Question: What are fabricators experiencing regarding raw material availability/cost, supply chain interruptions or improvements, infrastructure project funding, industry demand, pandemic-related setbacks or improvements, or other unanticipated concerns?

Gore: 2020 was a challenging time for many of our customers. We are highly optimistic and seeing a solid rebound as we enter 2021. This rebound, while positive, has created challenges in sourcing of raw materials and outside services. In some cases, we have seen significant increased lead times and cost increases of 100 percent or more. We are fortunate to have strong supply chain relationships developed over our 30-year history. These relationships have ensured we can secure the material we need to support our customers.

While we saw some customers struggling in 2020 due to the pandemic, we have a diverse customer base.

Pitzo: We have not experienced issues with availability of supplies other than personal protective equipment at the beginning of the pandemic. Prices are increasing on most materials. We were able to stay open throughout the pandemic and kept almost everyone employed.

Lollio: We have experienced a ripple effect from some of our customers over the last 12 months, including downsized orders and pushback on purchase order shipment dates. Some of our material suppliers delayed their shipment dates by a week or two, nothing major, because of COVID-19 fallout.

Petty: Steel prices hit record lows and record highs months apart [December 2020 low $429/metric ton ($390/net ton), February 2021 $1,417/metric ton ($1,285/net ton), according to SteelBenchmarker]. Besides the pandemic, there was a presidential election, civil unrest, soaring material prices and a global recession. Somehow, 2020 gave us the best year we’ve ever had, with an ever growing list of clients and projects. 

We recently waited 10 days to receive a very common stock size for a structural application and paid double what we had paid for it the last time we had done the same job. This puts everything behind and always trickles down to the end user needing to pay more for the service/product. 

Gore: We believe the manufacturing sector in the U.S. is growing and will continue into the foreseeable future. There is evidence that the pandemic has shown many manufacturers the risks of a global supply chain that does not include resources within our borders. We believe there will be a strong move toward onshoring as a strategic approach to mitigate risk in the future.

Pitzo: We did experience a slowdown in business in 2020 but are very optimistic about 2021. We get a sense from our customers that there is pent-up demand and inventories are low. We feel that if and when taxes are increased on businesses, orders will slow down. The tax reform in recent years helped our customers be more competitive in the global markets that they compete in, and reversing those reforms will decrease U.S. competitiveness and therefore slow our orders down.

Lollio: Never be overconfident with the American manufacturing industry—or any industry for that matter—there will always be ebb and flow. That is the nature of the beast. I feel strongly even if you are consistently breaking quarterly profit margin records that your company should be focused on cutting-edge R&D, procuring more work, leaning out operations and, most importantly, having a happy team around you coming into work everyday who have the same vision as you to stay in the game. I am extremely optimistic the American manufacturing industry will rebound nicely this year with us getting over the COVID-19 hump.

Petty: I wouldn’t say I’m confident but my own anecdotal experience is that it is. We service a few manufacturers in the area, and they continue to do projects with us, seemingly with a long-term vision that these times will pass and they will be ready when it does.

Gore: We are starting to see increases across nearly all of the industry segments we support. Perhaps the most robust demand is in the warehousing and logistics segment to support the retail shift to e-commerce. Analysts are forecasting continued growth in this space, even post-pandemic, as consumer behaviors have shifted.

Pitzo: We are not surprised that orders have picked up this year. We are working towards offering more services to our current customer base, including more inventory and order management as well as engineering and assembly services.

Lollio: We are picking up all the way around the last several weeks heading into a strong second quarter. I was a bit surprised last year in the midst of COVID-19 fallout that we didn’t experience a major drop off with our aerospace customers directly affected by the airline industry [downswing]. Sales did decline some, but nothing major like some of our fellow companies that had to suspend operations or, sadly, closed their doors.

Petty: Within 48 hours of the presidential change of power, we received notice that three different federal jobs we had quoted, one as far back as a year and a half, had been approved. One was scheduled for many months from now. They notified us that the money was there for it. These were surprise jobs for us that I thought had already passed us by. Construction and home building seem to plow forward despite the pandemic and soaring material prices. I’m confident the speed of that will have to be adjusted eventually by the market. Locally, we are in a big bubble when it comes to real estate.

Gore: We have been surprised by the increased lead times and cost for some of the core materials our customers need. We source and manage inventory for many of our clients, so we have had to leverage our long-standing supply chain relationships to stay ahead of the curve and support our customers. We find that some of the new client opportunities we are quoting have not recognized shortages and cost increases in the supply chain. So far, this has not impacted our ability to support new customers. Still, we are realistic and recognize that bringing on new accounts could become a challenge in the future without some timeline and cost considerations.

Pitzo: We have been able to continue to get the supplies we need. We have always valued paying our suppliers within their terms to be a good customer to them. That value of treating our suppliers well pays off especially when supplies tighten up.

Lollio: We have ramped up our marketing and sales, especially over the internet to procure more work, and it has worked to some success.

Gore: Our outlook is very positive, but we are definitely witnessing a tightening of the supply chain. We have extensive planning and forecasting discussions with our customers to ensure we can support their business peaks and valleys. These planning practices are a key to our survival and success.

Pitzo: We are hiring in anticipation of increased demand. We have pumped up our training programs to increase the skills that are lacking in the available talent pools. Skilled welders and machinists are scarce, and we have to train our team members ourselves.

Stout: We have seen huge benefits in leveraging our ERP scheduling and planning systems. We have added IT talent to increase our programming and coding capacity to maximize what has become a competitive advantage. Being able to look at and analyze our data in new ways has been surprisingly beneficial to our customers to minimize inventory, maximize run quantities and decrease lead times. Giving customers the data that shows what they order, when they order and how often they order has been mutually beneficial. Anything that helps make our customers’ buying experience seamless is our focus.

Lollio: We do have more backorder jobs that were postponed, and materials already paid for from last year. Over the next six months, I plan to hire more production help based on my company’s production forecast and will implement more cross-training and continued education where needed.

Petty: I’m hiring another full-time employee and building another service truck in the next three to five months. Our demand keeps soaring past our ability to meet it without overworking, so it looks as though we will keep growing. Adding CNC capacities and heavier equipment has added a lot of efficiency to our small operation.

Gore: It is hard to tell what effect the new government-backed initiatives are having on our business so far. We obviously welcome initiatives that support American manufacturing and workers. Many of the private sector customers we support are looking to capitalize on these opportunities, which will undoubtedly impact our business over the next few years. We are not fabricating some of the materials associated with infrastructure investments. We follow analysts reporting on metals markets, manufacturing sectors and key economic indicators.

Pitzo: The PPP loans helped our business get through the shock of the pandemic and decrease in orders. We have never had help from the government in the past but those loans, that will hopefully be forgiven, were a huge reason we were able to keep everyone employed. We now plan to invest heavily in new equipment.

Lollio: Yes, local/state and federal government mandates are very important, and we monitor them daily. A change in mandates and laws can be critical for any size company.

Petty: East Tennessee has a lot of federal investment. In the last year, the amount has grown. I anticipate this will continue and am quoting more and more government work, some directly and some as a subcontractor.