Oct. 1, 2014
Is Service Center Consolidation a Myth?
In any gathering of service center executives, one subject will inevitably come up: industry consolidation. Last month's Stainless and Its Alloys Conference was no exception.
When the subject is raised, executives usually debate the pace of the change, how much more is needed, the responsibility of various players to make it happen, and whether ownership changes without a corresponding rationalization of facilities really has any positive effects for the industry.
But there's apparently another question that needs to be asked: Is consolidation even taking place? According to Carl Parker, chief procurement officer for Samuel, Son & Co., the answer is decidedly no.
In his presentation to the gathered stainless executives, Parker said the North American distribution market has added 538 new players since 2009 as the industry has recovered from the recession. The addition of more than 500 new entrants to the field suggests anything but an industry in the throes of consolidation. "We hear a lot about consolidation. It hasn't really happened," Parker contends.
The growth has taken place primarily in the Midwest and South in the United States, the country's prime manufacturing locations. The Northeast has remained relatively stagnant. Outside the U.S., the growth in Mexico is obvious, while Canada has been largely flat, he says.
Working against a consolidation trend is the low barrier to entry for a service-center-type business. Unlike other manufacturing or high-tech enterprises, establishing a distribution warehouse is a relatively easy investment for newcomers. "We've had much more competition coming into our marketplace. This is a concern as we go forward," Parker said.
For more coverage of the stainless conference, see the October issue of Metal Center News.