Sherwin-Williams Deploys Private Transport Fleet

FRIDAY, MAY 6, 2022

Global coatings firm The Sherwin-Williams Company recently announced the deployment of a private fleet of trucks and railcars to speed up its raw material deliveries.

In the company’s first quarter earning call, CEO John Morikis noted that while raw material availability improved meaningfully late in the quarter, the supply chain has not completely recovered, and the industry bottleneck has shifted from production to transportation and logistics.

“In the near-term, we are speeding this recovery by employing our own fleet and tank wagons to supplement suppliers’ delivery capabilities,” said Morikis. “Our ability in this area is unique among our competitors. We are also focusing on SKU prioritization and formulations to make the most of the raw materials that are available to us.”

Industry Setbacks

Late last year, it was reported that the coatings industry was beginning to see a shortage and price surge in paint. Apart from the ongoing effects of the COVID-19 pandemic, the industry witnessed both a surge a demand from do-it-yourselfers stuck at home, a Texas freeze and worsening supply chain issues.

At the time, the Federal Reserve said that the higher inflation was only “transitory” or temporary and appeared to be showing signs of abating. The central bank’s report was backed by White House officials, who also state that while they’re sensitive to the rising prices, they foresee that supply chain issues will soon subside, having observed the slight downward trend in hardware, lumber and other building materials.

In a separate report, however, equity analyst firm, Morgan Stanley, predicted that that the inflation would continue through the first half of 2022 and then veer into deflation for the second half. In specifically refencing the coatings industry, the firm said this represented “the peak of raw material availability issues/cost inflation, but just the early stages of price achievement against it.”

The major factors that would determine how persistent the inflation is in the industry, however, is how the nation bounces back from Hurricane Ida and the functionality of global supply chains for the chemical industry. As mentioned, the Texas freeze in 2021 also affected the chemical industry, in that much of its petroleum production—a critical ingredient in paint—was slowed.

These shortages, seen mostly in epoxies and acrylics, as well as several types of solvents and additives, were the main issues the industry was facing, according to the firm.

As a result, many coatings companies increased its selling prices. Some of the companies included Sherwin-Williams, PPG and RPM International Inc., the parent company of specialty coatings and sealants brands including Carboline and Tremco. In January, chemical company BASF also announced that it would be increasing prices for its paint and coatings additives globally, with increases of up to 35%.

In the latest Price Producer Index by the U.S. Bureau of Labor Statistics, construction input prices rose 2.9% in March, and 24.4% higher from a year ago. In nonresidential construction, input prices also witnessed an increase of 2.8%.

The steadily increasing numbers haven’t been much a surprise, however, as March was the eighteenth-straight month in which the cost index rose more than the bid-price index on a year-over-year basis, according to the Associated General Contractors of America’s Chief Economist, Ken Simonson.

At the beginning of the year, the AGC found that increased prices of construction materials were outpacing the rate at which contractors are raising their bid prices. In a survey issued by the association in January, 86% of contractors rated material costs at their top concern for 2022, more than any other concern. Availability of materials and supply chain disruptions were the second most frequent concern, listed by 77% of the more than 1,000 respondents.

In the AGC report, the association noted that prices rose faster than the 17% increase in bid prices for a wide range of inputs in the cost index. According to the latest PPI report, year-over-year steel mill product prices rose 42.9%, aluminum mill shapes jumped 43.7% and plastic construction products increased by 35.2%.

Other products breaching the 17% bid increase threshold included diesel fuel (63.8%), truck transportation of freight (24.5%), asphalt and tar roofing and siding products (22.6%), lumber and plywood (20.9%), gypsum products (20.8%), architectural coatings (20.6%) and insulation materials (17.4%).

Current Trucking Issues

As a result of current labor constraints and transportation, Sherwin-Williams CEO John Morikis recently announced in the company’s first quarter earnings call that Sherwin had employed its own fleet of trucks and tank wagons to mitigate the issue.

When questioned about the new service for its customers and how it affects the company’s suppliers by John McNulty from BMO, Morikis said, “It’s not our intent to do their jobs, but we are in this together with them, trying to work with them, and as you would expect, when that happens, there’s a discussion about what it cost that goes along with the fact that we are going to do that.

“So right now, and you know our company, our focus is on taking care of the customer and the fact that we have got our fleet and it is a point of differentiation. We do leverage those and there are times when we are less efficient doing that.”

To offer an example, Morikis went on to describe how one of Sherwin’s largest customers on the Consumer Brand side was very adamant about a South to North recovery approach. To more efficiently handle the issue, the company took on the undertaking so that customers’ needs could be met.

“And so, if it’s to use our fleet of trucks to help in the pinch to be able to get raw materials to a plant, or in some cases, right now, we are producing where we can get the raw materials and we are shipping it in some cases across the country to ensure that we have supply where we need it and if we were less efficient than what we would like and we have this terrific footprint,” Morikis continued. “We want to optimize our supply chain to its fullest. But when it comes down to it, we are going to choose serving our customers.”

While Sherwin-Williams is reported to be one of the first coatings suppliers to be handling the issue on its own, many other companies throughout the coatings industry have also noted on obstacles presented by transportation.

In an April interview, AkzoNobel’s Chief Executive, Thierry Vanlacker, warned North American customers that a shortage of truck drivers had disrupted some of its operations.

“The great resignation has definitely impacted the trucking industry in the U.S. It is the most difficult region if you have the materials to ship them around the country,” he told The Financial Times.

In recent article by Forbes, it was reported that the American Trucking Association estimated that the 2021 driver shortage capped at 80,000 drivers. If this trend is to continue throughout 2022, experts predict that the trucking industry could need more than 160,000 drivers by 2030.

Current issues impacting the trucking industry include supply shortages, skyrocketing prices and labor shortages.

Vanlancker said in a statement that the group’s “vigorous pricing initiatives” had helped it manage “the unprecedented variable cost inflation that impacted our industry during the quarter.”

Apart from coatings manufacturers, the abrasives industry also noted trucking and transportation as being a current hurdle in the industry. In a webinar on April 7, several leaders from the abrasives industry met to discuss solutions, industry trends and market trends—a discussion that had originally taken place at Technology Publishing Company’s 2021 Contractor Connect event.

Returning speakers included Dominic DeAngelo, Commercial Manager, Harsco Environmental; Russell Raad, President, Abrasives Incorporated; and Jason Vukas, VP, Sales & Marketing, U.S. Minerals.

When talking about trucking and freight specifically, Vukas said, “It’s up there amongst the biggest challenges we’re dealing with, it’s certainly the most common one. Everything we touch inbound and outbound obviously it’s got a freight component to it, the trucking part of that is by far the most difficult right now.

“I don’t see any solution to it. I don’t see anything that’s being done on any level that’s going to necessarily improve it. I hope I am, but seeing it on a day-to-day basis, I don’t think we’ve seen the worst of it yet.”

Radd added, “As it changes every day, it’s like the weather coming it. It is an everyday issue. But I think adjustments are being made and trying to communicate that with people.”


Tagged categories: Asia Pacific; Business conditions; Business management; Business matters; Business operations; COVID-19; Economy; EMEA (Europe, Middle East and Africa); Good Technical Practice; Industry News; Labor; Latin America; North America; Program/Project Management; Project Management; Sherwin-Williams; Workers; Z-Continents

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