth. With Command Alkon’s Material Supply, there’s no bouncing from system to system.
- Real-time insights confirm whether there’s enough material to get through the day. Phew, no more guessing about a plant, specific material, or silo status. How are we looking for tomorrow though? Material Supply forecasts your supply levels to better understand when a plant truly needs a delivery versus when a plant wants to have one. This awareness is especially powerful in a time of inflated fuel and transportation costs.
- Keeping materials replenished is important, but every plant has a max capacity. By knowing exactly how much material a plant has, we can better plan trucks routes and save on fuel costs.
When we can focus on big picture issues, we can accomplish much more. See Command Alkon’s award-winning Material Supply in action here.
