There’s an old adage that the smart suppliers build capacity when demand is weak. There are several reasons. For one, costs of construction materials and supplies are low. More importantly, you’re ready to supply customers when demand rebounds. Few companies are brave enough to do it. Directors want costs kept low and financial reserves high.
One company that followed the adage during the downturn of 2008-2009 (and now reaping the benefits) is Carpenter Technology of Wyomissing, PA. The company expanded its premium melt capacity by 40 percent with a $115 million plant that came on line in 2009. Fastener capacity has also been expanded.
“The decision to complete capacity expansion in our premium melt area during the downturn is proving successful,” says Bill Wulfsohn, CEO of Carpenter Technology. He made the comments in a recent briefing with analysts.
Aerospace sales were $196 million in the most recently completed quarter, up 26 percent. Energy market sales increased 146 percent.
What does it mean to design engineers? Leadtimes for nickel and titanium alloys are already extended toward the end of this year. Make sure that your requirements for critical materials are covered in long-term contracts, especially for premium metals. The smart guys, like Boeing, were locking up requirements for titanium alloys during the recession. Roughly half of Carpenter Technology’s business is covered by long-term agreements, but the percentage goes to 65-75 percent for premium materials. Customers are pushing the company to expand capacity to meet future demand.