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Surcharges and Material Costs

Transparency on pricing and market volatility

Storflex Holdings Inc

www.storflex.com

607-695-4213

schedule a call to discuss


How and when surcharges are calculated

  • Prices have steadily increased over the last year and show no sign of plateauing in the immediate future.
  • Steel mills and intermediaries site increased demand, difficult labor market, commodity shortages and COVID
  • Increased demand in a number of sectors continue to push steel prices up and have most mills working at, or near capacity.
  • Steel prices started to climb in September of 2020. The chart to the left shows the climb.
  • Cold rolled steel is the predominate commodity used in shelving and has increased in price 225% through August of 2021 according to the CRU
  • Cost of Raw Material Affects the Customers Price

  • Our steel suppliers final price is based on the CRU at time of delivery in Corning NY, not the purchase date. This is a major pricing and strategy shift by suppliers of steel.
  • Mills will no longer just take an order for any volume, long term purchase orders are a must for end product supply.
  • Steel suppliers lead-time is being quoted at 10-12 weeks however, on average delivery is 4 weeks longer than quoted.
  • There is almost no spot metal market for unplanned demand.
  • Storflex is buying 16-20 weeks ahead of customer demand. Prices continue to increase during the 4 months creating the need to adjust our surcharge to cover our increased cost.
  • Lead times for processing products on the production floor hasn't actually changed. We routinely find ourselves receiving metal and shipping it out to customers within days.
  • Lead-times are extended based on a few items:
  • The order flow has outstripped the capacity of raw materials, limited labor resources, equipment for processing, and transportation (both inbound and outbound)
  • Metal suppliers quote 16 weeks and our lead-time to our customers are generally 19-20.

  • The industry at large is struggling with material availability. The material issues seem to be with all suppliers for the foreseeable future:
  • We are limiting the number of specialty products on the production floor
  • Limiting colors to help us do longer runs
  • Limiting sizes to help maximize raw material and limit scrap
  • Hiring more people:
  • We have increased our staff by 50% since the beginning of 2021. Started additional shifts and increased pay to attract more staff.
  • Storflex is adding more equipment and automation to the production process.
  • These actions don't have an immediate impact as equipment lead-times are 12-14 months
  • Transportation has been an issue to secure inbound material and shipped finished products to customers.
  • We have engaged a series of additional carriers as well as replacements for poorly performing
  • www.storflex.com

    Schedule a call to discuss

    607-695-4213

    Balancing Availability and Price

    We are often asked can I get product sooner and what is the easiest to get?

    The three biggest things customers can do to help delivery:

  • Limit the amount of process steps:
  • Shelves without perforations eliminates both people and machine steps.
  • Limit the number of colors to the 4 highest volume of white, black, almond and gray.
  • Custom products that require hand welding require skilled labor which is challenging to find and keep. Limit as much as possible
  • Limit run sizes and nonstandard items as much as possible:
  • 3' and 4' runs are the most common
  • Allow ease of shipment and packing:
  • Customers that allow us to consolidate their shipments to a central location help us build ahead and give us the ability to build and ship multiple orders at one time.
  • Don't complicate the requests for special delivery, packaging or shipping instructions.
  • www.storflex.com

    Schedule call to discuss

    607-695-4213

    Customers Frequency Asked Questions

    The final surcharge is calculated at the time of delivery due to the volatile nature of our supplier's pricing. Storflex uses a FIFO system of order maintenance. The first order in is the first order out. When prices normalize and begin to come down we will begin reducing the surcharge in the same way.

    Unfortunately, a delay for any reason means the order is subject to the most current surcharge. Because orders are shipped with materials received within a week or two of delivery our costs are calculated at the time of delivery as well.

    Storflex places orders with suppliers as far out as our demand view supports. We set our production plan around confirmed purchase orders from our suppliers. This is not a perfect process or a guarantee given the market volatility.

    Price increases are a result of scarcity of raw materials, labor, and high demand. Storflex has only modestly increased prices to offset increased labor and operating costs. The balance has been done by surcharges. This also allows us to reduce prices as costs come down.

    Surcharges are not a profit center and Storflex doesn't manage them as such. Surcharges are intended to cover increasing raw material costs associated. As these costs go down so to will the surcharge.

    Storflex is generally not quoting a firm lead-time. Each order is reviewed for the availability of material, labor, capacity, and transportation. When these four elements align, we will confirm a scheduled ship date. For customers looking for a general lead-time, we are currently quoting 18-20 weeks.

    Controlled order entry is a process of reviewing each customer order with a focus on 4 basic elements. When there is a clear view that material availability is in alignment with labor resources, capacity, and transportation we will confirm a shipping date. Orders are not accepted until confirmed by your sales associate.

    Surcharges are calculated quarterly in accordance with the CRU release.

    Steel is not the only issue. Wood for back panels and other shelving accessories have long lead times and have been a problem in recent months.

    We do not want customers to place orders out in time they don't intend to take. We are working with each customer individually to understand their demand and make sure we can accept orders based on the controlled order entry process.

    Shipping damage has increased at an unprecedented pace. When a product arrives from the factory ensure you review it for damage and note any damages with the driver before they leave. Please take pictures as well. This will help when filing a claim with the carrier. Once the driver leaves we have lost our opportunity to make a valid claim.

    Storflex has instituted a $25,000 order minimum value, before the surcharge. This is not to eliminate customers but to allow our factory floor to reduce setups and maximize output. We are encouraging customers to combine orders to help us be efficient when a single order is not greater than $25,000. Along with minimums we are also combining like sizes and colors to help accommodate as many customer deliveries as possible.