Like a roller coaster with unexpected drops, curves and corkscrews, unpredictable circumstances can affect your supply chain. No matter how much manufacturing suppliers prepare in advance to secure raw material resources, there will be times when factors, such as the Section 232 and Russian sanctions, affect their supply that they cannot anticipate, nor control.
First, President Trump ordered a Section 232 investigation to evaluate if steel and aluminum imports threaten U.S. national security. After the Department of Commerce’s investigation and report on the findings, the President imposed tariffs on aluminum and steel imports beginning March 23, 2018.
Not long after, without notice, President Trump announced Russian sanctions to be applied to its largest aluminum producer, United Company Rusal PLC. Rusal is the world’s second largest producer of aluminum.
These two events quickly affected the price and supply of materials needed by many OEMS.
Sorting through these unavoidable industry issues is enough to throw any good OEM, and its manufacturing suppliers, off the track. This is why it is important to understand your supplier’s raw material sources, especially during highly volatile and politically charged times.
The tariffs and sanctions are reason enough for OEM consumers of manufactured components to be familiar with where their suppliers’ materials originate. These events also proved the need for suppliers to secure back-up plans if supply situations go south―or east, in this case.
Are you asking your suppliers where they get their materials, and if they have back-up plans, should their current suppliers be unable to meet their needs?
At Alexandria Industries, the steps we take to secure our material resources can mean the difference between keeping your manufacturing lines running – or not. For us, not having material is something we never want to experience.
Every year, our team works with our raw material suppliers to secure the amount of metal we anticipate needing to fulfill our customers’ manufacturing needs the following year. This is one reason why receiving accurate annual forecasts from our customers is so important.
Events that happen outside of your or your supplier’s control can affect your costs in unexpected areas. The tariffs on imported steel and aluminum will apply to more than just the components your supplier manufacturers for you. The tooling, fixtures and dies made from these raw materials may fall under the tariff umbrella as well. Understanding the full impact of what is happening and how things can increase or decrease the price of your products can be critical to your success.
If your supplier finds itself struggling to get raw material to make your components due to an unexpected (political) issue, it will need to seek alternative resources. It is highly likely your supplier will pay more for the raw material, and pass that cost on to you.
At Alexandria Industries, we have safeguards in place to protect you and our company against possible material shortages. We carefully negotiate supply, source, and price, for our raw material needed, to keep our customers’ costs as low as possible.
If tariffs were not enough to cause aluminum extruders and their customers worry, the Russia sanctions may make them panic.
The sanctions will cause material shortages for many extruders in the United States. If their suppliers’ purchased aluminum through Rusal, they will likely experience extended lead times to get aluminum. It could take months, or worse, if they are unable to get material at all.
Material shortages and fluctuating prices can cause even the most prepared supplier’s lead times to grow. Fear of these potential outcomes can trigger OEM purchasers and buyers to panic and order more product than they currently need. These actions (or reactions) cause a domino effect of longer lead times within the supply chain.
The combined one-two punch of recent political maneuvers―tariffs and Russian sanctions―is something that the aluminum industry has never experienced, and is evolving. What happens today, tomorrow or next week, may quickly change.
This is why supply, price and lead-time are three critical factors you need to understand about your suppliers’ suppliers. If your suppliers are not sharing their strategies to work around political and legal events and maneuverings, do not hesitate to ask them. Your company’s best interest could be at stake in today’s global supply chain market.
If you have questions about your raw material resources, feel free to contact your sales representative.