News: equipment makers fight to hold the line on prices

Tag : Materials Handling Equipment

But manufacturers can't do it all on their own, he warns. "We arean industry that relies heavily on steel and battery costs, andthose costs have escalated quickly. So our second line of defensehas been to make tighter bonds with our vendors and search for newways to stem the rising costs, but this can only go so far."
Jungheinrich Lift Truck Corp. of Richmond, Va., has taken a similartack. It has worked out an arrangement with a battery manufacturerthat allows customers to purchase the battery and charger as partof a package at a lower overall price than they would pay if theypurchased those items separately.
At the same time, the company has been taking steps to boostefficiency. John Sneddon, president of Jungheinrich, reports thathis company recently invested more than $60 million in upgrades toits manufacturing plant in Hamburg, Germany. Part of a four-yearimprovement plan, the upgrades have enabled faster buildthroughput, less inventory holding, and a reduction in waste."Thiswas able to offset the higher cost of raw material to some extent,"Sneddon says.
But no matter how hard they work to avoid it, manufacturers mayhave no choice but to pass along some of the cost increases tocustomers. "Iron ore costs went up 65 percent in one year, and thecoal used in steel making has tripled," says David S. Olson,national sales manager for North East, Pa.-based Ridg-U-Rak. "[Theprice of] steel has nearly doubled in the last six months, andwe've had to pass that on to our customers."
Olson's company is using a surcharge system to recover its costs,and he says customers generally accept the additional expense."Someare reluctant, but most are pretty ... accepting," he says. "Likeit or not, it's reality today."
Things could be worse. As Olson and others point out, the weaknessin the automotive market has helped to mitigate the effects ofswiftly rising commodity costs and lessened the risk of shortages.
Still, the sharp rise in costs shows no sign of abating, andmanufacturers hope customers understand the difficult position theyare in. As Daifuku's Ray puts it, "The problem now is that thespeed at which costs are increasing and the sheer amount of theincrease is simply more than even the most agile and well-managedcompanies can absorb."