Continued from Part One – the continuation of a Q&A with Rob Olney of ETM Manufacturing.
How would you rank the biggest roadblock to achieving the profit margins you want to be seeing?
For us, labor is the biggest part, then materials, then, for our customers, logistics costs. Labor’s going to be what it’s going to be — a plan is in place for us and people are executing on it. Same with raw materials; companies did what they could do to move to lowest cost material to be least impacted. I don’t feel that, aside from retailers, OEMs have looked at their supply chain and the logistics costs associated with it closely enough. When companies feel the squeeze, they can’t easily touch labor or health care costs, but they can say, “Holy smokes, have you seen our freight bills?” The next level is asking critically, how do we look at our supply chain? ETM is certainly looking for our customers to open facilities closer to final point of distribution.
How do you approach total landed cost planning, if at all?
There are some really good estimators out there, and we try to take total cost planning directly to our customers and walk through it with them: “OK, what are your material, packaging, logistics costs?” From there, we find a whole different way of innovating to reduce the non-value add part of the product.
I read your blog post from back in February titled “Inflation Is Coming; What’s Your Plan?” Does ETM have strategies in place to mitigate commodity price risk (or any other risks for that matter)?
It’s an old-fashioned one, but when we find that we have an opportunity to bid on projects or participate in a business that uses extrusions, some smaller mills are interested in talking with us directly. I was surprised with how low the minimums were. All our sheet stock goes through our distributors. But with extruder profiles, there’s an opportunity to cut out the middleman and be more competitive for our customers.