The secret to cost-efficient metal purchasing (Hint: It’s not the price)

Purchasing and maintaining the right metals inventory can ensure consistent product availability and cash flow—letting you smooth operations, maximize efficiency and bolster productivity. But to effectively optimize your inventory, you have to see it as more than the materials in your warehouse. Cost, quality, supply chain risks and logistics are all factors that can significantly impact your business operations and bottom line.

If you’re purchasing metal on a transactional basis—either because you don’t have the resources to stock bulk orders, or your orders are simply too random to predict ahead of time—your purchasing process is likely rather straightforward. When you need a certain product, you call around to a number of different suppliers and find the one who can offer the lowest price on that particular day.

The thing is this focus on price could actually be costing you. Metal prices fluctuate, sourcing different suppliers takes time, delivery costs add up. These universal truths substantially increase the overall cost of your metal.

So what should you be looking at instead? Weight. More specifically, you want to get those delivery trucks as close to their weight capacity as possible.

Think about it. The more orders you’re able to consolidate—and the more metal weight you purchase at a given time—the fewer truckloads arrive at your receiving door. Not only does this save you a lot on delivery costs, but it can create countless unexpected cost efficiencies as well.

To understand what these cost efficiencies might look like, let’s consider the experience of one of our customers. Once they switched from taking a transactional approach and placing their orders on a process-by-process basis, and looked instead at their purchasing trends over time, they were able to consolidate some of their metal purchases. This resulted in a cascade of cost efficiencies.

  • Less time receiving. After the company bundled their orders, the trucks started coming in weekly rather than daily. Because the shop supervisor was only on the floor receiving orders one day a week rather than five, he was able to spend more time on other things—like staying on top of the company’s metal inventory.
  • Up-to-date inventory. With a better idea of what metals were in stock, the company also better understood what it needed. This, in turn, provided insight into which products would benefit from future bundling.

  • Ability to maximize leftovers. While the company’s bundling approach gave rise to leftover material, it also had a better understanding of its purchasing behaviors and its inventory, which made it easier to put those leftovers to good use.

As an end result, the company was not only purchasing metal at a lower price-per-sheet, but it was maximizing those orders—and using less receiving power to do it.

Unquestionably, making the shift from a price-centric organization to a weight-centric one takes some internal reflection—and guidance. If you’re interested in exploring this cost-saving measure, our experts would be happy to help.