The State of
FENCING FOR 2021 Tom Luby, Business Consultant
and Fence Industry Spokesperson
With 2020 finally behind us, what can we expect for 2021? The COVID-19 pandemic and tremendous political and social upheavals have dominated not only news cycles, but our everyday lives. We survived and now must look forward to what is next. For now the new norm for the fence industry seems to be a volatile supply chain, drastically spiking pricing and questionable delivery times, to say the least. What many of my clients are asking is why? What is the cause of the shortages across the board in fencing, pardon my pun. Shortages for wood, steel, ornamental iron, chain link and even vinyl are persistent. How long can we expect this situation of volatility in the supply chain to last? It reminded me of the early days of the pandemic and the unforeseen and unexplained run on toilet paper. Now wood and steel seem to be the new toilet paper, and this is frustrating for managers and purchasing agents. But this was not the first time; back in 2004, we suffered shortages for many fence commodities, especially steel and vinyl. “What happened in 2020 was unforeseeable in many respects,” says Michael Siegel, coowner of Ideal Aluminum Products of St. Augustine, Florida. “I don’t think any company had a ‘pandemic playbook’ to manage supply chain and customer relationships. We have seen the largest companies on the globe unable to keep up with supply from consumer goods like toilet paper to building products like fence. To expect smaller companies to have a plan to adjust to these situations is more than can be expected, really. At Ideal Aluminum, we are very focused on understanding our customers (fence contractors and distributors), and their customers (consumers and commercial general contractors). I don’t believe I saw anyone predict the downstream increased demand for fence products when the pandemic hit. “Most people were thinking it was 2008 again, and like that recession, entire equity in 44
FEBRUARY 2021 | FENCE NEWS USA
the business might be at risk,” he continues. It is unimaginable to sustain a demand drop to zero for 30-60 days. It is difficult to even imagine a 50% decrease in demand over a six to ninemonth period, not knowing if there would even be a return to old norms. Fortunately for us in the fence industry, it went the entire opposite direction. Demand is strong, the supply chain upstream is a challenge, and costs are shifting. But these are good problems to have. It sure beats the challenges of the hospitality industry.” Many contractors are now worried about getting product and installing that product in a timely manner. “With COVID-19, the year 2020 brought a whiplash impact to supply chains across the globe that no supply chain manager could have planned for properly,” explains Lisa Malone, senior director of Supply Chain Management for Ameristar and Jerith. “The great toilet paper shortage of 2020 should have proven to residents of the United States the fragility of supply chains. While this case may be toilet paper, one can relate this to current supply chains across the globe and how the effect of unplanned consumption can disrupt some of the strongest supply chains. We see this within the steel industry today. This isn’t just one person’s problem as it is an industry problem, not only at the steel mills but downstream manufacturers, OEM’s, and end users. “At the start of the pandemic when the automotive industry announced the pause of its production due to the COVID-19 outbreak, steel mills were forced to stop production and idle furnaces (the start of the whiplash),” Malone continues. “When automotive production came back online, it came back online with
a vengeance. Steel demands were much higher than the steel mills could supply due to the idling of furnaces. This created massive shortages of available capacity to the open market for steel tonnage, which is what a lot of the industry is facing today (the back end of the whiplash). The situation should not surprise any supply chain manager, as this is basic supply/demand economic theory. However, with prices skyrocketing in incremental increases faster than ever before, buyers of steel are left shaking their heads as to why steel isn’t available unless you are under contract. “At Ameristar Perimeter Security and Jerith Manufacturing, we have always strived very hard to build our end-to-end supply chain as secure as possible considering reliable sources and a consideration for total cost (price, delivery and quality). The numberone important element in developing our key supplier partners is based on a mutual partnership. I believe the word ‘partnership’ is abused a lot in the supply chain world as many believe the partnership only goes one way, supplier to customer. In other words, ‘supplier, what can you do for me today?’when in fact, ‘partnership’ is a two-way street.” Malone says, “This means an understanding for each other’s businesses, full transparency as it relates to communication and extreme professionalism. In the end, we are all trying to do what is best for our businesses but we must approach with logic, reason, and respect. Without the true foundation of a partnership between a supplier and a customer, the rest is merely a transaction. The end-to-end supply chains that will succeed in 2021 will be the supply chains that have partnerships with the key suppliers and provide the best information