Page 40 - MetalForming November 2022

better availability.
While all metal formers face unique
challenges in managing fast-rising raw- material costs and gaining enough vis- ibility into future orders to plan pro- duction, those successfully doing so share a common strength: the decision to become transparent with customers on their costs and pricing. For example, a recent industry conference featured a panel of CFOs who advised manu- facturers in the audience to create and adopt indexes that explain price increases and require their vendors to do the same.
“The more transparency you have the easier the conversation becomes around pricing, because customers can wrap their head around the cost driv- ers,” said Jason Palmi, president and CEO of Ramcel Precision Stamping & Manufacturing, Northbrook, IL. At Ramcel, customers receive a break- down of final costs in every part of Ramcel’s pricing, including raw mate- rial conversion and any outside processes needed to fulfill each order.
“We're not in a position to take a bet on the movement of commodities and hope for the best,” Palmi explained. “We always have been very upfront, and we’ve taken a partnering approach with customers using a pass-through pricing model for years. That has helped us survive recent market crises and emerge stronger.”
Central to the success of Ramcel’s pass-through pricing model is the man- ufacturer’s focus on understanding what is going on downstream by having real-time visibility and control over its supply chains. This provides Ramcel with the real-time cost data needed to make the best trade-offs for customers and help them accomplish their goals.
Lessons Learned
Uncertainty over the future of raw- material and supply pricing contributes to the highest levels of risk that metal formers and fabricators have seen in decades, making accurate real-time cost, production and pricing data
Metal formers are doubling down on training and certification to ensure that engineers and production-team members can gain greater visibility and control over costs and quality.
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essential for managing operations. Dis- cussions with executives at Ramcel and other manufacturers point to five key strategies for managing pricing.
1. Use inventory management to automatically update customer pricing based on the current cost of raw mate- rials. For example, automating inven- tory management has helped one metal former significantly reduce the amount of staff time required to update highly individualized customer pricing, allowing the company to pivot rapidly and maintain margins. An integrated manufacturing reporting system that can refactor inventory valuations in real time based on pricing adjustments also is needed.
2. Capitalize on the insights and knowledge about inventory and pro- duction capacity to upsell customers. Metal formers long have used price breaks to motivate customers to place larger orders. Today, manufacturers can use insights and production capac- ity to offset higher material costs and increase their plant utilization by offer- ing customers specific volume dis- counts.
3. Identify cost variances and scrap faster with real-time data. Metal for- mers can use real-time production and process monitoring to look beyond the cost of raw materials and gain insights
into actual production costs. This in turn enables engineers to course-cor- rect pricing and manage product expenses over the lifecycle of each part in production.
4. Keep truth-testing supplier fore- casts and use the data to define con- tingency plans. Having manufacturing execution (MES) and enterprise resource planning (ERP) systems on the same database makes it possible to identify how the accuracy of supplier forecasts will impact production plan- ning and schedules. Metal formers advise that it doesn’t take dozens of metrics to get this right. What’s needed is enough data to accurately create what-if scenarios that take full advan- tage of the high-demand, low-supply conditions facing many manufacturers.
5. Integrate quoting and comput- er-aided design (CAD) in the same workflow. By starting with CAD draw- ings and detailed data of the parts cus- tomers need to produce, metal formers can streamline quoting and improve pricing accuracy. The ability to lock in orders sooner also can help alleviate the impact of fluctuating material pric- ing. Additionally, manufacturers can add more value by providing the expected delivery date of the order based on production scheduling avail- ability. MF