How Metals Supply Chain Inefficiencies Threaten Western Industry

How Metals Supply Chain Inefficiencies Threaten Western Industry

Anduril, Tesla, SpaceX, Government Funded Infrastructure, CHIPS Act, Rising Construction of New Homes, Energy Infrastructure, Ford, Waymo, Domestic Manufacturing - the list goes on and on. All are western-built for our growing industrial base.

These companies can only move as fast and as profitably as their supply chains, which is why they hire such an important team in that dept. Without a robust supply chain, we could completely derail the progress of these innovating firms. And it’s not a distant or abstract problem; it’s right in our faces and needs to be solved at the same or faster pace

Current metals suppliers inflate costs and delay our entire industrial base due to a lack of technology. Ultimately stifling innovation, margins, and speed in the most important ($2.5T) industry to the west.

Quick break for disclaimers:

• first draft, im sure ill change my mind on some things based on feedback, happy to hear it

• rapid fire thoughts based on past 8 months of research and time spent in multiple factories (4 years on shop floor previously)

• lacking direct insight to legacy big players in metals supply, which is the largest weakness in the post

Despite huge advancements in manufacturing tech, the metals supply chain on home soil remains outdated and inefficient. Yes, you can see videos of “lights out” automation, but these are only present at the top 10% (at most) of the operations of metals supply firms.

Why would they innovate more? These metal suppliers are concretely showcasing 20% - 30% profits quarter after quarter after quarter. They are able to grow their logistical reach through acquisition of legacy suppliers with legacy equipment. Automating these legacy shops would take billions if not trillions based on existing infrastructure as mentioned. But, it is essential that our supply chain remains or exceeds the speed of our leading industry technologists - I will keep hammering this point.

This inefficiency is more than just a minor inconvenience. It’s more than waiting for an email back; it’s a major threat to industrial progress. Industries that depend on metals are facing increased costs, delays, and reliability that stifles innovation, reduces margins, and slows down progress.

The gap is widening between supply and demand, and we need someone in the west to fill it before it is outsourced overseas. Over the next decade, the gap between metals production and demand in the US alone is projected to widen:

• Aluminum: The U.S. could face a production-demand gap of up to 40%.

• Steel: The gap could reach 20-30%.

More than stats, these represent a significant risk to the industries that form the backbone of the western economy. If supply chain doesn’t modernize, these gaps could lead to shortages - skyrocketing prices and slowing production.

If the Western metals supply chain doesn't modernize quickly enough, there's a risk that industries will go overseas to meet their material needs, further widening the gap between domestic production and demand. This is already happening.

The Opportunity

Manufacturers costs vary but are significantly depend on material costs. On the low end you hear 15% of revenue and on the high end 50%. I’ve seen 80% but it’s just a horribly quoted price.

“Aren’t metal suppliers already automated? How would you do this better”

The answer: from inception. While many suppliers have some amount of automation, it’s typically up to 10% of entire operations as stated above. The core issues lies not only on their legacy equipment, but also in the family of businesses they have acquired over time. Often, you will find 10 factories in a family… 1 may be super automated and sexy while the other 9 are manual as hell. This uneven adoption created huge overhead costs, losing a lot of the gains from automation.

The key is to automate from inception. From delivery of raw goods to shipping to your customer. Everything in between—storage, picking, cutting, processing, and inspection—will be handled by robots and automated machinery.

“How does software play into this?”

Laser precise quoting engine. Scheduling efficiency and scrap reduction through ML. AI raw material sourcing.

Try buying metal today, I know a few examples of online modules which are a great step in the right direction, but most of it is done via email. Now, a quoting engine won’t solve everything but you want to take a Xometry quoting engine and apply it to metals supply. All of your input costs, machine costs, energy, cutting time, shipping etc. are extremely accurate in metals because it is so simple compared to other forms of manufacturing. 99.9% of metals estimating is done by a human which not only estimates inaccurately, it takes a ton of time in the long run. This quoting engine is the financial driver for better financial outcomes for supplier and buyer.

Scheduling in metal works, and manufacturing as a whole, is a nightmare unless you have a skilled manager. ML unlocks efficiency if you are tied into inventory, machines, and orders.

For scrap reduction, you essentially want to maximize your margins so you dont get $0.20 on the dollar for your input costs.

Last one is a bit harder to solve, and I won’t get into too much, but you must optimize your input costs to provide low-cost product to your customers. If you can analyze market trends, raw prices, supplier performance over time, you can literally hack the system.

Again, to come up to speed or to exceed the speed of metal buyers (first sentence for ref) we must build cheaper and faster, while maintaining quality, at every damn step.

Core Risks

While all seems beneficial, we must address the critical risks in solving this issue.

1. High Capex - Automating from day 1 requires significant capital investment. Factory, people, machinery, robots, heating, cooling, electricity, tools, etc. And that’s without the investment in software development. These high costs can be a financial risk, especially starting with zero customers.

2. Logistical Challenges - This one is hard. You may have one factory in sf, but you can’t economically ship to Brooklyn without high freight costs, ultimately eating your margins. This is why legacy suppliers acquire strong shops around the US. We must build factories that are repeatable across states and provinces.

3. Volatile Input Commodity Prices - Fluctuations in raw material purchasing are hard to avoid. These swings can be affected by geopolitics, global demand, further supply chain disruptions, or trade policies. Even a natural disaster or unexpected political events could screw you.

The mistake that people make is saying “well this is how it goes” or “its always been this way”

The time for change is now, our supply base improving marginally is not sufficient. And the rapid advancement of our supply chain is not a “nice to have”, it’s a critical need. By embracing automation from day one, and vertically integrated software, the west can close the gap between supply and demand, reduce costs, and ensure that its industries remain competitive on the global stage.

The future of western industry depends on addressing this looming crisis. The path forward required investment in technology, a commitment to the mission, and a focus on building a supply chain that can support the next gen of industrial evolution.

Let’s do this

If you agree, disagree, or have any thoughts, or questions. Let me know.

Thanks.

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