During a veritable banquet of fastener industry intel and commentary, Mr. Charlie Kerr of Kerr Lakeside serves up a super-sized portion of predominantly fastener-related banter. Who ordered the surcharges? (1:35:17) Brighton Best International president, Jun Xu joins Mike McNulty on the Fastener News Report with shocking FDI results (55:32). Nelson Valderrama of Intuilize explains how distributors are harnessing data to implement AI systems to up their game (24:08). On the Fastener Training Minute, industry educator Carmen Vertullo covers A36 steel (1:30:10). Plus: NFDA ESPS meeting highlights (15:16). Brian and Eric set the table for a feast, and hope for enough paper towels at clean up time. Run time: 02:51:39
Fully Threaded Radio Podcast – FCH Sourcing Network
Topic: Episode # 162 – Our Dinner with Charlie
Date: March 19, 2021
Hosts: Eric Dudas
Duration: 2:51:39 Minutes
Intro: It's Fully Threaded Radio, Episode 162.
Why do you think that is? I mean, why is that? Is it just because people are lazy today or they're bored? Are we just bored, spoiled children? Who've just been lying in the bathtub all day, just playing with their plastic duck. And now they're just thinking, well, what can I do? Okay. Yes, we are bored. We're all bored now, but has it ever occurred to you that the process that creates this boredom that we see in the world now. May very well be a self-perpetuating, unconscious form of brainwashing created by a world, totalitarian government based on money. And that all of this is much more dangerous than one thinks. And it's not just a question of individual survival, Wally, but that somebody who's bored is asleep and somebody who's asleep will not say no.
I keep meeting these people. Just a few days ago, I met this man whom I greatly admire, he's a Swedish physicist [inaudible 00:57]. And he told me that he no longer watches television, he doesn't read newspapers and he doesn't read magazines. He has completely cut them out of his life because he really does feel that we're living in some kind of Orwellian nightmare now. And that everything that you hear now contributes to turning you into a robot.
And when I was at Findhorn, I met this extraordinary English tree expert who had devoted his life to saving trees, just got back from Washington lobbying to save the redwoods. And when I met him at Findhorn, he said to me, "Where are you from?" And I said, "New York." He said, "Oh, New York." I said, "Yes." He said, "That's a very interesting place. Do you know a lot of New Yorkers who keep talking about the fact that they want to leave, but never do?" And I said, "Oh yes." And he said, "Why do you think they don't leave?"
I gave him different banal theories. He said, "Oh, I don't think it's that way at all." He said, "I think New York is the new model for the new concentration camp." Where the camp has been built by the inmates themselves. And the inmates are the guards and they have this pride and this thing they've built. They've built their own prison and so they exist in a state of schizophrenia where they are both guards and prisoners. And as a result, they no longer have having been lobotomized the capacity to leave the prison they've made where they even see it as a prison. And then he went into his pocket and he took out a seed for a tree. And he said, this is a pine tree. He put it in my hand and he said escape before it's too late.
It's time for Fully Threaded Radio.
Eric: It is Fully Threaded Radio, voice, FCH Sourcing Network. This is the podcast that serves up a feast of fastener industry information and commentary with each serving. And we have an exquisitely full menu plan for you today everybody. We're glad you clicked in. Eric Dudas, here. And the co-host of Fully Threaded is with me as well. He's the executive chef of the FCH data lab and lifetime honorary Texan, Brian Musker. Hey, man.
Brian: I do enjoy cooking actually, so partially correct. But I just got this question. Where did you pick up the idea for this specialist clip from the movie?
Eric: Yes. I knew you would catch that. Well, that was taken from the 1981, film 'My Dinner with Andre', which is a classic. You might get the idea to go out and watch it after you hear this episode, everybody. But I figured, there's lots of enthusiasm and a definite appetite for good news out there in the industry, Bri, but there's also an ominous backdrop to everything that a lot of people are feeling. And I figured, with today's feature segment just seem fitting.
Brian: Wow! Well, that's really wild. Incidentally, this is on a totally non-fastener thing. The director was a Frenchman Louis Malle and I got into him when I still lived in New Zealand in the seventies. And he directed some amazing movies that you can still pick up. One of which I remember was a group of pigs sitting around a French table on a French country farm drinking wine and listening to the radio reports of the Trojan War. I'll never forget that.
Eric: Yeah. Connections everywhere.
Brian: Like a movie version of Salvador Dali.
Eric: Wow. That is crazy. While we're dropping all kinds of references, we're going to have to tie that into the theme as well today. Bri, I'm thinking 'Animal Farm' myself, but let's take it back to fasteners. This is Episode 162 of Fully Threaded Radio everybody. Really is predominantly fastener industry related. We're publishing this time on March 18th, 2021.
There are Charlie Kerr fans in this audience. And this one is for you during this conversation, he'll inform, he'll amaze. Sometimes he'll even challenge you to stick with the conversation. And if you do, it's very possible, you'll become a Charlie Kerr fan too. If you're not already.
Plus, if you're a fan of 'My Dinner with Andre', the film we just mentioned, you'll completely understand the discussion we just had.
Eric: Don't miss it. I did a summary of all the topics we hit on and there are 22 separate things. So, this is a really dense conversation, but I guarantee you it's worth the listen. The movie theme idea carries through, into our lead-off segment today, Bri. We've got Nelson Valderrama and he's talking about AI throws us a little bit of a change up during this segment. He's thinking a lot about how fastener distributors can harness their business data and using AI and machine learning, do a variety of things to up their game.
On the Fastener News Report, Mike McNulty, kicks off with a predominantly fastener related preamble. As he surveys the various issues occurring in the world is the backdrop to this conversation that he has when he welcomes Jun Xu, President of Brighton-Best International.
They delve into the Fastener Distributor Index, which broke a record this time, Bri. And in a way you might not have expected. Frankly, it seems like a very stark contrast to so much happening in the supply chain right now. But I think it's one of the reasons you won't want to miss this conversation.
Brian: Yep. All of a sudden, we're surrounded by these contradictions.
Eric: Which is probably why on his Back Page report, Mike serves up a list of logical fallacies that will resonate with many of you. Kind of like an acidic Ceviche on the side that splashes across and otherwise mild flavor profile of a simple chicken dish.
Brian: Wow. This is way away from fasteners.
Eric: Yeah. We're recording around lunchtime.
Brian: Okay. Thinking of food. Okay. I understand that.
Eric: Hey, what do you think of when you hear A36, Bri?
Brian: Well, I think of a material. I think is used in threaded rods.
Eric: See, I knew you'd be right on the money. When he told me today's topic, I immediately thought of M4-rifle variance. When you look out there, there's a never-ending amount of confusion. When you look into the differences, A2, A3, A4, etc. I guess, it tells you where my head is these days. M4-rifle variance, everybody, the most common would be your trustee AR-15, the Modern-Day Musket.
Let's get back to the fastener action. Carmen Vertullo will be talking about A36 as it pertains to fastener material, threaded rod being a prime example. So, he said it was a feast there. You have it. We've also got a great menu of sponsors supporting Fully Threaded Radio. We would not be able to bring you the podcast without them. Bri, please bring them on.
Brian: Yes, we are lucky to have great sponsors and normally they're sponsors they've become friends over the years. So, thanks to all of you. The title sponsors of Fully Threaded Radio are, Stelfast, Brighton-Best International and Goebel Fasteners.
Stelfast, 'For Service You Deserve and People You Trust.’ Brighton- Best International, 'Tested, Tried and True.’ Goebel Fasteners, 'Quality the First Time.’ Also sponsoring Fully Threaded Radio, Buckeye Fasteners, BTM Manufacturing, Eurolink Fastener Supply Service, INxSQL Software. ND Industries, Parker Fasteners, 3Q Inc, Volt Industrial Plastics, Würth Industry North America and Solution Industries, 'Home of Solution Man.’ So, thank you for the sponsors. Make sure if you're listening, then when you're looking for any fasteners, think of these sponsors first.
Eric: Thank you, sir. And before we wind down, the appetizer course of today's offering got an email from one of our sponsors here echoing one of the major themes in the industry today. And that's the steel prices that are crashing down upon us. Manufacturers have been feeling this for a while. It's starting to make its way, well, it has made its way out into distribution. We'll be touching on it today again.
Goebel Fasteners, shout out a note with a little more information on this topic. And they also want everybody to remember that Goebel's got a large stock of inventory. They're your leading rivet source. And they've got plenty of material for same day shipping. The chains getting tough, but Goebel's your partner throughout.
Now, Brian, you're still saying 'gerbil'? I don't know I keep going back and forth. Now, I'm back at Goebel because I read on LinkedIn recently, I saw hashtag, it said go Goebel and go-bell. I don't know, go Goebel just seemed like it had a better rhythm to it. So, I guess now I'm back. I don't know we're going to have Christian on next episode. He can revisit this with us.
Brian: Right. If anyone knows how to pronounce Christian, does. Okay.
Eric: I think he has sanctions all three of the popular pronunciations. There's three that I know of. We appreciate all of our sponsors. We get them all on the podcast as often as we can. Hey, one other thing before we take a short break, got an email here from Nancy Rich over at Mid-West Fastener Association. And I know you saw this one too, Bri.
Brian: I did.
Eric: We're very honored that the MWFA membership committee voted to make Fully Threaded Radio honorary members of the MWFA. They said it would never happen.
Brian: Wow. How times have changed. Remember when we first joined up as Fasteners Clearing House, and there was a bit of a problem because there was no category to stick us into.
Eric: FCH Sourcing Network has long been a member of the MWFA. Our home association now Fully Threaded Radio honorary members were so very glad. Not sure though, here Bri, whether it was a unanimous vote or not, doesn't say, but hey, we'll take what we can get. Thanks guys. And gals. It was implied. Don't forget everyone. It's the 75th anniversary of the Midwest Fastener Association.
The name has changed over the years, but it's the same group continuously for 75 years later during the year, August 17th and 18th is the tabletop show in golf outing. They've actually got an event they're calling Fastener Week, which we'll be talking about on the podcast in upcoming episodes.
And many of you are aware that the Tough Mudder event that we've been talking about is happening the weekend before I believe it is, Bri. It's at the Rockford, the Tough Mudder. So, I hope a lot of people will use that as a segue into this whole thing. And who knows what the world will be like at that time, cross your fingers for favorable conditions. It'll be a gala. We'll see you there.
Eric: Thanks for listening to the podcast, everybody. We really appreciate it. And we'll be back faster than you can eat that last Crouton.
Brian: I haven't even asked which one they want there.
Eric: There're lots more podcasts coming up, Bri. It's Fully Threaded.
They're, like more Goebel for the fastener industry, Brian and Eric Fully Threaded Radio.
Stelfast customers say it all. Tim Minter Northern State Supply. I've been in this industry for 40 years. And, I can never remember basically when Stelfast hasn't been a part of it, they've taken care of us over the years helped us grow. Quality outfit, quality people. This goes back to the days when you surrender and you call up to Toronto. And we ran out of some 70's jam nuts, and they were basically just opening in Cleveland. I believe at the time. And president and company took care of it. And got us what we needed in about three or four days and saved us from shutting down the production line and they'll bend over backwards and take care of your needs for you. It's more of a personal relationship with the group. Very good group of people. 'For Service You Deserveand People You Trust.’ It's Stelfast.
At Brighton-Best. We continue to expand our wide range of products, including stainless steel and metric fasteners. Our family of brands include preferred US Anchor and Ironclad Performance Wear. BBI has been a trusted partner since 1925. With award-winning hand tools, gloves and dry wall screws. BBI is the largest master distributor of fasteners in the USA, 'Tested, Tried and True.’ We are Brighton-Best. To learn more about Brighton- Best visit brightonbest.com.
Regardless of the required size materials or finish. Eurolink has the European resources to meet your hard, to find metric fastener demands. How do we do it? Eurolink has access to more than 100,000 quality metric parts with daily air freight shipments and monthly sea freight shipments. We have the ability to solve your toughest metric fastener supply issues. Just think of us as your heavy metal rockstars. To learn more about how we can rock your fastener world, just visit us at eurolinkfss.com.
You're listening to the world's leading source of information on the fastener industry, the Fully Threaded Radio Podcast.
Eric: Brian and Eric, shadowboxing the apocalypse. So, you don't have to. Fully Threaded, we've got Nelson Valderrama with Intuilize coming up in just a few moments. We'll be talking about AI it's applications for fastener distributors.
The National Fastener Distributor Association had a virtual meeting earlier in the month. It was back March 3rd and 4th. That was their annual ESPS some of you, no doubt attended that. I had an opportunity to take part in day one of that event, Bri. As usual, you were slaving away in the server room.
Brian: Or near it.
Eric: The ESPS meetings are always really successful. I had received some good feedback on those. I think that's the kind of a meeting that can be served well by the virtual format and on day one, it wasn't too shabby either the first session that I was a part of involved Alex Chausovsky of ITR Economics. He's been with us on the podcast before Bri.
Eric: He dished up some of that economic reporting and outlook that ITR is so famous for. And I suppose the takeaway from it is that 2021, according to them is going to continue to be a strong year with growth. Although due to everything, they're moderating their view on just how much growth that will be. So, they're pulling back a little bit on their previous optimism, but growth, nevertheless, which I guess we'll take that. And they've been expecting this for many years, Bri, because, they're, long-term forecasters.
Brian: Right. Yes.
Eric: 2022 and '23. They think that we're going to start to experience some contraction. So, they're sticking with that. That was sort of the macro takeaway. My favorite comment that Alex Chausovsky made was it's time to capitalize on other's pessimism. So, we're not actually hearing that much pessimism, at least from the fastener distributor in US and they're people we talk to. But, if there indeed is any out there, they take advantage of it and keep pumping hard. And I think from the people that we talk to, that's exactly what's happening. So ITR is saying, come what may keep working hard?
Brian: Well, the Fed also announced yesterday. They expect the US economy to grow more than they originally had five and so many percent, 3/4 percent or something that's pretty high.
Eric: Well, that's an interesting comment. You don't really know how to take any of their comments these days. At least I don't. Melissa Patel from Field Fasteners asked Alex a very perceptive question. I thought it had to do with a comment that he made about the value of the dollar, particularly as it relates to all of this stimulus spending. And they're talking about a reduction in value.
Now you have to ask yourself whether this is all semantics or whether reduction in value is the same thing as inflation, or at least I do. And I think perhaps that was what was behind Melissa's question. Anyway, Alex pointed out that what they mean specifically when they talk about this is that they're expecting the dollar to diminish in value against a basket of foreign currencies.
So again, I wonder how much of this is semantics and economists always seem to have euphemistic ways for explaining things that are experienced by us plebeians, but they're real things. And I think that a lot of that's going to be happening in real time around us.
So, one comment that I have on the whole conversation had to do with the idea of cryptocurrency. Now this is something that I'm going to make sure we talk about more on the podcast in coming episodes, Bri. We're not going to spend a lot of time on it right here, but it's a big mistake to use the phrase cryptocurrency and digital currency interchangeably, not the same thing.
Brian: Right. They usually join together. It's fair to say.
Eric: Well, I think it's more than that. I think they're actually used interchangeably. And again, it's a big mistake because you're going to hear, and depending on the media that you pay attention to, you might already be seeing a lot of references to central bank, digital currencies and the Fed. You mentioned them earlier. They're actually talking a lot about something called the Fed coin.
Now those are not cryptocurrencies. They are digital currencies, not crypto. So crypto are digital. Digital are not necessarily crypto. And to use them interchangeably, you're opening yourself up for a rude awakening if and when the full ramifications of Fed issued digital currency come out, because this is going to be huge. This will be huge. Anyway, I shot an email off to Alex after his presentation and asked him about that.
We'll get somebody from ITR or somebody else who's knowledgeable about that to join us, to kick that idea around. I think it's really important for our audience to understand this. There was a pretty good group for his session. Bri, there was probably 150, 160 people at one point. So, I thought that was pretty respectable.
Brian: That's a lot.
Eric: So ITR clearly has a lot of fans. Next up was a panel discussion. Again, it was Melissa Patel with Field and Mark Strandquist with Optimas. I had the honor of moderating that panel discussion and we were talking about supply chain issues. So, no surprises to anyone who's been listening to Fully Threaded. It was good to get their perspectives. And that carried into the breakout sessions. This was towards the end of day one.
And the way they work it, Bri is when you log on to Zoom, Jamie and Vickie would usher you into a breakout room. And the one I was in, I don't know there were eight, 10 people was moderated by Bryan Wheeler over at Star. And the conversation was really more about when I got there was also talking about their experiences with what's happening with the supply chain.
And Bryan made a very, I thought dramatic comment had to do with overseas deliveries from the manufacturers. He says orders going to Asia after May 1st. Don't expect them to be delivered by the end of 2021.
Brian: Oh, my goodness. That's sort of fairly crappy. Isn't it?
Eric: It's stunning actually. Now, keep in mind. This isn't just Star. This is what he's thinking for the industry in general. Well, the world in general, we've just got big problems with these clogs. So that was really the backdrop for the conversation. They were also talking about how they're doing business at this point in the COVID hysteria. And many of the participants really felt that there were some efficiencies that have been picked up for their workforces working from home, which I think we're hearing a lot of.
Brian: Well, different companies having different experiences and it's all men and not everyone personally can deal well with having to work from home. There's still a whole part of having to meet up with the people you work with just to swap ideas and things around. Things have to be changed rather than just working at home.
Eric: Yeah. Different people handle it differently. And the various companies have different strategies for having scheduled meetings, where they have sort of a group thing. Some companies have picked one day a week where they all physically go into the office, but the rest of the time they're working virtually.
As a matter of fact, one of the managers in this conversation said that an unexpected outcome of all of this is that he realized he's seeing his underlings become more independent thinkers. So, they're solving a lot more of their own issues, which when you hear Charlie Kerr later in the podcast is a very important attribute to have for a solid organization.
And a lot of people who aren't able to do this are flushing out, but I guess it's not unexpected or surprising, but it's always good to be able to compare experiences like this. And that's what the NFDA and these round table conversations are great at. So, I thought it was a very effective meeting for the NFDA technically it was pretty comfortable, I would say so good job to everybody.
Oh, one other thing I should mention. That's topical, as we shift over to Nelson, Kameron Dorsey over at Beacon Fasteners and Components was describing one of the efficiencies that they've expanded during all of this and that is they've built in an AI module onto their order entry system.
Brian: Oh, that's interesting. We should get them in to talk about that.
Eric: Yeah, I agree. I'm going to reach out to Kameron. I'm sure he'll come on the podcast. Beacon of course has been a long time INxSQL software user. And I think this module just zips right onto it. And they've found that it adds a lot of benefit. Just being able to, I guess, scan these RFQ's and product requests and boom, get them right into the system. Seamless flow, Jody from Copper State called it. And the future is here, Bri.
Brian: Good it's about bloody time.
Eric: And so, it is Nelson. Let's play that now. Nelson Valderrama from Intuilize is here. We're going to talk about AI in the fastener industry. Hi Nelson. Welcome to Fully Threaded.
Nelson: Hi Eric. How are you?
Eric: Very fine. I saw that post you put out on LinkedIn, you wrote an article recently for American Fastener Journal and you were pointing out a couple of the highlights of what AI is doing in the fastener industry. I figured its high time that we had you on the podcast. I met you some time back. We did a panel together at one of the shows and, really glad to have you with us.
Explain a little bit about what Intuilize is before we get to some specific questions on what AI is all about, please.
Nelson: Sure. Yeah. Intuilize, we are an analytics company that we are focused on helping, distributors to accelerate their profitability. And we do that by helping them out with their pricing and their inventory. And we are proud to say that, we have been helping a lot of, fastener distributors. One of the most forward thinkers. Owners are working with us and we're very happy to be here in this podcast, Eric.
Eric: We try to speak to some of those forward-thinking fastener distributors on the podcast from time to time. I think Fully Threaded listeners will remember recently we spoke with Kirk Zehnder over at Earnest Machine and we actually had an on-the-fly consulting session with him and Ian Heller from Distribution Strategy.
They were talking about actually some interesting things that distributors can do to maintain a competitive edge in this onsetting age of the marketplace. And that's kind of where some of this AI idea fits in. Please share with us a couple of the ways that you're rolling this technology out to help fastener distributors so we can start getting our arms around it a little bit.
Nelson: Sure. We are helping, distributors basically, with their pricing, when we recommend pricing for them. And we're helping them in order to make sure that they have not just the best price out there, but they're able to, get those quotes.
So, let me give you an example here. When I was working on the distribution side and running a couple of businesses, our ideal scenario would be that every single quote that we send to our customer become an order. And that's what we do with distributors. We, recommend them the pricing to a particular customer of a particular product for them to get their order. And we are measuring the heat rate. So, they know that they are getting the order or not. So that's one of the examples that I can provide to you.
The other example is about, recommending what products to buy. And I think today in the challenging environment that we live, in terms of supply chain, we are helping our customers with the demand planning so they can find, which products to buy, how many to buy and when to buy them. And this goes back to, the analogy that, we have with our customers about baseball. Have you watched the movie 'Moneyball', Eric?
Eric: Fantastic movie. Yes. Statistics are everything. Is that where we're going?
Nelson: Yeah, definitely. So that one, it's a movie and if listeners are interested in this. It's a 2011 release movie, has, very interesting actors. And basically, they were talking about baseball and how baseball change, after analytics were involved in the sport. And it was fascinating to see, how back then baseball team, they wanted to recruit people and they were just using the scouting.
And I think one of the similarities between distribution and baseball is that we are trying always to mitigate risk. We're trying to figure out, what part do we want to buy and how much we want to buy for them? And in baseball, they're trying to the same thing. They're trying to choose those players that, make things happen.
So, they are looking into trying to predict human behavior. So that's a great movie because that's what allows us to understand, you know, how AI can help companies, is the way AI has been helping sports, which is making better decisions and reducing risks.
Eric: So, we want to help fastener distributors hit a home run. Yeah, that was a great movie. And I guess that is a really wonderful analogy. I bet you use that very successfully explaining some of your ideas to fastener distributors. I'd like to understand how you are penetrating the market. And I know that I use the example of Earnest Machine as a forward-thinking company. They're one of the ones that are actually using your services right now, aren't they?
Nelson: Yes, they are. I work in the distribution world for over 23 years. I started with GE Supply back in the 1990's. And then I had the opportunity to work for a couple of private equity firms in the US buying and selling businesses. And during that time, I found out the big opportunity of analytics and I think that's going to be the future for the companies.
We decided in 2019 to do a soft launch with a couple of people that we knew. And in that bucket were, Earnest Machine, Birmingham Fasteners, Advanced Components and others, and they were, really open to the idea. All of all of these companies have forward-thinkers’ owners and they know that the future is here. So, they made the investment with us and we are working with them hand-in-hand every single month to make sure they are increasing the bottom line.
That's how we're going to the marketplace, Eric. Knowing people, making good relationships with them, but more important to show them that we can, give them results. At the end of the day, I think that's what distributors are looking for the bottom line.
Eric: A hundred percent. Well, I'm glad you gave us that background because I was leading up to that also. And it's very important. You're connected with some really great companies, high profile, and you started showing up a few years ago, you've done a lot of articles for all the big magazines, Link, Fastener Technology, American Fastener Journal. You're on social media and at the shows and all that.
So, you're doing a good job of getting your face out there, but probably a lot of fastener distributors who are in our audience today, haven't truly understood what it is that you're speaking about. So, this is a great launching point. And another thing you spoke about, or you mentioned is the problem in supply chain right now.
Maybe we should drill into that a little more, because that is something we've been talking about, a huge amount in the industry. Just these last several months. Let's think about demand prediction and how do you actually help distributors to wrestle with a topic like that? It's big right now in the industry, what Intuilize offer?
Nelson: I think that's something that is happening, not just in the fasteners, but I think all distributors in the US and Canada, I think the world, they are being challenged by this. So how we help them, uh, what we do with the distributors is to try to understand, the behavior of the demand for every single SKU, every single part, and we use machine learning to do that.
So, we go out, we try to understand, every single part, what is the need, that is being prompt or the demand that is prompt by different customer segments and so forth. And let me go back to the analogy of baseball. This is the same thing that happened in baseball when you are hiring, or when you are bringing new team players into the team, you are looking for players that can make, to first base and then to, score around and you are going through different scouting process and you're going through different processes to get that.
And if people watch the movie, they will understand that, the old school guys, they were just, using their intuition, which is a good thing, but they were not having data in their hand to see, what these players can do for them. And under what circumstances and baseball, was transformed by this. And today, anyone that loves the sport, they can see in football, in soccer, in basketball how analytics is being used by the coaches and by the players to improve.
And it's exactly the same thing in distribution. What we're doing with our customers is provide them actionable insights on what parts to buy, how much to buy. And just to give you an example, I was talking with Jared, the Procurement Director of Earnest Machine, late last week about, the advantages. And he said, Nelson, one of the things that we have been able to do with Intuilize is that we are able to understand for a specific SKU's, how could be the demand for the next two to six months?
And we see that it's accurate. That's very, very important for them. But second, we can see how big is the gap between what we used to buy and what we should buy, in order to take those opportunities, to make sure we avoid stock-outs. And that's what I love, what we do at the end of the day. As you know, in baseball is we want to reduce risk, for the distributors. And what are risks, avoiding the stockouts and as well to make sure that they don't have excess inventory. So that's how we help them. Eric.
Eric: You used the phrase, machine learning, so machine, so to speak, learn through the use of data. And I wonder if you could give us a practical idea of how long your average mid-sized to small size distributor would have to use a system to accumulate enough data in their day-to-day business operations to make that machine learning possible. Are we looking at a year? Are we looking at five years? Is it a month? How does that usually look?
Nelson: So that's a great question, Eric. So, let me first start with this, machine learning has been in the marketplace for decades. It's is not a new thing. I think, today there are more access, in terms of the platform, the hardware, the software to use it. And if there is any distributor that wanted to jump into machine learning or analytics, they need to hire a couple of dieters, data scientists, they need to set up things.
They want to understand what they need to do. What are the problems they wanted to solve, etc. And in my experience that will take them just to understand what they wanted to do between, a year of two, five years. I spoke with some distributors in other verticals that they're still struggling, just trying to get things out of the way.
So that's the first thing that I wanted to put out there. For people that wanted to do this by themselves, they are more welcome to do it, but it's going to be a long journey to run their businesses and understand what is machine learning.
Now in answering your question in terms of time. Typically, in terms of data, in order to use machine learning, we need to use data or have data for between a year and three years of data to start really crunching the numbers, but now important, Eric is the quality of data. Trash in, trash out, so if you have data for three years, but unfortunately there's a lot of noise in the data and it's not helpful. It's not going to work at all. So, we're looking for answering your question between at least a year of data, three years is better and more important that is clean data.
Eric: Okay. I understand that. And it's a long road, but that's what has to be done. So that's just putting it out there. Folks. Now, given that you are working in this universe and most fastener distributors today, at least the ones who are on the ball are using some kind of an ERP platform. I'm going to guess that you connect, or you can at least work with, operate with systems like INxSQL software, which is what FCH does we connect right with them. So, do you do that also?
Nelson: Definitely, Eric. I think back in 2018, when we were in our research and development process, I think it was the first or the second question that we got from prospects is can you connect with my ERP system? Because an owner, a general manager, they don't want to deal with, other IT projects at all.
So, we develop connectors and actually, one of the customers that we have, and I can mention here is Advance Components. They use in InxSQL and they can tell, anyone in this audience, how easy it is for them to work with our platforms, because we connect with INxSQL every single time we're extracting the data that we need and we're pushing whatever we need. So definitely we do it with most of the ERP's out there and that's part of what we offer.
Eric: Okay. That's huge. So that's something that I think a lot of people in our audience, you just got their attention in a big way. Let's talk about another application. So, we talked about demand, prediction, and definitely there's a place for AI there. What about product recommendation? That seems to be a huge part of the game in online selling, does Intuilize help distributors to formulate some kind of a plan for that too?
Nelson: Definitely. For anyone that is doing, e-commerce nowadays, for anyone that have used, I will say Amazon, they will understand that recommendation is the present it's not the future anymore. Because your customers will come into your website or your customer will send you an email or sometimes, will call you.
And you want to make sure that you are providing to them, not just what they are asking for, but those complimentary items. The example that I gave to people here that are in the fastener industry is that a lot of the distributors. They are carrying some tools that are being used for the installation of the fasteners or removal of them. And sometimes what I found is that, customers are buying the widgets from them, but they are not buying the tools. The tools are being bought somewhere else.
And the idea is that at that moment, when you have the customer in your e-commerce or you have them in front of you, or you have them over the phone, or you have them in the email. You can recommend them an item that they are likely to buy based on their past performance, based on their trends that they have. And these will be very important for any distributor to tap into, because this means increasing the average ticket that they have. That means that in that specific moment, they are able to, grow their revenue.
I think more important it's about the customer experience. And this is something that, I will say a lot of our customers will testify, which is we are helping them to really increase and improve the customer experience because we are allowing them or we're helping them or enabling them to get the right stuff in front of the customers so they have a consistent process in order to keep growing.
Eric: Makes complete sense. For those of you listening, who have ever met us at the Vegas show or Fastener Fair, or any of the shows and we have Vegemite in the booth. We also have those hideous little crackers that go with it. So, you're going to buy the Vegemite, you got to buy the crackers. We might as well offer it to you, but we don't actually sell that in our booth, but you get the point.
Nelson: Yes, definitely.
Eric: Well, listen, you've been out there in the market for a few years now. You've been really on the vanguard of this because let's face it. It's a new thing. People in general are learning about this whole thing. What's the biggest point of resistance that you've met when you've been presenting your ideas?
Nelson: I think the biggest one, Eric is about culture. And when I say culture, I remember walking the Las Vegas show two years ago, and I was talking with the owner of a big distributor, automotive. And I asked him, how do you do business and this and that. And I asked him, "Do you do you know any analysis or analytics?" And what he said is, "Yeah, I do it." And he just pointed out to his head and say, everything is here.
And I was shocked by that because I saw that maybe he's running a company of, $25 to $30 million in revenue with 50, 60 employees. And the thing that's come in to my mind is what is this guy thinking that he will leave to the next generation. What will happen if for some reason he's hit by a bus or he just decided to retire, and I'm bringing this up because this is about culture.
This is about, the leaders and the owners of a company saying, do we want to embrace this? Or we don't want to embrace this. And I think you and I discussed this in the past, which is the train already departed and COVID is just accelerating the whole digitalization of our economy. It is not going to be the baby boomers. It's not going to be, my generation. It's going to be the generation that is behind us that is going to transform all this because they are digital natives.
So, anyone that is thinking that e-commerce or analytics are the thing of the future, I think they are going to miss the boat big time, because it's happening today. So, answering your question it's culture, it's about owners really embracing this.
And, again, I think the example that I provide to you with Advanced Components with Earnest Machine, with Birmingham Fastener and other ones, is that the owners saw these. They were visionaries that they saw that this is going to be the present, the future, and they embrace. And they're reaping the benefits in a couple of months.
Eric: You're talking about concepts that are new to some of us here in the fastener industry. And you've obviously got a lot of knowledge and a lot of thoughts on this. Who do you pay attention to? Who are you watching Nelson, that's leading the way for you?
Nelson: Oh, man, that's a great question, Eric. Typically, when I'm looking into information or people, basically I have three sources, one is the high-tech companies and what they are doing. And on those ones, I put the Phase, the Googles, the Amazons of the world, and I'm looking at what they are doing, what they are publishing and so forth.
And I want to learn from them in the sense of understanding, the best practices. Because I think what they are doing we can learn from it and we can, embed or absorb some of that stuff and put it to work in the distribution side. So, I will say that's one source.
The second source is about retail. And why I say retail is because retail went through the same process that we're going through in distribution. I don't know if you recall 10 years ago when we were talking about, Amazon and e-commerce, I was laughing about it. I was like, I won't be buying this stuff. I won't be buying clothes. I won't be buying these on the in the internet. No one to talk to.
Eric: Oh, no, you're not alone. You're not alone.
Nelson: I was there. And now it's just been transformed. And then we have companies like Blockbuster and Sears that are just history.
Nelson: Sears and Blockbuster. Yeah. So exactly. And I wanted to learn from them because I think they are facing those challenges. And I want to see who and how they are solving those ones. And there are some best practices that we can learn from retail.
And the third one, people that are in the marketplace that are also preaching the world. We have Ian Heller, he's a guy that has been, preaching the world. A couple of people in LinkedIn, that they are also, kind of being the forward-thinkers that are helping us out to understand this better. So that's kind of the three sources that I use in order to get, up-to-date with what we're doing.
Eric: I thought you were also going to say the Oakland A's.
Nelson: Well, I have other preferences in baseball, but I won't disclose these ones here. I don't want anyone to get mad at me and start challenging me in terms of my team preferences. I will say.
Eric: Alright. We got enough to deal with McNulty, always talking about the Indians.
Eric: So good call on that.
Nelson: That's enough. Exactly.
Eric: You're a wise man. We love to have Ian Heller on the show and we've had him a couple of times and I watch him a lot too. He's helped me out in my thinking over the years and we try to roll in his basic concepts interesting times for sure.
Well, Hey, Nelson, you're a very knowledgeable guy. I really enjoy having you on the podcast. I think we will have you back too if you'll have us. And one of the reasons aside from your general knowledge in overall good nature is you've got this wonderful accent.
Now I have to ask you, I've been wondering, but I'm going to let it fly. You're familiar with BTM U-Bolt blend coffee, clearly. You listened to the podcast; you know Jake listens. I wonder if you'd be open to doing a little voiceover for his coffee commercials. I think you'd be perfect. What do you think?
Nelson: Yeah, that makes complete sense. With Jake, we keep building up a friendship. We sit on the board of Southwestern Fasteners Association and he's a great guy. I love what BTM is doing in the marketplace. Definitely, I will do it. What about if I do it in Spanish, that will be something that you will be open for?
Eric: I think so. I'm put you on the spot, I'm open to anything. I think Jake will get a big kick out of it. And who knows? They'll probably sell a few more cups of coffee too. Not that that's what his main focus is, but you get the idea, let her fly, let her fly.
Nelson: Let's try this. Let's see, I have traveled the world and I will say that BTM, U-Bolt blend coffee. Es en mejor café coger horsabor he con aroma es espectacular. What about that?
Eric: Muy bien con carne. I love it. Nelson Valderrama, Intuilize. You're the AI guy for the fastener industry these days. And I'm so glad that you were able to join us finally. And we'll be watching what goes on. Thanks for being here.
Nelson: No, thank you Eric, for the opportunity. And again, I just wanted to open the doors for anyone in the industry who is interested to have any conversation about this. They can contact me, in my website or if they can reach out to you, that's fantastic. But again, we are all here to help the industry. I think this is the present and this is going to be about the future. And we want to make sure that people are educated and people is knowledgeable about it so they can make better decisions for their own companies.
Eric: Perfect. Hey folks, we'll be back in un momentito. It's Fully Threaded.
This isn't some kind of partially threaded radio show. Oh no. This is Fully Threaded Radio, talk radio for the fastener industry.
Goebel fasteners presents the GO-Lock structural interlocking blind rivet available in aluminum, steel and stainless steel with diameters 3/16th of an inch, 1/4 of an inch and 3/8th of an inch. The GO-Lock is one of the most versatile and common style of structural rivets on the market today. Paired with the Airpower 3 Pneumatic tool. This combination proves efficiently robust for truck and trailer applications, where the need for heavy duty fasteners is required with its high strength features. It is clear why the Go-Lock is the best performing structural blind rivet in the market today. Goebel Fasteners, 'Quality, the First Time', goebelfasteners.com.
This is Jake Davis with BTM Manufacturing. And for over 50 years, we have been a leading manufacturer of bent wire and threaded products, including U-bolts, single and double-end studs, anchor bolts, and many more per print items. Based in the heart of America, Kansas City, Missouri. BTM supports Fully Threaded Radio because they support our fastener industry.
Being a part of FTR is almost as good as a hot cup of industry flavor U-Bolt blend coffee, and if you still don't know how good that is, call BTM Manufacturing today and find out for yourself. BTM Manufacturing, 'Commitment to Service'.
Are you tired of empty promises from software vendors? Are you paying for support that you are not receiving? Is it time for another paid upgrade? There is a solution INxSQL delivers quality software designed for the fastener industry at an affordable price with industry leading support, quality software, affordable pricing industry leading support. Only INxSQL can deliver all three, www.inxsql.com.
David: This David with ND Industries You're listening to Fully Threaded Radio.
Eric: I see on LinkedIn, Andy Cohn, formerly of Duncan Bolt. You may recall folks he sold his company. He's changed his occupation to Beachcomber.
Brian: Ah, okay. Well, I could see Andy wandering up and down a beach actually.
Eric: I think he's got a lot of people jealous with that one.
Another person out on LinkedIn is Tracey Lumia, Link Magazine. She put a post out there about International Fasteners. They're launching their 'Daggerz U'. So, everybody's getting in on online training these days, Bri. 'Daggerz U' is being brought to us by International Fasteners, long time FCH sourcing Network members. I had a look at their website and I didn't verify this, but I would bet you, Joanne Bialis has something to do with it because it's a very sharp looking presentation.
Brian: Yeah. We see Joanne at all the shows. She’s a very good attendee and Musker.
Eric: Used to. Those were the days. Used to see all of our friends and sponsors out there, including our title sponsors who happened to be Stelfast, Brighton-Best International and Goebel Fasteners. Of course, the Fastener News Reports brought to us by Volt Industrial Plastics. And just before we get to Mike McNulty's Fastener News Report.
And also, on the topic of online training, long time sponsors Würth Industry North America has come out with an all-new, I guess you'd call it a webcast, Bri. It's an educational webcast. They're calling it Würth Knowing.
Brian: Cool name.
Eric: Yeah, it was a sitter well they've done it inspired by their industry renowned Fastener Academy training. Würth knowing is going to dive into topics related to fastener engineering, bolt and joint design and fastener assembly as the series unfolds. And I have to tell you that they did a heck of a job promoting the premiere party for this, which was back on March 10th.
So, they had a live streaming event set up and it was pretty well attended. I saw Tracey out there from Link and also the Fastener News Desk. People were in the live stream as well as a lot of other people and tell you they've pulled out all the stops to make this a great show. And from what I saw, they've succeeded.
Eric: Very professionally done. I would actually say the quality is high enough where it could have shown on HDTV. You've seen some of those home improvement kinds of shows out there. Bri?
Brian: Yeah, I have. I have. Lynn watches them a little more than I do. Okay.
Eric: It's because you're always working.
Eric: Würth Knowing is hosted by Randy Lammers and Aaron Keevan and we're going to have them on the next episode of the podcast, Bri, and get a little insight into how they put this thing together. What goes on behind the scenes? They look like pros. I'll tell you that. You got to get out to YouTube and just punch in Würth Knowing. And they've got two episodes in the can already, maybe more at this point, but that's what I saw. Really well done. Good job Team Würth.
Brian: Wow. So now speaking of videos and did you see Baron's new video?
Eric: Yeah, well of course I am on his Fastener of the Week Newsletter. I always see his promos and sometimes they have those YouTube videos. This one was what 'Making of a Stud', right?
Brian: Yeah. I know exactly a good old tech something. Okay.
Eric: He look happy as a clam there sitting there in the back of those ginormous studs, Spring Nut and Bolt, Texas based, hot forger. A lot of you know Baron. Now, what was the point of that blue coating on those things?
Eric: Well, I think it's Teflon. I think it's a special, Teflon coating. Blue Teflon.
Eric: For what purpose?
Brian: Well, I don't know. I presume it's a corrosion protection and probably also aids in the assembly, I think.
Eric: I'm glad I got you around.
Brian: Your old Teflon frying pan. Well, should he condition them, they last for years.
Eric: Well, lots of people in the fastener industry getting out there, sharing what they know and that's about what time it is for Mike McNulty. He'll be joined this time by Jun Xu of Brighton-Best International. Mr. Musker would you care to do the honors?
Brian: Certainly. And now for news about screws that you can use here's Mike McNulty.
M McNulty: Thanks, Eric and Brian. This is Mike McNulty from Fastener Technology International Magazine, bringing you the Fastener News Report. Which is sponsored by Volt Industrial Plastics, makers of the world's finest plastic fasteners.
Spring training is underway in Florida and Arizona. And we have reached the 365-day anniversary of 15 days to slow the spread. Meanwhile, Israel, the United Arab Emirates, the UK, Chile, and the USA are leading the world in vaccination rates while Mr. Potato head and Dr. Seuss have gone into hiding from the woke mobsters, but I am still focused on fasteners and ready to deliver today's Fastener News Report.
In this episode, Jun Xu, President of Brighton-Best International joins us to reveal the latest results of the fastener distributor index. Also known as the FDI. Also, in today's broadcast we have our top story on Novaria and the Young Fastener Engineers, as well as newsmaker headlines from Agrati, AIS, Optimas, Derry Enterprises, Auto Bolt, Parker Fasteners, EFC, Würth House of Threads. And STAFDA on the back page report. We're going to talk about logical fallacies. We'll get to all of that and the latest FDI results right after this.
My name is Joe Volltrauer. We got really good people work ethic. You do a little more than what you're getting paid for. I'm a great believer in that. That's how you get ahead. 'We are Volt'. If you grow too fast, you go broke real quick. And growing too slow is not as dangerous, but it's boring. 'We are Volt" We know how to build the tools. And if you don't have the tools, you can't do anything.
Volt Industrial Plastics, makers of the world's finest plastic fasteners.
Solution Man can. Solution Man, you're my fastener hero. Just doing my job, ma'am. S-O-L-U-T-I-O-N, S-O-L-U-T-I-O-N, Solution Industry, we are solution.
Brighton-Best International stocks, one of the largest and most diverse lines of construction, industrial safety and consumable products in the world through our preferred Ironclad and US Anchor brands. We are committed to providing high quality products to help get the job done right. The award-winning preferred brand line of products from BBI include hand tools, cutting tools, abrasives rivets, and drywall screws. Ironclad gloves are the industry leaders with more than a hundred tasks specific. High quality PPE gloves covering cut, impact, cold, heat, water, abrasion, rip and exterity. Receiving the 2018 occupational health and safety award for new product of the year with our trained sales team members, competitive pricing, 20 plus national warehouses, and next day service to all major population centers. BBI is committed to bringing quality innovation and safety to each and every job site.
M McNulty: The seasonally adjusted fastener distributor index for February, 2021 came in at 66.1. A major increase from January's positive reading of 57.7 and the highest number since the second half of 2018. Fastener distributor index data is collected and analyzed by the FCH sourcing network and Baird.
The FDI seeks to identify demand pricing and outlook trends within the American fastener distribution industry to get some insight on these results. We to Jun Xu, he is the president of Brighton-Best International. Hi John, thanks for joining us on the Fastener News Report.
Jun Xu: Hi Mike, I'm glad to be here.
M McNulty: And it's good to have you, I think this is your first time on the report. According to my recollection.
Jun Xu: It is. Yeah, it is absolutely.
M McNulty: So, your timing is great. You've picked a month where we have, maybe one of the top five best results of the FDI and what do you think of the latest FDI results?
Jun Xu: Yeah, I do have good timing. The results, I think they're accurate, that's certainly kind of what we're seeing in the market. Really, since April or May of 2020, we've seen continuous growth month after month really. December typically is a little bit slower, but we didn't experience any slowdown. In January, it's just been growth on top of that. So, it's accurate, based on what we're seeing.
I think, there's always two drivers to growth. It's either inflation or tonnage growth. And I think both is happening now. From the inflation side, I saw some of the mentions about steel prices going up, all the chaos with ocean freight, as well as the US dollar depreciating. So those are certainly inflationary factors that's driving the market, but it's also tonnage. Demand is up, from a tonnage perspective. So, I think at least as far as the fashion industry is concerned, we're definitely firing on all cylinders right now.
M McNulty: Yeah. It's gone gain busters. The sales index surge to an 85.9, which is the second highest I've ever seen. It was 90, back in, I think it was December, but two-thirds of the respondents saw their revenue climb above seasonal expectations, which I guess February is normally a softer month. I don't know if that's the case for you guys or not, but in general, I think it is according to Baird.
Jun Xu: We've not seen it honestly. It's just continuing to grow and honestly, our biggest challenge right now is finding enough people in the warehouse to help us ship our product. The labor market is still fairly tight. We get people coming for interviews, but people don't show up for interviews. They're scheduled, but they don't show up. That's happening quite a bit.
So, finding people I think has been a challenge. It's also a function of, COVID and how comfortable we are bringing in new people as well. So, there's that as well, but, I think, that the labor market is actually probably our biggest problem.
M McNulty: Your biggest problem. So, you're getting applicants, but they're not showing up, they finding something else to do, or maybe they have too many jobs to pick from?
Jun Xu: I think the issue is that they're getting unemployment and they're scheduling interviews. But they're not deciding to come up. So, I don't know that's my speculation.
M McNulty: You're probably right. We, we touched on that in the last month's episode about, these incentives to stay home. And, I gave an anecdote about my wife who is a substitute teacher who made the most money she ever made last year by being on unemployment, but she's back to work.
Oh, well. These are maybe good problems to have, let's move into the forward-looking indicator also called the FLI. It set a new record of 73.9, the ninth straight month of positive outlook and a substantial jump over the previous month, which was good as well. So, people are expecting things, not only saying they're good right now, but they're expecting that down the road. Are you guys seeing the same thing?
Jun Xu: Yeah, absolutely. Absolutely. So, I wonder how much of this is actually like, pent up demand, based on, 2020 activity. I will say that I feel like people, deliver their inventory too much. We were expecting sort of a longer tail to this and a lot of people just got caught in the other side of this inventory equation.
M McNulty: Did they let it go too low?
Jun Xu: Yeah. They let it go too low. And then no one could have expected what's going on with ocean freight right now. It is just ridiculous. The ocean freight rates, I think are five or six times normal and we don't really expect this to come down at least until summer. So, my understanding is a lot of these ocean carriers, they negotiate longer-term contracts around April. And they're not going to let the prices drop right before they negotiate long-term contracts.
So, we're expecting this to last until at least the summer, I would say. But, when people deliver the inventory, I think what they're hoping was things were normal afterwards. And usually after, Christmas, the shipping season, before Christmas rather, things start getting better like November and December. Usually, we see a decline in shipping and you see, some normalization, but it's just people deliver too much. And then it just, came on faster and faster.
I think part of it too is stimulus. A lot of governments are pumping a lot of money into their economies, to grow the economy. And, I think that's driving a lot of the raw material increases as well. So, there's a lot of factors going on, but I do think for 2021, I think it will be a great year. Mainly because, in 2020, the way we look at our market really is sort of in three major cohorts.
There's construction, there is manufacturing activity and then there's oil and gas activity. So at least from my perspective, those are the three main buckets I would look at. In 2020 construction was very strong, manufacturing, definitely dipped. Because it was obviously harder to control, spacing and separation in a manufacturing environment. And I think what we saw was that the smaller manufacturers, recovered faster than the larger manufacturers, because when you're talking about 50 people versus 1000 people in a factory is very different for cause for reopening.
So, after COVID, things got better. But now, in the automotive sector, we were seeing a lot of chip shortages, which are leading to line shutdowns as well. So, I would say, manufacturing really hasn't come back to full steam yet, even now.
And then for oil and gas, I think prior to October, it was just terrible. We even had; I think negative oil prices at one point. And then it came back, starting in October, November. And so, we're starting to see some recovery in oil and gas, but still not to full steam yet because people aren't traveling. There's a lot of parts of the economy that are still kind of being held back.
So, the way I see it if we got through 2020 relatively well with two out of the three cohorts, that are sub-par, in 2021, if things get back to par, then I actually think that the growth is even faster down the road.
M McNulty: Yeah. So, it's going to be a pretty good year.
Jun Xu: I think so.
M McNulty: Now I just want to circle back a little bit. Your comments on inventories were played out with the data with the FDI as well, because both those numbers went down and then we had 69% of respondents believe, as you said, customer inventories are too low and then they're going to have to restock. So that should also bolster bullish demand for future conditions.
Jun Xu: Right. We are in the inventory game, that's how we make our money. If you'd have nothing to sell, there's no revenues.
M McNulty: They'll go somewhere else.
Jun Xu: We, don't make money doing marketing. That's what I would caution people. I think I wrote something earlier about just-in-time inventory and held them without their age and it really came to bite us this time. Inventory, is the best insurance, that you can have for volatility. In my mind, you can't plan it down to one week or two weeks when ocean freight takes three months to get here or one month rather.
M McNulty: Unexpectedly.
Jun Xu: One month, two months.
M McNulty: Winter storms, the trucks are sitting in the rest stops instead of driving that kind of stuff.
Jun Xu: You just can't predict. So, I just always say, look, if you buy insurance for your business, the best insurance for your business is inventory,
M McNulty: Oh, that's an interesting report. I'm thinking of people have like used equipment and we have some other markets that we cover. The most successful used equipment guy. He's got warehouses all over the country just filled with machinery and he's always able to deliver, and he buys it cheap.
So, okay. I want to mention the six-month outlook numbers, which are good also with all this other good information. We had 83% of the people think conditions are going to be better six months from now, 14, the same and only 3 expect it to be worse. And that's the lowest, worst number that I can remember ever reporting. So that's all just, more good news on top of good news.
Jun Xu: I think, from a macro level, we're very lucky actually, I think to be in this industry, we're all very lucky. If you look at the major trends that's going to happen, hopefully there's an infrastructure bill that will come out of Washington at some point. That would be a boom to the fastener market. You look at a lot of the bills and renewable energies, they're using a lot of fasteners.
You look at, automation as a trend for the future. Automation obviously uses a lot of fasteners. I think, we're very lucky to be in this industry where a lot of the macro trends that we see are beneficial to us rather than, negative to us.
M McNulty: That's good because a lot of people would say, Oh, the fastener, it's kind of an afterthought for a lot of people, but it seems like it's insulated from, transits are going on right now. So that's good news for fastener distributors and fastener makers all over the place.
Jun Xu: Yes.
M McNulty: Going on in comments and we've discussed some of this already, but this time around with the respondent commentary, almost every comment touch on raw material, inflation logistics issues. One company said, "FedEx and freight companies lost some big shipments. Otherwise, we would have been much higher in sales." People talking about raw material spikes, the 30 to 60% range freight costs for overseas being a challenge.
One, respondent said lead times are climbing as overseas is bombarded with orders from the big boys. I'm not sure who the big boys are. Maybe that's you guys. Domestic supplier lead times are skyrocketing. Everything starts and stop. So, the supply chain, the hiccups, and still getting more expensive. And you said, you thought ocean freight was going to be a problem at least until the summer. What about these other things with material prices, you mentioned currency? You think you see those things going on in the summer and through the end of the year, as well?
Jun Xu: It's really hard to say. I think if you can get three months ahead, right then you're pretty good, six months or a year, it's hard to say. I will say, it doesn't seem like, the demand is going to shrink. It's only going to increase, especially as people get more active in the economy. The government's passing more stimulus. It just seems like the demand is going to grow, not shrink.
For the, currency. It's, really hard to say. There's a lot of factors into it, but when the government is pushing money supply, right. You're pumping money into the economy.
M McNulty: It's getting weaker.
Jun Xu: So, it does depreciate. How do other countries react to that, because a lot of countries peg their currency against the dollar? Are they going to react in suit? Probably, I don't think anybody wants the dollar to drop too much. So, it's hard to say, there's a lot of reactions to it. And also bear in mind, the other economies are also in the same boat.
They're also pushing money out as well. So, it's all relatively speaking. Who's pushing more money into the market will probably depreciate faster, but there's a lot of things going on, but I think in general, it's probably more of a deflationary environment for currency, depending on how countries adjust to currency against the dollar, from a policy standpoint.
M McNulty: And the same thing with the shipping issues, you already said through the summer. That's a good way to look at three months out. And if you predict that, right, you're doing a good job. I think it's going to be, a challenging year, but in a different challenge than last year that were challenging meet and fill demands. So, I think these are good. I mentioned earlier good problems to have.
Jun Xu: Yeah, definitely. Better to be on this side than on the other side. Yeah, for sure.
M McNulty: The March, April month for the last year, nobody wants to see that.
Jun Xu: I'm glad you didn't invite me to talk about those months.
M McNulty: Jumping off the cliff that month. So, it's been good. In the fastener industry we're serving manufacturing and construction, it's good that we're not caught up in the service industry. I feel bad for those folks obviously. And the same thing with, transportation for airlines and stuff like that. It's a tough, tough slog for them right now.
Jun Xu: Oh yeah. For sure.
M McNulty: Good. Any, anything else you want to add on the FDI?
Jun Xu: I think it's directionally correct. And, I think it's a strong market. We expect it to be strong at least into the foreseeable future.
M McNulty: I think Eric needs to schedule you more often to keep the numbers up high.
Jun Xu: Fair enough.
M McNulty: Okay. Well, let's move on. I mentioned earlier, you're the President of Brighton-Best, what's going on new. There's always seems like there's some news coming out of Brighton- Best, but anything there to report to the listeners.
Jun Xu: We're continuing to invest into the business, in 2020, even though, we couldn't go out and see as many customers. We took a lot of time to look at our business and we invest into certain pockets of it. We've expanded, quite a bit of our fastener range. So stainless and metric would be areas that we expanded our range into.
The US anchor program, we actually introduced two new ICC approved anchors. One for a large diameter, concrete screw, and one for a wedge anchor. We introduced vending machines as well to the market. Drywall is doing well, obviously tied to construction and, ironclad is actually going really well, as well.
M McNulty: That's the glove line, right?
Jun Xu: The glove line. So, we've introduced, quite a few new innovative, styles as well as, expanding Ironclad into actually a broader range of PPE, not just gloves. So that will be coming out in 2021. So, the main point is that I think for us as a company, it's important to keep on moving forward, even though in 2020, pretty much everyone was just treading water.
We were all just in a holding pattern, and trying to see where this market would go and, the market is strong. I think it's important that we all get out of our holding pattern and start going into a business mode again, basically looking to grow and looking to expand. No one ever won a medal in the Olympics for treading water, right?
No one ever said I can tread water for 10 hours and here's a medal. It's all a bit of a race, to see. I think if companies continue to tread water, if you will. In 2021, they're going to see the market, leave them. Other people will step into that fold. So that's what I would encourage people. I think 2020 was a tough year, we got through it. I think we got through 2020 better than we went into it. And, you should look at 2021 as a year of expanding our businesses.
M McNulty: Yeah. That's good advice. I think, one thing that a lot of people learned, a little bit more time to step back and reflect on how you were doing things and what you wanted to do and spend some time on that. Sometimes you didn't have, because you're all caught up in the day-to-day activities. A little bit of a blessing in disguise.
Now you mentioned the glove line and, George Hunt III, was on the podcast with Eric and Brian last month. And he was talking about gloves. I don't know if you have heard about this, but they're talking about everybody competing in some kind of a mud run thing.
Jun Xu: Yeah.
M McNulty: Are you on that team?
Jun Xu: No. I told them to wear some goggles because you don't want that stuff getting in your eyes.
M McNulty: He was pushing the gloves. I think the fingerless gloves, said those were going to give a good grip for people.
Jun Xu: It's actually a great. It's a great line. I'm very happy that we got into it, honestly. It compliments what we do. It's a great dollar per pound product. It's doing really well.
M McNulty: Smooth out some hills and valleys for other lines.
Jun Xu: Yes.
You've got a lot going on at Brighton-Best. And, it looks like you are not treading water and you guys are out swimming out in front. The last thing I wanted to bring up before we finish up is, I wanted to, this is a little bit late. But I want to congratulate you on being selected as one of the winners of the Young Fastener Professional Award, which was announced in Las Vegas in 2018 at the fastener show. And, so congratulations for that.
Jun Xu: Thank you.
M McNulty: And also, the other winner was someone, you know, pretty well, Peggy, Hsieh, she's the Chief Operating Officer at Brighton-Best and also part of your family.
Jun Xu: Yeah, absolutely. I know her very well.
M McNulty: So that's a nice honor for both of you guys. And I was actually there. We didn't talk after talk after, so I want to congratulate you over the air and remind the listeners that you guys won that. Congratulations.
Jun Xu: Thank you. Thank you.
M McNulty: And, also, I wanted to mention that, if listeners go to the October, November issue of Fastener Technology International, they could see the picture of Peggy and Jun and other family members on pages 160 and 161. So that's a courtesy of the traveling salesman, thanks for joining us. And we hope to get you back on in the future.
Jun Xu: Okay. Sounds good. Thank you, Mike. Enjoyed it.
M McNulty: That was Jun Xu. He's the President of Brighton-Best International.
The FDI number for February was 66.1 versus 57.7 in January, 2021. Visit Fdisurvey.com to participate in the process and get a detailed PDF copy of Baird's monthly analysis.
Now for today's top story, Novaria and Fort Worth, Texas has acquired the Young Fastener Engineers Incorporated, also known as TYE. A designer and manufacturer of aircraft and aerospace hardware with the primary focus on fasteners and inserts. The terms of the deal were not disclosed, but this acquisition continues Novaria's expansion into aerospace fasteners.
Novaria CEO, Bryan Perkins tells us quote, "We've made several acquisitions since April, 2020. All of which are unique contributors to our evolving business model. The acquisition of TYE is an integral part of our strategy to expand our portfolio of proprietary and qualified products that we offer customers. Since 1963 TYE has introduced several product lines for the aerospace industry.
TYE's committed focus on innovation. And the new partnership with Novaria will allow the firm to continue to expand its product portfolio and drive innovations to the market. TYE operations will continue at its Southern California facility with its tenured, skilled employees included former owner and president Pat Wells. TYE uses a vast network of aerospace distributors, and it is also a stocking manufacturer, maintaining inventory of several thousand-line items. All TYE products are manufactured in the USA.
Next up today's fastener newsmaker headlines. In acquisition and expansion and contract news. Agrati announced an equipment expansion at three factories in France to produce electric vehicle fasteners. All Integrated Solutions, also known as AIS. A division of MSC Industrial Supply company has moved to a new distribution center in the Minneapolis St. Paul area.
Optimas Solutions has added larger diameter metric fastener production of matte thread and TAPTITE 2000 licensed products. BUMAX in Sweden and its sister company Bufab in Denmark partnered with the Danish sea jacket project to develop foundation fasteners for offshore wind turbines.
Derry Enterprises has acquired, O.K. Fasteners a Huck and mechanical fastener distributor. Tanner Bolt Nut Incorporated reached an agreement with Parker Fasteners to become the new exclusive master distributor in the USA for Parker's Lock-Out maximum security screw. And EFC International formed a partnership with Research Engineering and Manufacturing Incorporated also known as REMINC to distribute parts made by REMINC licensees.
In personnel news, Jan Morr accepted a position as Regional Sales Manager at Würth House of Threads and operating company of Würth Industry North America also known as WINA. Auto Bolt named Garrett Hedges, VP of sales.
TR Fastenings appointed Kevin Rogers to the new position of Director of Plastics and Rubber Sourcing and Category Management. And it named Andrew Fletcher, the Director of Plastics and Rubber Commercial and Technical. Stanley Black and Decker named Donald Allen Jr. President and CFO.
Brighton-Best International, also known as BBI announced that Dan Jaram, Sophia Glaubitz and Clarence Mosley are taking on the added roles of managing prominent buying groups within BBI. Grainger announced Julie Myerholtz as Vice President and Chief Information Security Officer, and All-American Threaded Products also known as AATP announced Al Bate as its new national sales Manager.
In milestones. Hague Fasteners of the UK is celebrating 50 years of special bolting production. And NEFCO is celebrating its 40th anniversary by launching its "United We Build" branding initiative.
In event news, the Specialty Tools and Fastener Distributors Association also known as STAFDA is relocating is 2021 annual convention and trade show from Charlotte, North Carolina, to the Orange County Convention Center in Orlando, Florida. The original dates were November 7th to 9th, and the new dates are October 24 to 26, 2021. You can get details on all of these stories and more in Fastener Technology International Magazine and the Fastener News Report and monthly newsletter both available email@example.com.
Now let's turn to the back page to talk about logical fallacies, the semi-sarcastic and somewhat humorous phrase quote, "what a time to be alive." Unquote could certainly be applied to the normalization of informal logical fallacies being passed off as serious debate, not to mention the normalized uses of them and professional journalism commentary and all forms of media and business communications.
So, I thought it would be a good exercise to see if any of these 10 popular logical fallacies sounded familiar.
Number one, Ad Hominem fallacy. Ad hominem is Latin for against the man. Instead of advancing good sound reasoning in the ad hominem argument replaces logical argumentation with attack language where someone rejects or criticize another person's view on the basis of personal characteristics, background, physical appearance, or other features irrelevant to the argument at issue.
Number two, straw man argument. An argument where someone attacks a position that the opponent doesn't really hold.
Number three, false dilemma or false dichotomy, a line of reasoning that limits the options to, two when they're in fact, more than two options to choose from.
Number four, slippery slope fallacy, which works by moving from a seemingly benign premise or starting point, and working through a number of small steps to arrive in an improbable, unlikely or ridiculous outcome.
Number five, circular argument, when a person's argument is just repeating what they already assumed beforehand. And the conclusion appears as one of the premises in the argument.
Hasty generalization, a general statement without sufficient evidence to support it.
Number seven red herring fallacy, a distraction from the argument, typically with some sentiment that seems to be relevant, but isn't really on topic.
Number eight, the Tū Quoque fallacy comes from the Latin for 'you too', and is also called the appeal to hypocrisy because it distracts from the argument by pointing out hypocrisy or similar faults in the opponents, making it.
Number nine, equivocation also known as ambiguity. This is when a word phrase or sentence is used deliberately to confuse deceive or mislead the other by sounding like it's saying one thing, but it's actually saying something else. Equivocation comes from the roots of equal and voice, which refers to two voices. When a single word can say two different things.
And number 10 bandwagon fallacy, which assumed something is true or right, or good, just because people agree with it.
Do any of these sound familiar, logical fallacies have been in use and formally identified for well over 2000 years. And there are many more than this short list studying these and identifying them should be a prerequisite in all levels of schooling today. But it kind of doubt that it's on the radar of many people and current positions of power. But I can logically claim that it is always a good time to be alive, but this time is certainly a unique one for observing the abandonment of good logical fact-based and common-sense arguments.
And finally, for our Backpage bonus question, did you know that the United States constitution is the world's longest surviving written charter of government? There's only one nation on earth that can point to with pride to a written constitution that is more than 230 years old. And that's the United States of America.
Here's a quote from the US Senate website on the annual celebration of constitution day, quote it's first three words. "We, the people affirm that the government of the United States exist to serve its citizens. For over two centuries the constitution has remained in force because its framers wisely separated and balanced governmental powers to safeguard the interests of majority rule and minority rights of Liberty equality and of the federal and state governments. Since 1789, the constitution has evolved through amendments to meet the changing needs of a nation. Now profoundly different from the 18th century world in which its creators lived." Unquote.
The longevity of the constitution points to two different directions at once in my opinion. To its remarkable greatness and to its fragility. As George Washington warned from his position of heading up the constitutional convention, the final document quote, "Should not have too good of an opinion of human nature." Unquote, this has been Mike McNulty of Fastener Technology International bringing you the Fastener News Report. Please send your news pictures, comments, corrections, or complaints to me at McNaulty@fastenertech.com.
You hear that? Your line is speaking to you. It's asking you a question. Are we good enough? Is good enough good enough? Do we have everything we need for today and tomorrow? Are we delivering the best possible solution? Will what we make stand the test of time. Can we be bigger, faster, safer, smarter? Can we get what we need before we need it? Can we increase production? Can we be more precise? Can we work day and night for weeks on end? Can we create what's never been done? Yes, we can. Let's discover your worth.
'Quality products, Quality Service, Quality Customers.’ That's 3Q Inc a fastener distributor. Unlike any you've worked with before with its unique remote managed inventory, stocking programs, wide array of secondary service offerings and wholly-owned cold forming capability. 3Q Inc has been supporting fastener distributors since 2008. 3Q offers a wide range of 100% American made fasteners, including ITW SEMS Lock Washers as well as specialty and imported parts. Give 3Q a call today to discuss your needs and experience 3Q quality for yourself. 3Q Inc, www.3q-inc.com.
Parker Fasteners is your premier cold heading manufacturer forging the future with precision and quality is our top priority. When you think of domestically produced sockets and tamper-proof screws from alloy and stainless, including A286, think Parker Fasteners. 'Forge the Future' with Parker Fasteners, visit Parker fasteners online today at parkerfasteners.com.
ND Industries has been increasing the safety and reliability of fastener assemblies by developing innovative materials and processes since 1955 names like ND Patch, Thermoloc, Electroloc and Vibra-Tite serve a wide variety of fastening applications across North America and around the world. To see our full line of innovative products or to discuss your application requirements, contact ND Industries today at www.ndindustries.com.
Carmen: Well, hi everyone. This is Carmen Vertullo with your Fastener and Training Minute, coming to you from the Fastener Training Institute and AIM Testing Laboratory in beautiful El Cajon, California. As is often the case today's Fastener Training Minute comes from an email question from one of our many listeners. And that email question had to do with the number or letter or designation, whatever you'd like to call it A36, A3-6. What is that? While it should mean something to us fastener folks, but it more importantly means something to the steel community. And when I come back, I'll tell you why you should know what A36 means when you hear it in the context of a fastener material.
Eric: Knowledge is the key to success in the fastener industry and the Fastener Training Institute has the tools you need to succeed from advanced to beginner's training courses. The Fastener Training Institute provides a wide variety of resources to boost your team's ability to operate at an elite level, go to fastenertraining.org, to see the schedule online and in-person classes coming up and reach out with any questions or requests for custom course materials, the Fastener Training Institute, fastenertraining.org.
Carmen: Well, welcome back everyone. This is Carmen Vertullo returning with the Fastener Training Minute. Today's topic is A36. I recently received an email from a listener who asked, "I have a request for quote for A36 Threaded Rod. What is that?" Well, oftentimes when we hear the word, A36 in the steel community, we think of low carbon steel, relatively low strength, probably the most common type of steel, there is ASTM A36, usually applies to rods and plates and bars.
We hardly ever see it properly used in the context of a fastener requirement because when we use the term A36 relating to fasteners, what we should be talking about is ASTM F1554 Grade A36, which happens to be about the same exact material as A36 steel rod plate or bar. However, without the F1554 on it, there really is no such thing as an A36 Threaded Rod.
And the old days we had an ASTM A307 which is another specification for low carbon, low strength, steel fasteners. We had a grade 'C' in there which was threaded rod very equal to A36. And by the way, the A36 strength is about 60,000 KSI. On the very low end. It's allowed to be as low as 58, but you'll hardly ever, I would say, never see a bar of A36 that's lower than 60 KSI tensile strength.
And that's where ASTM A307 starts and A36 does have an interesting property about it in that it is 36 KSI yield strength. And in ASTM F1554, the grade, A36 literally means it's 36 KSI yield strength. Yield being that point where the fastener or the material stretches and permanently deforms, it won't go back to the way it was, but it doesn't break.
And the tensile strength or the ultimate tensile strength is the strength at which the steel would break. So now whenever you hear A36 you'll know that it's talking about steel, unless it's accompanied by ASTM F1554 grade A36.
Now the quandary is many end-users just don't know what they're talking about. When they ask for A36 threaded rod, we see it often from the construction and constructural communities. However, if you look at the material test report that comes with your low strength threaded rod, that is the Mill Test Report.
Chances are very good that it will indicate that raw material meets the requirements of ASTM A36, and that should satisfy any end-user that asks for A36 threaded rod. Well, now, you know, all there is to know about one of the simpler topics in fastener, A36. This has been Carmen Vertullo with the Fastener Training Minute. Thanks for listening.
Michelle: This is Michelle Richards with the Olander Company, and you're listening to Fully Threaded Radio.
Eric: Alright, Brian, here we are with the main course of this fastener feast.
Brian: At last.
Eric: Hope you got a big appetite folks. This is a pretty large serving, but it's done to perfection. I promise before we bring it on, though, I wanted to mention that Charlie is a guy, who has got a lot of information. We're very lucky that he shares it. And during this conversation, he discusses steel surcharges, which have been on the rise.
And right after we recorded the segment, he received some additional information and he wanted originally to add this into the conversation. And I just asked him, Hey, could we leave perfection just where it is be like trying to re-season a very delicate cheese souffle.
So, he said, yeah, just go ahead and read the important part of this in advance of the conversation. I think you'll get the message. Here it is, the latest surcharge announcement received on March 10th was not what I anticipated. I was expecting the steel scrap surcharges to remain around 1585 per hundred weight, which was the February, March rate.
Maybe even a little drop instead, scrap surcharges for steel delivered in April 21 will be 1935 per hundred weight. That's an increase over February and March of 350. Now in contrast, he pointed out that as recently as September, 2020, the scrap surcharge was 415 per hundred weight. So, it's a pretty substantial jump. And he gave us a few examples of what that actually means. Here's one of them, 1"-8 x 4 socket head cap screws. The surcharge is going to be about $18.90 per hundred pieces. So, it's not chump change Bri.
Brian: No, it is not.
Eric: He points out that surcharges for fuel and alloying elements have also gone up just not as severely as scrap. So, this is hitting manufacturers. Distributors will be feeling if not already, pretty soon. Charlie's got a lot of great info during this segment, folks, hope you enjoy it.
Well, it's feature segment time on the podcast again, and Fully Threaded Radio guests always know they'll get their money's worth when the great Charlie Kerr of Kerr Lakeside is our guest. And that is the case right now. You're an audience favorite Charlie, thanks for being here again.
Charlie: I appreciate the opportunity to join you again.
Brian: You don't know, how lucky you are, okay.
Eric: The last time I had the pleasure of visiting your facility out there in Euclid, Ohio, you gave us the tour yourself. I happened to be accompanied that time by a young man. Who's basically trying to figure out what to do with himself after high school. You did a really great job of convincing him. There's a possible future in the trades, not going to college. He's definitely potential college age material. Well, we'll get into that and all kinds of other things. What have you been up to lately?
Charlie: Well, needless to say, not what I would like to be up to, COVID-19 has cramped my lifestyle a little bit. I'm sure I'm not the only person that's, able to say that.
Eric: We've heard about that.
Charlie: Last summer, it didn't really do too much to me. I go to a lot of major league baseball games in the summer, and I go up to Detroit for a couple Tigers games. When the Indians are up there, I go to Chicago for a couple White Sox games. When the Indians were in Chicago, plus I probably go to about 15 to 20 Indians games, Cleveland, obviously that was a big absence in my lifestyle.
So, I made up for it, riding my bicycle. And I typically ride about 1,000 to 1200 miles a year. In 2020, my odometer said 2020 miles when I parked the bike for the season. And I've lost a bit of weight and I've gained some of it back, but it looks like for at least the first half of the summer, the place is going to be how I keep myself occupied in my spare time.
Now professionally, I've said this on a few other forums that I've been on that are fastener related. I learned so much about German fire risk mitigation in the last year, but I feel like I've actually gone to medical school and I'm a little bit irritated by this and I'll tell you why. I'm all for safety in the shop. Keeping the place, free of hazards, whether they be grinding wheels, not guarded properly, or bloodborne pathogen prevention.
But it just seems like all these different protocols that are a direct result of COVID-19 sanitizing surfaces, face coverings, social distancing. I feel like I'm running a hospital and I'm not happy about it. And I get that some of the stuff, I'll give you for instance, nobody at our company that I'm aware of has had a cold this year. And I think part of that is between the door knobs and the shopping cart handles that gets sanitized. A lot of surfaces that people routinely touch that would get them sick. Aren't candidates to do that anymore.
Speaker 6: People are being hyper careful.
Charlie: I don't mean to make light of the situation. I saw a five-minute bit that George Carlin did probably 20 years ago about how people that are real germaphobia people are actually making themselves more susceptible to get sick. Because being surrounded with germs and viruses enables your body to build up an immunity or resistance to it.
So, like I said, I'm not a healthcare professional. There's a lot about this that, I don't understand, but I just want to get back to some semblance of normal. And, I think I speak for a lot of people when I say that.
Eric: You're not doing the anal swabs over at Kerr Lakeside, are you?
Charlie: No, I'm not. In fact, one of the things, kind of backtracking a little bit when this all first started, I forget whether it was the CDC, National Institute of Health, the State of Ohio, they wanted us to take people's temperatures when they showed up for work. So, in the meantime, I got an advisory from a labor law firm that the precision machine products association has a retainer relationship with, they get periodic years.
What we think a lot of it deals with labor related issues, whether it be OSHA, EEOC to name two right away, some Orissa, related things. And their advisory was be very careful because if you're taking people's temperatures, when they're walking in the door, you are performing a medical examination. Which brings with it all kinds of opportunities to not, adhere to HIPAA regulations, protecting people's privacy and things like that.
So, I just said, look, I'm not a real order shouter router, but I've made it real clear. We're not doing anything that could be construed as a medical exam. We'll encourage people to take their temperatures before they come to work. We'll trust them if they do. And they have a fever not to come in, but once again, I am not running a medical clinic. And, I'm aggravated by it.
Brian: What did he say after that? All of us has been stuck on that road actually.
Charlie: Well, there are some businesses, Eric going back to the tour, we have 150,000 square feet of space on the roof and it sits on 10 acres of land. And we have, depending, it varies a little bit, but 65 to 75 people.
Eric: How big is that main building with all the machinery?
Charlie: It's about 100,000 square feet.
Eric: Yes. It's a pretty good size.
Charlie: Our people are really spaced out. We're not working in pods or clusters or anything like that. We've been fortunate. We have had a couple people that had family members that tested positive for COVID-19. We did have a couple of people that tested positive themselves, but were asymptomatic, but nobody who's in our employment has had to be admitted to the hospital as a result of a COVID-19 infection.
Eric: Well, it was neat as a pin when we toured through there. And I always wondered how long it takes you to get the place ship shape when the NCFA goes through, because I went through your facility on several occasions with the association and you always have it all gussied up and everybody's wearing their finest uniforms and everything. And there's, everything's nice and neat.
So, when we showed up sort of unannounced and you gave us that personal tour, I was shocked because although, unfortunately we didn't hit a lot of machines that were running when we got there. It was very orderly. It was very straight. It was almost like showcase ready.
Charlie: Okay, I'm going to contradict myself. A few minutes ago, I think I said on two or three instances I am not running a medical clinic or a healthcare facility. You want to know one of my favorite sayings is about housekeeping in our factory. When someone says, "What do we have to do, to make housekeeping, satisfy Charlie Kerr. My answer is, "It has to be as clean as a hospital and organized as a library." And I've been saying that for 30 or 40 years. So, I want to come right out and be honest.
Eric: Well, it shows. It shows.
Charlie: I have contradicted myself with this. I'm not running a medical center, but our factory could, in my mind, never be too clean. And for a couple of reasons, a factory that has poor housekeeping is, more likely to have industrial accidents.
And I also believe that people that have a cluttered disorganized work area are more mistake prone. If you work in a clerical position in the office, you're going to misplace papers, deadlines might get missed. If you're a machine operator, your net production numbers, won't be as good. You're going to run parts that conceivably don't meet dimensional specifications. So, I'm a real stickler about that.
I take pride in the appearance of our building on the outside. I take pride of the appearance of the building on the inside. And I've been in a number of facilities that, I'm going to get vague here. We tour somebody, we were considering someone as a potential supplier.
There are some things we purchased for resale that are too big or too small for what we're capable of making and we walked in the front door and I turned to my dad and I said, I can just tell by the appearance of this place, they will never make a part that will get through our quality department.
So just let me do the talking because I don't like to embarrass people. So, we went through, there were no drawings anywhere. People were using nuts as thread gauges; raw material was stored outside getting and rained on. And I said, thanks for the tour. Well, anyhow, I just politely said, we're still going to look at other options. And that was the end of it.
I knew the people; through ASTMs I never would have said your place is a pig pen. There's no way I'm going to do business with you. I'm not that kind of person. Now my old man was, believe me, I got really nervous that he was going to start running his mouth, but he played nice. He said, okay, he got with the program.
Eric: Well, it definitely shows that pride. And of course, you're extremely proud of what goes inside of your product boxes too, in which are rated across the warehouse portion of your facility. And I'll tell you when we were finished with that tour, my young companion was very impressed in that you gave him a lot to think about. You share something in common with him, also.
He's a junior at a military school and I don't know how many folks know, but that's your background too. So, you were really kicking back some, I don't know, some similarities between your experiences. He really got a kick out that, you guys, who went to military school, you a sort of a fraternity.
It's definitely a unique experience. I spent five years at Howe Military school. I graduated in 1974. Interestingly enough, I had in the early 1980s, my dad was a really hard guy to work for. And there were a few moments of my life where I thought I should explore other career opportunities outside of this business.
And I went on an interview at a company, not a competitor of ours, but it's a cold heading shop that made fasteners. And I would have been about 30 years old. So, I was easily, 12 years removed from high school. The last thing I expected was to be questioned about my experience at Howe Military and the guy interviewing me says, well, what would you call your key takeaway from your experience at military school? And because I wasn't anticipating being asked about military school, I didn't know what to tell him.
So, I said, "Can we come back to this?" I think, you know, the new term for that is circle back. I just said, "Can we come back to this a little bit later on? I want to give you an intelligent answer. And I need a couple of minutes to sort of think about it a little bit while I'm supposed to be paying undivided attention to everything else, you're going to ask me about."
So, toward the end of the interview, I said, okay, I know how to answer that question. I said, I learned how to solve my own problems. My mother and father weren't there. There was adult supervision, there might've been one adult for every 25 to 30 cadets and you were on your own. And what you learn at an age of 13, 14, 15, 16, up through high school. That every time something comes up, you can't go run into mommy and daddy or an older brother and sister, you have to figure it out on your own.
And that was an important benefit to me and we're going to probably go into this a little later, based on some things that you and I previously discussed about, items of interest. When I interview someone to work at this company, I will never flat out ask them, do you think you're a problem solver. But questions that I ask about different circumstances and how they would deal with them will reveal to me whether or not they're a problem solver or a problem identifier. And a problem hander offer.
Couple years ago, not couple years ago it was probably 20 years ago. One of our supervisors came in, with one of our header operators and announced in my door we have a problem. And I looked at him and said, it was the solution to the problem. He said, "What do you mean?" I said, "You're not just going to tell me you have a problem and walk back out the shop. You can tell me how you think we can solve this problem, because you know more about that equipment out there than I do."
And about five minutes later, my phone rang and they say, we got the problem solved. Don't forget you ever talk to us. And I run our business like that. If you're in a key position, you've got to be able to solve problems without getting someone higher up the chain of command involved. So that's my military school story.
Now. You're probably wondering how I ended up there. Since it happened, when I was 11 or 12 years old and I'm 65, now I'm comfortable telling this story. I took a standardized test in seventh grade and I finished like in the 20th percentile. And for those of you who aren't really familiar with standardized test, the lower, the number percentile, the worse your score was. That meant 75% of the people that took the test had a better score than I did.
Eric: Hang on 75 plus 20.
Charlie: Or 20. There were a lot of people that did much better than I did. Anyhow, Sister Mary Maureen at St. Paschal Baylon Elementary School called my mother into the principal's office. My mother was a school teacher earlier in our life. And Sister Maureen told my mother, there is only one way he could have gotten this bad a score. It's if you deliberately try to answer all the questions incorrectly.
So, my mother comes home and she confronts me with this. I said, "What? These tests are waste of time. Yes. If I thought the answer was 'C' I would take that number two, pencil and circle in the little oval on a different line." And that was it. It's like, okay, if I'm that antagonistic to the concept of education, I need to go someplace. Trust me, if I'd have pulled a stunt like that at Howe, I would've gotten killed, there's no way that would have happened there.
Eric: Wow. Well, I thought you were going to say, you got sent to a military school run by nuns.
Charlie: No. I got sent to a military school run by retired army guys. They were all like captains and majors, but that was all ceremonial rank. Most of them had been at NCOs in the army, staff sergeants, master sergeants. They didn't take any crap from anybody, especially adolescent young men whose parents paid a fair amount of money. It was kind of like, okay, your parents sent you here. They're going to get their money's worth.
When you leave here, you're going to be in much better shape in terms of how you've been educated, your ability to, function in a disciplined environment. And trust me, my parents got their money's worth. If I hadn't gone to Howe, I wouldn't have gone to John Carroll. I probably be following the garbage truck, throwing empty cans into the back of it.
Eric: So many guys have similar stories. They go through the ordeal, a military school or some other really tough curriculum and they hate it at the time, but they look back on it and they say it saved their life.
Brian: Of course, you didn't have to go to a military school. You could have just gone to a British type high school and you'd be forced in line with being whacked for everything you did wrong.
Eric: Was that how it was, Bri?
Brian: It was. I can still remember. First of all, you could get whacked for anything. And if it was really bad, you'd get whacked in front of the whole school by the headmaster. And I remember for one of our years, we had to learn Latin was compulsory. And so as usual, we paid no attention to teachers. I want you to learn this vocabulary. And of course, we didn't pay any attention to him.
And of course, he told us to put our books away and then asked us a few questions and realized that we hadn't done anything. And he then said, I want you to put your hands out on the table. And now I'll ask you the questions again. Every time he got a wrong question, what was the Latin word for those? You got whacked across your fingers with a cane. We all have got very, very good.
Charlie: Brian and Eric, I have a question for both you guys. You mentioned the headmaster. Have either of you seen the movie, Shawshank Redemption?
Charlie: Okay. The wording of that prison was exactly to a T the headmaster at Howe Military School, when I went there, it's almost uncanny. But when I was in 10th grade, I had to fill out a schedule for my junior year. And I'd signed up for all these less than challenging classes. And I got called into his office and he called me at it. He said, "What's up with this?"
I said, "If I take Algebra 2 and Physics, and another year of Spanish, I'll probably get lower grades. And if I sign up for all these, easier courses and Mr. Headmaster grabbed me by my tie, yanked me across this desk and said, "Cadet Kerr, school was meant to be hard. As long as you're attending the one that I'm in charge of, it's going to be that way."
So, he signed me up for Chemistry and Physics and another year of Spanish. And God knows what else. And I graduated a member of the National Honor Society. And I think the moral of the story is if you take something that's challenging and you rise through the challenge, you'll meet the challenge.
Eric: And you continue to meet challenges, Charlie, you're an inspiration in a lot of ways to a lot of people, you sure help our guy out on that day. And, I have to, also say this the last time you appeared on the podcast, you also mentioned your extensive bicycling.
And I don't know how many thousands of miles you got, but we got quite a bit of reaction to that, which makes me wonder, I don't know if you're dialed into this or not, but you know, we're doing a fastener tough Mudder over the summer. It's being run by Bob "GQ" Baer and G.H. 3, and you're in good enough shape. You got to get in on this. Have you given that any thought?
Charlie: No, I've never heard of it until you just mentioned it. Divulge more details, please.
Eric: Okay. Well, it's a 5k obstacle course that includes electrification and mud pits. And some other things I'll send you the web link to it.
Charlie: Now, when you say 5k, how much of that is running?
Eric: I think it's interspersed pretty well because there's like a dozen obstacles mixed with it.
Charlie: I could get on my bicycle right now. It's almost 60 degrees here in Cleveland and I haven't ridden since, I took my bicycle with me when I went to Florida January, I could go for a 50-mile ride today. But if you wanted me to jog to the end of the parking lot and back, you'd be calling 911, I cannot run. Don't ask me why. I can swim and I can ride that bicycle for really long periods of time. I could probably get into a swimming pool and peel off a mile and not even think twice about it and I can walk forever. But for some reason when I start running, it's just not working.
Brian: Well, you need to come along and just watch then I think that might be better.
Charlie: I'd be curious to know about it, but if there's any running involved, a defibrillator needs to be close at hand.
Eric: Well, these guys are pros. I wouldn't be surprised if there's not all the necessary emergency equipment. I don't want you to tempt fate or anything like that. But I think the idea is back, that the training is going to start for this whole thing. And there's a good group of fastener people involved with this now, and people will be training up for it and then come August. I think you'd be plenty prepped, but again, I'm not a doctor, so I'm not going to give you any advice that is going to cause you to need a defibrillator.
Charlie: Anyhow, send me the info or tell me how to look it up. And I will certainly. And based on what you've said so far, it's something I want to learn more about.
Eric: Tough Mudder. I'll send you the link. Well, there's something else, you know, a whole lot about military school, getting whacked, riding bikes, baseball, but it's also steel prices. And we've been kind of stuck on this theme on the podcast and in the industry for the last several months, since all kinds of things started going sideways, material pricing, being one of them.
And when we were walking through your facility over by the brownies, I believe it was you call it legacy machinery, I think. You got them all set up there. You don't use them too often, but you've got all that bar of the odd sizes in that, and I guess your dad forced you to keep that on hand. I guess he was really ahead of his time. Wasn't he? When he made you keep all that stock around?
Charlie: First of all, let me clarify a couple of things. What you're talking about is cold finished bar, various diameters in lengths, 10-to-12-foot randoms. We don't run as much bar stock today, as we used to. We still, run screw machines, primarily inch-and-a-quarter Acmes and they chew up a fair amount of that steel.
But what you looked at there, might've meant 80,000 pounds of cold finished bar. There's a little bit of brass and aluminum in there, but most of it would have been free machining, 12L14, 1215 little bit of 4140, not so much 4140, because we do machine one inch diameter, shoulder screws out of 4140, 40,000 pounds. So that might last two or three years depending how busy we are, but the bulk of our raw material inventory.
And there's a lot of it is a hot rolled coil, coils weigh about 4,000 pounds a piece at any given moment. We probably have somewhere around half a million to 750,000 pounds of that steel under roof in the building. And we carry a large inventory of steel basically because it's not always hard to get like it is now, but having it at hand gives you a very high degree of flexibility.
If somebody needs us to make a part, or whether it's a standard in lots sizes that exceed what we stock or make to print part that is kind of like a standard, but a minor blank through, there's something about it that makes it deviate from the ASME B18.3-dimensional standard. Well, if we have the steel in the building that easily shaves two weeks off the lead time. And on the cold heading side, if we get cleaned out of a popular, for example, 5/16th, 3/8th and 1/2 inch, when it comes to piece counts, they're very popular thread diameters for us.
Well, if we get cleaned out of 3/8th and I'm not really in desperate need of 1/2 inch, or 5/16th and I've got the raw material to make the 3/8 sockets in the building. I can break in and start running parts. Generally speaking, steel that I think I will really need in September we probably scheduled to come into the building sometime in mid-June to early July. And I know that there's people out there that have an accounting background. They're probably say, that doesn't make sense.
One of our business philosophies and you've seen our warehouse, so you kind of know what I'm talking about. If you sat down at your kitchen table and you made a shopping list of everything you wanted to buy at a grocery store and you went to the local grocery store and half the stuff on the list, wasn't on the shelf at the grocery store, it's a sale that would have been made that won't be made because they don't have the item. And they're giving you an incentive to go shopping at a competitive location.
And our philosophy is if someone sends in a list with 50-line items on it and you stock check primarily, sometimes people are curious what something costs. They don't have our price book handy, anything we say we're out of stock on. Even if it's going to be in stock two weeks later, we're not going to get the order. And so, by carrying to support that inventory of finished goods, which we typically try to keep it 70% of the catalog. We have to have raw material in our possession, at least a couple thousand pounds for every thread diameter that we make.
Brian: So, if you were thinking back to like when COVID first struck us and you went by trying to buy paper towel.
Charlie: I didn't quite understand that. You just asked me a question.
Brian: Your comments about being out of stock or something and going somewhere else. I was reminding the people listening to the discussion, what it was like the week after COVID and every store got totally cleaned out of paper towels and toilet paper.
Eric: We're looking for toilet paper.
Charlie: Well, okay, now I'm going to get off the subject, but I'm going to tell you something.
Eric: We have a subject?
Charlie: Yeah. You want to know why that happened?
Charlie: And it's a raw material issue. Paper towels are made from the same pulp formulation as toilet paper is and when everybody was wiping everything off 50 times, there was a run on paper towels and a lot of paper mills. You hear the term paper mill. You think of photocopy paper, but mills that make either paper towels, toilet paper, facial tissue, whatever, they all basically use the same or very similar compositions of pulp.
Well, the reason why there was a toilet paper shortage, just because people thought they were going to need the toilet paper stocked up on it is because the pulp was diverted to keep up with demand for paper towels. And that created the toilet paper shortage. Then people started realizing that they needed to start hoarding toilet paper, and a lot of irrational purchasing decisions started getting made.
I think we're kind of past that right now, but it's a raw material diversion to go. Paper towels were in demand is a direct result of COVID-19 protocols. And a lot of pulp got diverted from making toilet paper to making paper towels.
Okay, let's get back to what we were talking about, steel. Let me share some information with you, because this is a raw material supply and demand issue as well. I get information from our steel suppliers once a month regarding, surcharges for scrap. And if it's 437 or 4140, there are other alloys, there's alloy surcharges as well. I know this sounds like a really long time ago, but as recently as November of 2019, we were paying a scrap surcharge to our primary steel supplier. And we're talking cold headed quality coils.
The bar mills use a different formula. And since we don't use nearly as much bar stock, as we do coil stock, I keep charts on the coil. $2.35¢ a hundred weight. That was the scrap surcharge for steel that was delivered to our plant in November of 2019, it gradually inched up through 2020. And then all of a sudden from December of '20 to January of 21, it went from $6.35 per hundred weight to $10.85 per hundred weight. And today it's at $15.85¢ a hundred weight.
Charlie: Now, I spent two years in the sixth grade because I don't do arithmetic problems in my head really well. So, I'm going to reach over to my calculator and type in 15.85, minus 2.35, the price of steel has gone up 13 and 1/2 cents a pound just based on the scrap surcharge in a little over a year. Now, why is the scraps surcharge going up like this?
Eric: Why is it?
Charlie: Well, there's a couple of reasons, but I want to give everybody if I could a little bit of a history lesson. Back in 2008, scrap surcharges were very high. Relative, like in some cases, the surcharge was higher than the base price of the steel. And what was driving that was, there was a shortage of scrap. So, the people that deal in scrap, whether they be the steel mills that melt the scrap to make steel or the scrap dealers that buy scrap. We generate scrap here, turning set up pieces and we sell that. It's got its value.
Well, the people that deal in scrap kept buying every piece of scrap they could get their hands on to beat the next increase in the price of scrap. And I'm going to name names here, because I know the guy that I'm going to tell you about would appreciate me giving him credit for this. There's a fellow out there, he currently works for Nucor. His name is Wayne Turner. Wayne Turner is the closest thing to someone with a crystal ball that could predict trends in scrap and scraps surcharges.
And he told me at a golf outing in September of 2008, the scrap surcharges were going to go from where they were then, which was like 35 cents a hundred weight. He said, they're going to be near zero by the end of the year. And he dropped his golf ball on the pavement and it bounced up, not quite back to his hand, then he caught it and said, they're going to rebound just as quickly as they dissipate, but they're not going to come back to where they were.
And that's exactly what happened. It will cost the scrap surcharges to go to zero. And this is where I'm making it up to tell the story. Some guy with a big barge full of scrap pulled up to the dock and the guy in front of the dock said, "I have nowhere to put that." The captain of the boat called back to where we were loading them and says, "Hey, they can't unload me. They got nowhere to put it." So, it just had this cascading effect and it took about six or seven months for the market to normalize.
But the reason why I told that story, that market was driven based on anticipated increases in the cost of the item. Today's market is driven by the actual demand for scrap. The steel mills are melting every ounce of steel scrap that they can get into new steel. And one of the reasons why the lead times for steel started going out is because they had a demand for steel that couldn't be satisfied because the supplier scrap would be sufficient for them to make the tonnage that they needed to make. So, go through your house.
Eric: Yeah, that's really getting into the detail. I don't think a lot of people think about that. A lot of people don't think about the ratio of that recycled steel, I don't know if that's the right term for it, Charlie, you can correct me, but the Virgin steel versus the scrap steel reconstituted, what actually is that? Talk about that a little bit, because a lot of people are on the distribution side in our audience, they're not in the manufacturing side.
Charlie: Well, let me give or make a couple statements. You use the term virgin steel. People in our business called that BOF, Basic Oxygen Furnace. And that's a fancy way of saying a load of iron or along with coal and limestone goes into a blast furnace and you start making what you called virgin steel.
There's a blast furnace facility out in Lorain, Ohio. That's run by Republic Steel. And to tell you the truth, I don't know if those furnaces are actually in operation at the moment. They could be. Charter and Nucor to name two that are prominent suppliers of cold heading quality steel for our industry. One was called electric arc furnaces. It's a fancy way of saying, soup cans, steel, coffee cans, bottle caps off of beer that are steel, old cars. Car scrap is not as valuable. And I'll tell you why in a second.
You know, like metal turnings, they put that stuff in this big bucket, heat it up and they start making steel. Now they still have to add alloy elements to the heat, but they basically scrap their raw material. Under normal market conditions it is less costly to make electric arc furnace steel than it is to make BOF steel.
Having said that there are some applications for steel where BOF and I'm not picking on Charter or Nucor core because, we've used a lot of their steel. But BOF steel is for upsetting purposes, generally friendlier to work on because it's pure. And I mentioned like scrap cars, don't command the same price per ton that, let's say I had, heaven forbid, one of my header operators fell asleep for a week and ran 40,000 pounds of parts I couldn't sell.
And it was all the same grade. Let's say it was 4140, all that scrap would be worth more money because it's 4140 steel in its entirety. A car has a lot of other stuff in it, aluminum, copper, chrome, not so much chrome anymore, but these residual elements, somehow have to be segregated out of the steel and, there are ways to do that.
But the steel mills they'll use cars that have been shredded, so let's say, they'll take a fender off the car. It's, pure steel. They'll shred that up and send that off to the steel mill or the engine it's probably pretty much old iron they'll use that, but you start getting into like seat frames and stuff like that. That has fasteners in it, they have codings on them. It puts impurities into the mix that the steel mills would rather avoid.
But anyhow, I got this chart here and it's not a coincidence, for example, going back to when I said in November of 2019, scrap was 2.35, a hundred weight that's on top of the base price of the steel. We were getting steel in some cases, less than four weeks. Okay. Today the surcharge is $15.85 cents a hundred weight.
If we placed an order today, depending out where the mill is in the rolling cycle. And let's just pretend it's March 1st, that just keeps the calendar. I know we're getting close to the middle of the month. I might not see that steel until sometime in July.
Brian: That's a pretty severe late talk.
Charlie: We're talking 16. It might not be that bad, but it could be. I'm going to go back to scrap and recycling.
Eric: Please do.
Charlie: I'm a late comer to the party for recycling. But one thing I want people in your audience to keep in mind, just because something is recyclable doesn't mean that it will be recycled. Plastic, it's got that little triangle on it, and it's got like a one or a two, depending on what kind of plastic it is. The plastic that enters the recycling stream right now exceeds the demand for it.
Therefore, all these people think they're doing a great job, recycling their trash, and they're putting, their plastic bottles in a bin, very small percentage of that ends up being converted it to another form of plastic. Right now, today, I guarantee you with no qualifications at all, every aluminum beer can or pop camp and every steel soup can or coffee can that you put in your recycling bin within a month is going to be made into new steel.
Because the demand for metal, I mentioned aluminum because it's a common way to package stuff, cans, the demand for that justifies the effort to segregate it correctly and see to it that it finds its way off to another facility like Charter Steel or Nucor Steel for steel items Alcoa Aluminum or Reynolds for aluminum. The plastic is going to the landfill.
Eric: Are you going to get us banned off of YouTube, Charlie?
Charlie: No. It's a supply and demand thing.
Eric: You're not allowed to say that, are you?
Charlie: That's where I got it from. National Geographic has a website with a YouTube video to go with it where I learned some of this. Anyhow, one thing if I could--.
Eric: Well, hang on before you get off of that. Just out of curiosity, because I know you know, a little bit about ammo, how long you figure it takes recycled lead to get back into a bullet.
Charlie: Well, that's a good question. Lead obviously it's recyclable.
Eric: That's all we have in the US now there's only recycled smelters left operating.
Charlie: Well, here's the thing though. If you go to a shooting range that has at the end of the target range, a well-designed capturing mechanism, I guarantee you, they get paid pretty good money for that lead. They're not going to get as much for it as they would, the brass that you would leave laying around. Assuming that it's brass in that steel cartridge casings, but the lead has a market for it.
Eric: I bet it's like four hours. It's in the bullet again, these days.
Charlie: There's demand for lead too in not just the ammunition, but the people that make free machining grades of steel, like 12 or 14, they add lead to it. We don't use a lot of that. We use a little bit, I'm sure that lead's more expensive today as well. For the very reason that you're talking about. There’re people out there that do reloading of their own ammunition. They make their own bullets too.
Eric: Yeah. They're out there.
Charlie: Speaking of stuff in short supply. Can I venture into the workforce for a couple minutes?
Eric: I was hoping you were going to reframe that part of it. Now we're like an hour into the conversation and we haven't got there yet, so let's shift gears.
Charlie: Okay. Let's start. You know, skilled machine operators are hard to come by. It's not a problem that is unique to Kerr Lakeside. The guy next door to me, he's got a small machine shop. He has a hard time finding guys who know how to run boring mills and that kind of equipment. He's a good guy. He, likes to shoot too. I thought I'd throw that out.
But a couple years ago, I went to a presentation that was put out by Fifth Third Bank. And the person making the presentation was the head economist from the bank not a member of their economics department. He was the head economist and most of his presentations were fairly routine. He talks about interest rates and returns on certain kinds of investment mechanisms, like bonds and stocks, T-bills things like that.
He didn't talk about any of that. He talked about the workforce and he started off his presentation by stating that the workforce in the United States today is becoming increasingly bifurcated. Now, earlier in this podcast, I told you what a great high school education I got and that I graduated from John Carroll University. I had no idea what the word bifurcated meant.
Remember when you taught me the word obsequious, that's an inside joke between Charlie and Eric. So, I'm thinking, okay, I got it. I raised my hand and said, "Excuse me, I really hate to be rude and interrupt you, but I'm just wondering if you could spend a moment explaining what you mean by bifurcated." I didn't say, I didn't know what the word, meant. I kind of implied that maybe it could describe multiple things. I wanted to make sure that I knew what he was talking about.
Eric: Right. In this case is all you want, clarification.
Charlie: Clarification. That's what he said our workforce is becoming more and more, one of two extremes people that have skills that are in great demand and have no trouble finding good paying jobs and people that have skills that aren't in demand or don't have skills at all. And the way he explained this, use your imagination. If you will, you're at a paint store and the guy behind the counter, lays out a color palette. That's got, different shades of a color going right to left.
Well, the workforce, after the second world war, was basically like this color palette. You had a very light shade at one end of it and a very dark shade at the other. And several shades getting progressively darker, going from the lighter shade to the darker shade and those progressively darker shades represented people that had increasing levels of marketable skills.
For instance, a guy that knew how to run a machine, but didn't know how to set one up. Okay. Well machine operators, I'm keeping the math simple at that time, might've made $3 or $4 an hour. This is like during the 1950's, the guy that set it up might make $5. And then, the supervisor of the department might make $6 or $7.
And then the guy that ran the whole shop was the darkest shade. He made the most money of everybody in the operation. Well, what the guy at the bank basically said was all of these shades were colors going from the lightest shade to the darker shade in terms of the workforce are disappearing. It's either, or you either have a skill that is in high demand that will pay a very good wage or salary where you have nothing to offer. And you're basically doing a minimum wage job.
Eric: Wait a second. It sounds like you're saying that valuable skills are worth more. You can't be walking around and saying stuff like that, Charlie. Now we're definitely going to get banned.
Charlie: Here's the problem. They're not worth more just because they're worth more, they're worth more, same reason scrap is worth more to the steel mill. It's in short supply. And this is why I have a hard time understanding all these people to run around pounding this drum that we need to raise the minimum wage to $15 an hour.
If I put a sign in front of my building that said help wanted, $9.50 an hour to start, nobody would come in to apply. I have a hard time getting people to walk in the door at $14 an hour with benefits like healthcare, group life, disability, paid time off you name it.
But back to the workforce thing, after the second rule war up to let's say through the 1960's. Maybe early '70's working in a manufacturing environment, whether it was a machine shop, a steel bill, there was no stigma attached to that.
There was no negative connotation. If you worked in a shop, as a machinist. The parents, with school aged kids don't want their children to go into manufacturing. Because somehow that has been deemed, an undesirable career path. So, a lot of people aren't.
Brian: That's true, that's a problem.
Charlie: I'm going to say something suicidal. I actually hoped the minimum wages raised to $15 an hour.
Eric: Alright. Go ahead. Explain that.
Charlie: Okay. I'll explain that. And I'm going to give credit where credit is due. I read this in an opinion piece, I read it in Investors Business Daily about five or six years ago. And the short version of the story is this. There's a lot of people that haven't worked in a while that used to make $17 or $18 an hour. They're not going to re-enter the workforce for a job that pays $12 or $12.50, but they might for a job that pays $15.
Now there's a lot of people out there that are currently making $12 or $12.50 an hour. That might be hirable candidates for entry level jobs at my company. Maybe not, just have to kind of sort this out. But a lot of those $12.50 an hour, people are going to be replaced by the guys that are used to make $17 or $18. That will re-enter the workforce at $15.
And you're probably thinking, okay, how's this going to happen? Well, the guy making 12 bucks an hour might be a custodian in a restaurant. All he knows how to do is mop the floors. Put paper towels in a dispenser when they run out, sweep up a broken glass, that kind of thing. Well, the guy that comes in at 15 bucks an hour, he might know how to do some work in the kitchen. He might know how to do some minor maintenance work, change the furnace filters.
None of this is like rocket science, but there're things he can do that needs to be done that the owner of the business can get some value out of to justify the higher wage rates. And I feel bad for some of these people that are making, say 11 or 12 bucks an hour. None of them work for me, we offer a higher rate than that to start.
All you have to do is know how to walk in the door and show up on a regular basis. And that guarantees no less than $14 an hour, plus our benefits package. Which by the way, if you stick around for a while, ends up costing us almost $23 an hour, assuming your hourly rate stays at $14 an hour, but that's another discussion.
I think given the shortage of people that want to work and the shortage of people that want to work that have a marketable skill. I think this $15 an hour, they call it fight for 15. I don't get it. If you're 10 years removed from high school and the best job, you can get pays less than $10 an hour. You're the problem, not the guy signing your paycheck.
And I know that sounds like a really callous uncaring incompassionate. Is it Incompassionate or uncompassionate, non-compassionate, whatever? I saw the 'Ebenezer Scrooge.' But here's the thing, Eric and Brian, we have a hard time getting people to walk in the door that are ready to work for almost 15 bucks an hour, 14 plus benefits. If you're working for $9.50 an hour and you're in your mid to late twenties it's because it's you. Now, there is one angle on this, I'm kind of veer away a little bit.
Eric: Don't veer too far. Come full circle at this point. You're giving me a really good segue.
Charlie: Well, you've probably read about the shortage of chips that go in automobiles.
Charlie: Okay. I'm spitting out some real rough numbers here. When the car companies have their assembly line. I'm talking to the domestic car manufacturers, whether it's Honda, Nissan, Toyota or Ford Chrysler or GM, the people that assemble cars in the United States, when they're cranking the cars up off the assembly line, as fast as they can make them, it's about 17 million units a year that's give or take a few. If this chip shortage causes that 17 million to become 12 or 13 million, a lot of things are going to change really fast.
There's a lot of fasteners that go into cars. There's a lot of steel that goes into cars. There's a lot of labor that goes into cars. This chip shortage could be a contributing factor to, I don't want to use the word recession, but if our sales start drying up because of it, it's a recession here.
And it's something I'm keeping a real close eye on because usually, if you're a fastener manufacturer and you supply fasteners to a car company, they're your number one priority. The chip manufacturers, this is incidental business to them. Cell phones, laptops, Smart TVs, probably even your microwave oven anymore. All these stuffs have chips in it.
And the number of chips that are used in those applications is multiples of the total chip demand that the car companies represent. And the chip manufacturers have flat out, said, I read this in a Wall Street Journal. We're going to take care of the people that represent a bulk of our business, which means the car companies could be starting to shut down some of their assembly lines.
And the reason why I wanted to veer into that at the beginning of the COVID-19 pandemic, some car companies did that because they didn't know how to prevent the whole place from getting sick. And that's why a lot of people in our industry did have some labor force reductions. We don't supply any of the car companies direct, but I know a lot of screws that we ship up into Michigan are related to the car business.
They're not in the car parts, but the demand for their product is driven by the demand for cars. So, I'm worried about that. You think, well, what's a chip have to do with Kerr Lakeside. Well, and none of that stuff is made in the United States, South Korea, Taiwan, even a company like Broadcom that makes some chips domestically. They get the wafers that the chip is made out of overseas. I think this has the potential to become a real ass ache for a lot of us.
Brian: I was looking at some stats in the weekend and they pointed out that just the changing stats of cars, something like in the '70s there was something like 5 to 7% of the cost of a car was electronics. Now it's 20% and they say, it's going to go much higher.
Charlie: It is. I have a cousin by marriage whose family runs a junk yard, not a real glamorous business, but I read something, excuse me, I didn't read this in the Wall Street Journal. I got this from an investment company called Manning and Napier, 'Three Overlooked Areas of Investment Opportunity,’ is the name of the article.
And the number one item in the article was salvage companies. And what's going on right now. The technology in the automobile has had a direct effect on what it costs to repair the thing. Now, back in the Stone Age, when I started to learn how to drive, there was no technology in the car at all.
Everything in the car was reusable if it wasn't damaged in the accidents. The car insurance is now totaling cars that are perfectly drivable. You could drive the car away from the accident, but so much of the technology in the car has to be fixed or replaced. That it is cheaper to scrap the car.
Brian: Yeah, right. This is the same article I read relating to cars pointed out that in their view, the whole idea of self-driving cars it's just going to become invasive. And simply because the cost of an accident is so high, that will dictate the fact that they will require the self-driving technology on all cars to try and stop you from veering off the lanes.
Charlie: Well, here's my outlook on self-driving cars. So, I get older, the idea that I wouldn't have to drive to get around kind of appeals to me. I would still feel safer paying a human being to be my driver than to sit in the back seat of a car and hoping that some guy didn't have too many beers the night before he put the car together, and forgot to put something in the control panel. Which meant that the car might start to have a mind of his own. Kind of making light of what could be a potentially serious situation. There's no way I could sit in the backseat of a car while it's moving on the highway with nobody at the steering wheel. Not happening.
Brian: Well, we'll ask you this question in 10 years, Charlie. Okay.
Charlie: Well, okay. I'm a creature of habit and I'm set in my ways. I told you earlier in the podcast, I'm 65. Before I got sent off to military school, my mother took me to the local shopping mall for a haircut. This was in 1967. We had just moved into this neighborhood. That guy that cut my hair, it might've been early 1968. We moved in like November of 1967, he still cut my hair today. He's not at the same shopping mall. If you're a supplier of mine and you do a good job and you don't try to rip me off, I'll be your customer forever.
Eric: Well, I'd say that's probably all the evidence I need. I mean, this is great. This is great.
Charlie: But the point I wanted to make is, I'm a creature of habit. In fact, before I got on the podcast with you, I forget the guy in the machine shop next to me was out changing his tire or something. And I thought, kids today don't know how to do stuff like that.
And I got one last story to tell you, while we're talking about cars, I'm not making this up. It really happened. I took my car in to the Ford dealer for an oil change. And I know you're probably thinking why in the world would I go to the dealer? Well, I could walk to the dealership from the plant. It's a convenience factor. And I had a coupon. So, I saved like 5 bucks. And the lady checking me said, "For an extra $15, we'll rotate your tires."
I said, "Okay, fine do that." She said, " Do you want to sit in the waiting room?" I said, "No, tell you what, I'll come back at the end of the day." So, I go back to work about two hours later. My phone rings, " Hello. This is Corrine from the Ford dealership. We're having a hard time getting the wheels off your car because the lug nuts have swollen up."
Now I'm telling this story because someone on this podcast probably runs a fastener shop that makes lug nuts or potentially could make lug nuts. I said, okay, "What's going on here?" She said, "Well." She used the term. "They're swollen." I said, "Okay, what's involved here?" She said, "Well, you got 24 of them on the car. And they're seven bucks a lug nut." I said, "Okay, fine." That's $168, which I thought was a little bit of a gouge. But with my luck, I'd get a flat tire with one of the wheels. The lug nut wouldn't come off.
So, I called her back and I said, "Is my car ready?" She said, "No, they still can't get the lug nuts off. The mechanic is going to have to drill a hole in the end of the lock nut and squirt." She used the term oil. It might've been graphite or whatever. So, it's turned into a two-day long repair job, oil change and wheel rotation with tax. And all the other stuff would have been like a $45 repair, that bill was almost $265.
Now, anybody listening out there that makes lug nuts for Ford Expeditions, I guarantee you, you're not getting 7 bucks a piece for them, even with the fancy chrome snake plate. I bet you're getting about 50 or 60 cents for that part.
Eric: More evidence we're in the wrong business, Bri.
Brian: I know. I'm really in the wrong business.
Charlie: Well. I tell you what I used to think that, but when I took my car in, the service bay in the dealership was empty. There were a couple cars back there, but they weren't up on the lift. I think they were just sitting there. Two years ago, I go in there. Every bay would have had a car up on the lift. There were hardly any cars in the lot for sale. And the availability of used cars was even thinner yet. And, I think that's all COVID related.
One thing, I might've mentioned this on a previous podcast. A lot of people that have been using public transportation, buses, trains, to name two that are prevalent in cities like San Francisco, Chicago or New York have gotten so COVID paranoid that they're starting to buy cars. And that's going to exasperate. The chip shortage is going to make, the car harder to get.
If you've got a bunch of people looking for cars that typically wouldn't be in the market, that's going to create even more demand. Which based on my supply and demand analysis, it's going to be hard to find a car you want, and you're going to pay more for it.
Eric: Well, that's one way looking at it. Or on the other hand, maybe the pandemic will knock down so many people they won't be driving very much. You won't need cars in the first place. You never know a lot of ways to look at it.
Brian: Or they're already picking up their self-driving cars.
Eric: Let me ask you this, Charlie, you ever seen the movie 'My Dinner with Andre?’
Charlie: No. Never even heard of it.
Eric: Oh, that's an old classic. You should look that up. It's a Chestnut. It's from our era too. You would love it. Next time we have movie night, you will fire that one up. It's your kind of movie. Well, anyway, I think we just produced basically 'My Dinner with Charlie' fastener version or 'My Dinner with Andre' fastener version.
Eric: It gave me a couple of opportunities to jump into the segue, to close this one down, but I didn't take him. We had the military school, we had the COVID returned and so forth. And, you did such a great job with my young friend, getting him to really, I guess, open his mind to the idea that there might be a future in something like the fastener industry. At least a hands-on kind of job formerly known as blue collar, but a good way to make a living a good clean, well, not clean, but honest.
Charlie: Well, I tell you what, it's not as dirty as people would think. And I want to clarify one thing you said a minute ago, you used the term movie night. For the benefit of everybody listening to the podcast. Eric invited me over to watch this movie called 'The Boat.’
Brian: Oh, my goodness. You are lucky.
Charlie: But Eric, I got a pretty peculiar sense of humor. I thought of a couple of scenes in that movie that lend themselves very well to a spoof. Remember the scene where they finished off their freighter. And then all those guys started jumping in the water.
Eric: Right. It's a summary. It's a German U-Boat.
Charlie: It's a German U-Boat. Okay. So, here's how the spoof would work. Cheech Marin. Is it the Periscope of the sub?
Eric: Oh, I like this already.
Brian: Couldn't fly.
Charlie: Tommy Chong is the captain of the freighter and all those people jumping off the boat into the water, are women in provocative bathing suits. And when the captain says, we're not allowed to take prisoners, Cheech Marin tells all the guys and the crew, "Hey, off the boat, we got to make room for them." That was a good movie. One thing to surprised me about that. That's not a recent release. That movie was made like what, 20 years ago?
Brian: Yeah. Long time ago.
Eric: Yeah, it was, but that was the director's cut. And the whole thing was done and the soundtrack was completely redone. I guess the only thing that was original off the soundtrack was the voices and the footsteps and everything else was remastered so that it was optimized for surround sound great movie.
Charlie: What does director's cut mean?
Eric: It means that they take the original footage and they basically recompiled the whole movie and the director gets to put it together the way he would have had he not been limited based on commercial restrictions.
Charlie: Okay. I got you.
Eric: You'd never be able to play a 3 1/2-hour movie in the theaters commercially, but the director did it. So, after they made their original box office off it, they gave him the footage and said, do whatever you want.
Charlie: Now, I tell you what. You never saw, 'Ben-Hur,’ that was a three-hour long movie.
Brian: I saw 'Ben-Hur.’
Charlie: I think 'Lawrence of Arabia,’ was a real long one too.
Brian: Yes. It was.
Eric: It's kind of like this segment, Charlie. It's pretty much one of the longest ever on record for the podcast. That's why we like having you on. You never know where it's going to go. And thus, I bring you back to 'My Dinner with Andre.’ We'll call it 'My Dinner with Charlie.’ And, you're going to be back.
Brian: Look up the movie, you'll see it. It's a very interesting movie.
Charlie: I'm doing it as we speak. I'll take that back. I just thought of something. I'm not going to look it up because with my luck, I would disconnect the connection we have here.
Eric: Well, don't worry. We'll be in touch. I got to send you that Tough Mudder link, which I will do. I'll send you the link to the movie. You'll have it. And, Charlie, it's always a great thing to have you on the podcast. I know the audience is going to get a lot out of this if they stuck through it because there's just pearls of knowledge and trivia and wisdom throughout it. So, we really appreciate it.
Charlie: I repeat what I say every time I get on with you, I don't take this opportunity for granted. And I know that you've had a lot of other leading personalities from our industry and I feel honored that you would trust me with your audience as you do with all the other guests that you have. And I thank you for it.
Brian: It's our pleasure.
Eric: It is. You're most welcome. Thanks again, Mr. Charlie Kerr, Kerr Lakeside. Don't worry folks. He'll be back and we'll be back in a minute. It's Fully Threaded.
Eric: Stelfast customers say it all.
Dave: Dave Kaplan, Mutual Screw & Supply, Rochelle Park, New Jersey. First of all, I know most of those people there literally for 40 years, they've been there that long. They're more than just vendors of mine. They're friends of mine. They refer business to me and they're loyal as can be. I can dropship product from them. And I never have a concern about them going after my accounts. They're the most loyal people on the planet. The people at Stelfast are incredible people.
Eric: 'For Service You Deserve and People You Trust.' It's Stelfast.
Since 1905 Buckeye Fasteners and the Ohio Nut and Bolt Company have been supplying the world with high quality fasteners. Our standard product lines include weld fasteners, graded weld screws, leg levelers. Self-Clinching hardware, clevis pins, rivet nuts and various other fastener lines allowing us to support virtually all types of industries. Buckeyefasteners.com, Buckeyes Fasteners, 'More Than Just Weld.’
'Quality Products, Quality Service, Quality Customers.' That's 3Q Inc, a fastener distributor unlike any you've worked with before. With its unique remote managed inventory, stocking programs, wide array of secondary service offerings and wholly-owned cold forming capability. 3Q Inc has been supporting fastener distributors since 2008, 3Q offers a wide range of 100% American made fasteners, including ITW SEMS Lock washers as well as specialty and imported parts. Give 3Q a call today to discuss your needs and experience 3Q quality for yourself. 3Q Inc, www.3q-inc.com.
Jake: Coming to you live from a much larger desk drawer. This is Jake Davis with BTM Manufacturing, and you are listening to my friends, Brian and Eric on Fully Threaded Radio.
Eric: Brian and Eric, back with you. Doing the job most fastener people won't do. Now with open borders, Bri, we might not have to worry about that much longer, but somebody will do it.
Brian: But maybe they don't have time to do it. Okay.
Eric: I don't know, you got room for dessert after all that?
Brian: Wow. That's a pretty full meal, I think. I'll just go and walk around a bit.
Eric: Charlie's take on the toilet paper shortage was interesting. I hadn't heard that particular angle on it before. I think it's partly correct. Although not entirely, but it led me to wonder, did you ever tell the paper towel story on the podcast? Did that one ever come out?
Brian: Oh man. Paper towels, bloody paper towels. Okay. So, this is not too many years ago. Probably. I don't know, five years ago. I went to Costco and my job was to go and get the paper towels.
Eric: This wasn't during any kind of a panic?
Brian: No. This is not a panic just an ordinary old shopping day. I couldn't find them. Now, it's not my specialty finding things like paper towels especially in Costco, it could be anywhere. So, I went and asked one of the associates where they have paper towels and he looked at me like I'd, ask him some really embarrassing question. And said they don't sell them. On a pivot. He said, "What?" I said, "Paper towels." He said, "No, no, we don't sell those."
You must do. I said, "It's not possible. You don't sell paper towels." So, he said, "Oh, go and get another person." So, look it transpired. I had four of these associates from Costco, all mystified as what was the paper towel. Now trying to think and I've been here before.
When I first arrived in America, I had a few problems with my accent, but how many other ways can I say paper towel? So now I start explaining, well, it's one of these things, you have them in the kitchen and they're made out of paper and you pull bits off and use them for cleaning things up and still no one had any idea what it was.
Eric: They weren't asking you. What are you saying? They were just thinking that you were saying something else. Do you have any idea what they thought paper towels were?
Brian: I don't have no idea. I can't imagine what it would sound like. Finally, one of the managers came over and the manager knew instantly what I was saying.
Eric: Clearly, he'd seen 'Crocodile Dundee' at some point. That's my guess.
Brian: It's not that different, really. True story it's sort of even Limbaugh was talking to Kevin said, what does all this crowd of people, now he's going to say what a paper towel is?
Eric: Well, I would have brought that up during this segment with Charlie, but given the roll he was on overall, I figured let's not segue off into that. Who knows how many more subjects it would have related to? But, yeah, that was hilarious. I remember the first time you told us that story; we were all in stitches.
Well, it was good that Charlie Kerr joins us on the podcast and share the stories that he did a lot of good information background and I know he picked up a few more fans. We'll have him back again. Also, Nelson Valderrama within Intuilize, expanding our understanding of the AI possibilities for fastener distribution. Jun Xu of Brighton-Best International join Mike McNulty on the Fastener News Report. And Carmen Vertullo had the Fastener Training Minute. As always great job, gentlemen, we really appreciate you being out there and we appreciate the sponsors of Fully Threaded radio who brought you today's episode.
The title sponsors of Fully Threaded are Stelfast, 'For Service You Deserve and People You Trust.' It's Stelfast. Brighton-Best International, 'Tested, Tried, True.' Brighton-Best. And Goebel Fasteners, 'Quality. The First Time,' Goebel Fasteners.
Fully Threaded is also sponsored by Buckeye Fasteners, BTM manufacturing, Eurolink Fastener Supply Service, Fastener Fair USA, Fastener Technology International. INxSQL Software, ND Industries, Parker Fasteners, Solution Industries, 3Q Inc, Volt Industrial Plastics and Würth Industry North America.
The email address, if you'd like to connect with us is firstname.lastname@example.org. You can also find us out on LinkedIn, of course me more than Brian.
Brian: I will see you there whether I write a comment is another matter.
Eric: He'll get to you eventually. Well, my guess is the audience doesn't have room for even dessert, Bri, but I will point out that the next episode of Fully Threaded is going to be a pretty big one, as well. As mentioned, we'll be joined by Randy Lammers and Aaron Keevan of Würth Knowing. Hear all about how it's going with their new webcast and Carmen Vertullo is also going to do a feature with us.
He's really into a new platform called Smart Cert, which is being implemented actually by Parker Fasteners. One of our great aforementioned sponsors, Matt Boyd will be here joining Carmen and the guy who's driving Smart Cert.
Eric: So, we'll learn all about it. Plus, Christian Reich with Goebel Fasteners.
Brian: To correct their pronunciation.
Eric: He'll set the record straight on that. And he's also going to talk about a new lock nut system Goebel's got going. There'll be other side dishes to that one too. Although I think we'll drop the restaurant theme. I'm a little sick of it by now. Hope it didn't annoy you too much folks. And we did very much appreciate having you with us and hope you got a lot out of the episode, despite all the weirdness. At least, maybe you got a couple new movies to put on your list of must see.
Brian: Yeah. You're right. Kind of look into the Louis Malle. Okay.
Eric: Go from Louis Malle to Würth Knowing full range. And with that, we'll clear the table for this episode of Fully Threaded Radio.
Thanks for listening everybody for Brian Musker this is Eric Dudas. Get out there, sell some screws. We'll talk to you next time.
Brian: Take the time to digest that. And we'll see you next time.
Conclusion:Fully Threaded Radio is a production of Fasteners Clearing House. Music provided by Audionautix.