Market Forecast: The Transition to Value-Added Services
Every week Diamond Brite Metals will be analyzing and providing comment on the metals sector to help inform and guide our readers.
In the past fifteen (15) years, the Service Center industry has undergone drastic and expansive change. The traditional Service Center business model, built on the distribution of metals, now faces an existential threat from within the industry itself. Heavy competition between Service Centers has forced managerial teams to lower prices, thereby reducing profit and income margins, to drive revenue and market share. With compressed margins, Service Centers cannot fully past cost to their customers. Rapid and substantial horizontal consolidation of the industry has only exacerbated the problem. Heavy consolidation demands that Service Centers diversify vertically to keep competitive advantages and to maintain margins. Facing staunch competition in the selling of raw material and razor thin margins, management has begun to look outside distribution to value-added services. With value-added services, distributors can compensate for the decreased margins on the selling of raw material. Value-added services such as polishing, cutting, bending, and welding transform both the raw material’s physical qualities and its profitability. While Service Centers still operate on the buy-sell transaction of raw material, management has primed their organizations for growth through value-added services.
Besides adding additional streams of revenue and increasing margins, value-added services improve the Service Center’s value proposition relative to the Original Equipment Manufacturer (“OEM”). OEMs are constantly attempting to improve time to market. The fabrication, release or installation of an OEM’s product can be slowed by the logistics of processing the raw material. Following its order from Service Center, the raw material may need to be shipped to multiple locations for processing (i.e. polishing, bending, cutting etc.) before the OEM can go to market. The addition of value-added services allows a Service Center to bundle processing with the sale of raw material thereby improving the OEMs time to market. Additionally, by offering value-added services, Service Centers reduce costs and improve quality for OEMs who have basic capabilities to process raw material internally.
Metals polishing is just one of the many value-added services that can improve the revenue and margins of Service Centers. At Diamond Brite Metals, we work closely with all major Service Centers throughout the United States to help them provide OEMs with unparalleled polished metals. In 2018, Diamond Brite Metals’ management, seeing the necessity to tailor offerings to their customers, divided the business into two strategic business units: Architectural and Commercial. The architectural unit focuses on providing architectural finishes such as #8 mirror and non-directional to customers who need such finishes on I-beams, channels, angles, and other profiles. The commercial unit allows Service Centers to offer subcontracted polishing, in all finishes from #4 to #8 mirror on all product lines such as flat bar, plate, rectangular and square tubes, and pipe. Diamond Brite Metals’ unparalleled capabilities and superior quality make it the go to polishing facility in the United States for Service Centers.
Whether you are a Service Center, a fabricator, or an OEM, please do not hesitate to contact our Sales Department at Sales@diamondbritemetals.com to submit an RFQ for polishing. No matter how complex or large the job, we will be your polishing experts.