Supply chain checkup

According to a recent Precision Metalforming Association report, metal forming companies anticipate little change in business conditions in early 2022. A majority of the 105 companies from across Canada and the U.S. reported an increase in lead times, a reflection of the supply chain issues everyone has been faced with for some time.

Canadian businesses are doing what they can to adjust how they manage their supply chain in response to this. Canadian Fabricating & Welding spoke with a few to see how they have adapted to this new normal.

Focused Markets

Throughout the past year, business has been strong for Stoney Creek, Ont.-based Richmond Steel Canada Ltd., a steel distributor that specializes in 1018, 1045, and 4140 grades.

“According to one report I read, the top 50 service centres were down 21 per cent in their business this past year, which surprised me,” said Mike Book, president of Richmond Steel. “I think that has actually created opportunities for smaller players like us that are more flexible and able to manoeuvre. The supply chain crunch also forced people to look around for others to work with.”

Positive outcomes haven’t meant that Richmond could operate like it did a couple years ago, though.

“Like everyone else, we had to broaden our lead times,” Book said. “Normally we would work on a six- to eight-week lead time, but now it’s necessary to push that out closer to 10 to 14 weeks – sometimes longer, depending on the product. And inevitably there are going to be some holes in inventory. It has been a fine balance between having too little and too much inventory.”

Book noted that the longer lead times haven’t affected his choice of suppliers at all.

“We may give more business to suppliers that we didn’t use as much before, but it has been important to us to stick with the companies that have gotten us to where we are today,” he said.

Asked what has changed in Richmond Steel’s approach to business, Book suggested it has been refocused.

“We’ve probably put more emphasis on our core products than on the fringe products we were starting to move into,” he said. “We do that because that is what we’re known for, and we can keep costs for our customers competitive. With the fringe products, we are not ordering enough for it to make sense.”

Strong Relationships

In recent years Winnipeg-based metal service centre Brunswick Steel has worked at scaling down its inventory to help streamline its operations. In 2020 it had improved its product turnovers so that it was receiving deliveries more often, keeping inventory low, and maintaining a tighter supply chain.

Of course, the team has had to adapt yet again.

“We had our turns down to about two weeks, on average,” said Adam Plouffe, Brunswick’s general manager. “Now they have gone back up to a couple months, but that has given us a buffer in maintaining customer relationships and making sure we have stock.

“We’ve had to go to truckload quantities rather than trainloads as well,” he continued. “That has had an impact cost-wise.” Otherwise, Plouffe said he feels like they’ve weathered the challenges well.

“I’m not saying we haven’t been short in some areas, but our relationships with our suppliers have held us in good stead. What really helped us during this time were actually the steel tariffs with the U.S. a couple years ago. In reaction to that, we set up better alliances with Canadian mills, so a majority of our materials are coming from those mills, and our purchasing department has such a good relationship with them that we are being served better than you might expect, given our size.”

Brunswick was also lucky to be able to add to its fleet of trucks early enough in 2021 that it wasn’t affected by shortages in the automotive market.

“You have to be really nimble and plan for the future as best you can,” said Plouffe. “You can’t always make the right decision, but that’s the approach we took this past year.”

Managing Customer Expectations

As both a capital equipment and consumables supplier to the market, Lincoln Electric Canada, Toronto, saw market demand drop precipitously in the first month or two of the pandemic. But that drop didn’t last long.

“I was surprised at how quickly automotive demand rebounded in the last half of 2020, for instance,” said Dale Malcolm, vice-president, sales and marketing, Lincoln Electric Canada. “In 2021 we also saw improvement in the resource sector and agricultural business as well. There were certainly more positives than negatives in industry through 2021.”

Lincoln Electric actually anticipated the potential for supply chain problems early in the pandemic.

“Most companies have very rigorous working capital goals, meaning you’re efficiently managing raw materials and work-in-process so that you deploy capital in an effective, efficient way,” said Malcolm. “Early on in the pandemic, because we felt it was the responsible thing to do, we made the decision to carry much larger raw material inventories than anticipated, and we did it because there was already tightness developing in supply chains, and our fear was that if there was any sort of interruption beyond what we were observing, it may lead to a disruption in our ability to provide to our customer base.”

Beyond material availability, there has also been the issue of inflationary pressures, and like everyone else, Lincoln has been affected on both fronts.

“On the equipment side, we’ve seen a great degree of difficulty in maintaining a consistent supply of components and substantial inflation in terms of cost of those components, so we have focused on trying to qualify additional suppliers that meet our standards to allow us diversification of supply from our traditional suppliers.”

In some areas, the company was lucky to maintain steady supplies.

“We were fortunate that on the consumables side, with our MIG, submerged arc, and cored wires, our suppliers are primarily domestic, and those suppliers were able to continue to produce so we didn’t have to interrupt our supply to any of our customers. That was critical for our business.”

Another thing that didn’t stop at Lincoln Electric Canada over the past two years was R&D work.

“We consciously decided to limit the number of product launches in the past two years largely because of supply chain restraints,” said Malcolm. “It would clearly be difficult to release a new product at a time when you are trying to ensure adequate supply of existing product lines. As a result, we have accumulated a large number of product launches that we anticipate will go ahead in 2022, provided supply chain issues improve.”

Communication Key

The most important thing for any business navigating these supply chain challenges is managing expectations. Having good communication with both suppliers and customers has probably never been more important.

For instance, Jonathan Palumbo, manager at cutting and bending specialist Plimetal Inc., Montreal, checks with suppliers when he is ordering a certain number of sheets of a particular material to see how much more stock they have of that material.

“If for a specific order I need 10 sheets from a supplier and they have 12 or 14 on the floor, I’ll take that extra so that I’m ready with it,” he said. “You don’t want to carry too much stock, but at the same time, customers aren’t as concerned about price right now; they care more that you have what they need. Price isn’t an issue as it sometimes is.”

Building manufacturer CDN Buildings, Delhi, Ont., has struggled to get steel coil for its manufacturing processes, but a bigger issue is suppliers of finished peripheral products such as windows and garage doors. CDN keeps customers in the loop regarding these issues to ensure it is managing that process.

“Ninety-five per cent of customers completely understand the situation,” said Joel Dendekker, plant manager. “On some jobs we have built the structure and gone back to install windows when they arrive because we can’t wait on them. We order well ahead of time, but sometimes a 14-week lead time ends up being 24 weeks. And in terms of garage doors, the actual doors aren’t difficult to get, but it’s the springs that lift them that have been in short supply.

“Despite all this, we have plenty of work and definitely don’t see a lull in the workload. Like everyone, we are working through the challenges.”

Editor Robert Colman can be reached at rcolman@canadianfabweld.com.

Richmond Steel Canada, richmondsteelcanada.ca

Brunswick Steel, www.brunswicksteel.com

Lincoln Electric Canada, www.lincolnelectric.com

CDN Buildings, cdnbuildings.com

Plimetal Inc., www.plimetalinc.com