While variables like rising metal prices are out of manufacturers’ control, taking charge of excess inventory solutions offers stability.
In an already volatile market, the cost of source metals is rising. A recent survey by IPC found that nine out of ten manufacturers are currently facing rising materials costs. And, with steep price hikes on raw materials, manufacturers are increasing electronic components prices worldwide.
Aluminum provides an excellent example. After a dip in November-December 2021, aluminum is back to all-time highs in the first quarter of 2022. In just the past two years, the cost of aluminum has gone from $1,000 per metric ton up to a high of $2,700 per metric ton.
Many of the factors behind aluminum’s rapid rise in price — soaring energy costs, growing demand, reduced inventories, geopolitical changes, and the impacts of COVID-19 — are also affecting overall supply and demand volatility. China, the world’s largest producer of aluminum at 57% of global supply, exports from 5 to 6 million tons a year. But in 2021, China capped its aluminum production to meet carbon neutrality goals. The significant reduction shortened supplies worldwide.
Aluminum’s price continues to rise and is projected to increase significantly, from 5-10% in this year alone. And aluminum is just one of the metal costs impact electronic component prices — copper and lithium prices have also shot up in the past 2 years.
Implications of rising metal prices for excess components
As recently as two years ago, the electronic components market was much more stable. With lower raw materials costs and less overall volatility, excess was overall less valuable. Now, with more expensive raw materials like aluminum and copper driving up the cost of electronic components, the value of excess components is on the rise.
When there is high demand and low availability, prices for excess components will respond accordingly. Seeking more value from your excess inventory is a logical response to this connection. With the right strategy, excess components can shift into the overall revenue stream, creating stability in an otherwise volatile time.
Interestingly, lean manufacturing practices are undergoing a reevaluation after the extreme supply chain challenges of the past few years. Safety stock is making a return for some manufacturers, while others are interested in creating a revenue stream via excess. The one constant we are seeing in today’s volatile market? All manufacturers are facing challenges, and all of their situations are unique.
Making a mutually beneficial match to find solutions
With high demand, transactions of excess materials are happening rapidly. Staying nimble and open to new ideas to meet your needs as they arise will allow you to expand into new markets. And now more than ever, global markets are key to reaching the most competitive pricing.
Determining the value of your excess and outsourcing the search for the right purchaser allows you to focus on sourcing and keeping your line up. On the other hand, if you are in the position of needing to build in a strategic buffer of safety stock, looking globally at sourcing options could offer a significant pricing advantage.
When you move your evaluation of excess beyond transactional into a solution-oriented experience, you are much more likely to address your company’s unique needs.
To summarize: While rising metal prices are out of manufacturers’ control, taking charge of excess inventory solutions offers stability.
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