4 strategies to help metals companies overcome volatility
Recession concerns and global turmoil are creating a perfect storm of challenges. Inflation and ongoing supply chain issues are leading to higher costs of raw materials in nearly every industry, and the metals industry is not immune. In Europe, energy costs have skyrocketed, contributing to steel manufacturers' decisions to shut down or heavily limit production.
Many metals companies are watching the market soften, and at the same time, they’re facing higher labor and transportation costs. In addition, a recent run of rate hikes is making it harder to borrow, and it appears to be slowing demand in many sectors.
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Metals leaders can maximize technology investments in times of uncertainty
Turbulent times leave many metals leaders nervous and wondering how they can sustain growth as they weather the storms of uncertainty. As a result, leaders are looking to technology and data to increase margins and help them make more confident decisions.
Four strategies can help metals businesses overcome volatility and embrace technology as a tool to help gain greater clarity and confidence.
1. Maximize margins by regularly revisiting pricing
While increasing prices across the board might seem like a good plan to cover inflation, it’s not necessarily the best step. Blanket price increases can disrupt the entire customer channel, and savvy customers often shop around to find more competitive pricing if they think an increase is unnecessary.
When various costs have increased, it’s essential to stay competitive by maximizing margins related to each product. In addition, it’s essential to know which products can sustain price increases and which cannot – knowing the difference between the two can result in a loyal or lost customer.
A metals-specific enterprise resource planning (ERP) technology can help leaders calculate the current cost structure and view inputs by energy, labor, transportation, and raw materials costs for each product. Moreover, the technology can facilitate situational planning and allow critical “what-if” analyses to help anticipate potential results.
2. Build trust by communicating with customers
Most customers are feeling the uncertainty and facing challenges similar to those faced by metals companies. Given this reality, an opportunity exists to show empathy and build trust by communicating proactively and avoiding surprise price increases.
Customer experience is key to choosing technologies, but it's not only about using technology to make it easier to place and track orders. It’s also about communicating with customers. The recent Crowe technology in metals survey shows that many metals companies are investing in customer relationship management systems to track customer interactions.
Companies should tell customers when supply chain issues are delaying orders and should give them an early warning when an increase in prices is anticipated. They should also consider going the extra mile with an in-person customer interaction to discuss how supply chain issues could potentially affect pricing over the next month, six months, or even a year.
3. Improve decisions with accurate forecasting
Trying to stay one step ahead of volatility can feel like an impossible task, especially when so many complex factors must be considered. Without a reliable forecast, it’s challenging to determine everything from sales and customer demand to production planning and purchasing.
The result of poor forecasting is that companies feel like they are flying blind and ill-equipped to protect themselves from losing customer confidence. It’s essential to spend meaningful time discussing customer demand expectations and forecasts. An accurate forecast is needed to build confidence together rather than guessing based only on historical data or "gut feels."
Modern ERP technology can help companies forecast to protect against unexpected changes and manage the risk of pricing volatility. Data from multiple vantage points – such as company data, publicly available information, or private market analyses – can offer greater clarity with a more accurate forecast.
What can feel like a complex headache can be made easier with artificial intelligence and machine learning. For example, using technology to help forecast the future price of steel can allow companies to place orders at the lowest possible price based on advanced data analytics.
4. Invest in technology to improve efficiency
According to the most recent technology in metals survey, metals executives are not slowing down their investments. Digitization efforts increase efficiencies and improve customer experience, and both are needed in times of inflation, interest-rate hikes, and talks of a recession.
Managing processes and products with offline tools that don’t allow real-time updates can become more complex as volatility increases. Without this information, teams could waste valuable time tracking updates from order to fulfillment.
Here’s the bottom line: Technology can help metals industry leaders manage volatility by allowing them to discover new markets. How? Instead of staying focused on survival and losing valuable time on outdated processes, companies can depend on efficient technology to stay informed and help identify new opportunities.
Overcome volatility today and forge ahead with confidence tomorrow
Prices, rates, and currencies are bound to rise and fall, but the technology you choose now can be the foundation of your metals company for years to come. Despite the uncertainty, you can overcome volatility and increase clarity with the right solution.
Crowe specializes not only in implementing innovative ERP systems that are revolutionizing the metals industry but also in coaching businesses through times of volatility.
Download a copy of the full 2022 technology in metals survey results today, or schedule a quick call with one of our digital transformation specialists.
