Copper wire is one of the main components in the cable and wire harness assembly industry. Any price fluctuation of copper on the commodity market affects the pricing of OEM made wire harnesses and cable assembly products. Current devaluation of currency worldwide has produced a sharp price increase on the gold, silver, copper, and other precious and industrial metals. This in turn, resulted in higher prices on most electronic components worldwide. Latest numbers show that Chinese electronics production numbers have also sharply increased and therefore the demand on raw materials has driven prices of copper even higher.
Not all purchasing managers for OEMs appreciate the gravity of the situation. Some, when presented with a quote which is based on the current pricing of copper and copper wire, simply compare it with the last year’s quotations on similar products. As a cable assembly and wire harness manufacturer who has been in business for over 25 years and who has supplied some of the largest brand names on the planet we would like to our pricing to stay the same, but we can’t. In fact, no cable manufacturer can stay in previous low price ranges unless they are eager to go out of business.
Wire harness manufacturing business is based on large quantities and very low profit margins. This is a standard in the industry. Therefore, it is only natural to assume that if you are a purchasing manager for a major OEM and you are presented with this same quote as you were presented last year, it means your cable supplier is willing to take a hit just to get your business. Refusal to face the current copper pricing may result in unfulfilled production supply. Unfortunately, due to a very competitive market of wiring harness and cable assembly products, some manufacturers are willing to present their clients with the quotes that are not sustainable just to get the business.
If you are a purchasing manager, you should act with extreme caution when presented with unrealistically low quotes on wire harness and cable assembly products because you may be jeopardizing your company by only considering pricing and not the capacity and the integrity of your supplier.
Pricing on copper and other raw materials will continue to fluctuate with greater frequency due to instability of global currency markets and it should become a manufacturer’s management policy to keep up with these changes. Such an approach will allow taking advantage of seasonal pricing fluctuations on wire harness and cable components as well as avoiding additional increases in production costs.
We have invested in our own copper wire production used in the most commonly requested wire harness assembly products, allowing us to provide clients with competitive quotes. This was a direct response to our careful observation of global markets. All indicators in manufacturing trends, currency market conditions, raw material pricing and consumer demand shows inevitability of production and outsourcing cost increase.
Some of the cable and wire harness components are affected less than other. A couple of factors are the amount of copper and crude oil based products that are used in a particular type of cable. Given the fact that copper prices may easily fluctuate in the range of 10% weekly it may become quite difficult to secure the lowest price. Should you worry if, according to weekly reports, your inventory has lost 8% of its value due to copper pricing decrease? Only if you did not have a sufficient profit built in and if, when you have to sell the product, the inventory value has not come back up to the rates when you first purchased and manufactured the products.
As we all know, there are peaks in electronics production during summer and fall, so the demand on wire and cable dramatically increases during that period. This may result in an increase in prices at times and, therefore, it may be a sound policy to secure all necessary components during the off peak production season. This will help to maintain the value of your inventory and reduce production costs. As long as production planners do their job and pay attention to the raw material pricing and strategically allocate the procurement budget, you should be able to successfully manage your inventory resources. Yes, it is a more complex process but it saves money.
We will be glad to assist you in your procurement of wire harness and OEM cable components in creating a sound outsourcing policy. One thing is certain, raw material prices, global currency markets and the ever increasing labor costs in developing nations have become major profit margin factors in the OEM electronics industry.