FROM THE FIELD
August 2004
The New Maze in Equipment Purchasing -- Part I

Spec’ing and purchasing, especially where engineered goods are involved, have always been something of a maze. On bad days, they could be a maze laid over a minefield. Ooooh. Boom.

Be that as it may, get ready for some extra zigs and zags coming soon. Several forces, from outside foodservice and from within, will likely add steps to your procedures—if you want to reduce unneeded costs.

From outside foodservice, the first big deal, in some ways the tip of the iceberg, has already had plenty of industry headlines. Stainless prices have sky-rocketed. Some types typically used in our business, with base prices and surcharges both figured in, have seen prices rise as much as 40% since the beginning of the year. Scrap steel on many markets doubled over the past year.

Many of the causes are short-term, or at least not necessarily permanent. NAFEM in Print’s Summer 2004 edition cites a bunch of them. U.S. supplier consolidations and closings hit just as U.S. demand began its current rise. Prices of the nickel and chromium used in stainless have jumped on the world market, too, further aggravating sensitive conditions.

Globalization is sucking up all kinds of materials, not just stainless.

But other pieces of the puzzle are more serious in the long run. Globalization is sucking up all kinds of manufacturing and construction materials, not just stainless. China by itself is enough to seriously swing market supplies. When a population more than twice the size of the U.S. and European Union populations combined suddenly comes online, almost all at once, lots of stuff gets used up. And lots of ships get diverted there to deliver.

Much of the U.S. construction industry currently has its tool belt in a bind. My longtime friend Debra Lee, publisher of Builder Digest of California, confirms that cement shortages have spread across much of America now, partly because of industry complications and tariffs on Mexican cement, but also partly because of new demand in China. In Florida, strictly speaking, the problem isn’t a shortage of cement, it’s a shortage of transport ships to deliver it. Meanwhile, in Arizona cement is hard to find at any price. Lee also confirms her construction industry sources are concerned about shortages and high prices in rebar, structural beams, girders, sprinkler pipes, even studs.

In the long haul, supply and demand will likely even out—that’s what economies do when they’re working. But in the meantime—and that could be a long time as a building boom spreads across developing areas—your construction costs are going up, your equipment costs are going up, and you don’t have time for everything to work itself out.

Now might be the time to start looking at materials you would not otherwise think about. Do you really need 304 stainless? Do you really need a polished finish? Less expensive type 430, for example, can be substituted for many, many uses—even including some food-contact applications. Check with NSF, of course, on all particulars. But you’ll likely find that you have more options than you realized. You can save money without giving up performance.

So much for global materials issues. Next month: A look at the industry internals that will add zigs and zags of their own.

Brian Ward
Chief Editor