Staying Afloat
If you’re anxiously waiting for any sign of economic recovery, chances are you’ve heard the news. The Federal government said the Gross Domestic Product (GDP) grew 2.8 percent for the third quarter. That means the painful four-quarter-long chain of decline has officially ended.
It is good news, but don’t break out the champagne and celebrate just yet. There is a mixed message in the steel market. Most service centers continue to de-stock to get the inventory cost in line with mill costs. U.S. mill capacity increased to a reported 62%, which is higher than a few months ago. Imports are up 28% in October. The MSCI reports that steel shipments are up for the fifth month nationwide. Are manufactures re-stocking or is there real demand? The residential construction market is near the bottom. The commercial and industrial construction has not yet hit bottom. Mixed signals. Real demand for steel remains low and there are no positive indications out there that it will pick up anytime soon.
Most consumers are not buying until they really need something – and that goes for our customers as well. We spent last winter getting lean and mean. We spent last spring getting smart and mean. Now, we have to focus on staying lean, being efficient, and reversing the “mean”.
What does all of this mean for the steel industry?
Because the recovery will be slow, managers will need to get creative when it comes to keeping their businesses afloat.
Consider these options if you haven’t already:
- Marketing
At Westfield Steel, we have continued our marketing efforts despite the poor economic climate. Why? Because just as it is important to spend money on advertising when the economy is good, it is equally important to spend when the economy is down. You are making an investment to reach the next customer.
- Carrying Outside Sales Reps
Many companies have cut of their outside sales team, dropping one employee after the other to shed the cost. Sometimes hard decisions are necessary, but carrying your sales reps is a good way to invest in the future of your company. Whatever may be happening with the economy, the sales reps are still heading out into the harsh world, still meeting with potential customers and still obtaining new names. Many of these customers are not buying today, but when they do, we will be ready.
- New ideas
This is where your creativity comes into play. What is the strength of your business? What extra services can you offer to generate additional revenue? At Westfield Steel, we created Westfield Steel Express, an authorized-for-hire common carrier that provides a lower cost alternative compared to traditional players in this market.
In addition to our own steel, we haul fabricated steel parts, lumber, equipment, building materials, steel coils, agriculture seeds, and salt. The main goal of Westfield Steel Express was to fix the inefficiency of Westfield’s trucks returning empty every day from deliveries throughout the region. Converting these empty miles into revenue-generating miles is the primary goal of Westfield Steel Express. The service fixed a problem and is generating revenue at the same time.
No business is recession proof. Every recession hits the steel industry – the key is to act fast and be proactive.
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The company blog, The Melting Point, will touch on various topics affecting the steel industry and those whose career is in steel. It is edited by Fritz Prine, CFO of Westfield Steel. Posts are written by Fritz Prine and others at Westfield Steel.
Headquartered in Westfield, Ind., Westfield Steel Inc. is a full-line steel service center committed to providing its customers with a competitive choice for all their steel needs. An independent, family-owned business, Westfield Steel was started in 1977 and has grown to accommodate its customers’ needs. For more information, visit www.westfieldsteel.com or call (800) 622-4984.
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