Buying Steel Plate: Retailer vs. Supplier vs. Mill-Direct
Posted on Mar 26, 2019
Purchasing managers have a lot to consider when sourcing commodity construction materials, especially when sourcing steel plate. This article looks at the differences between buying steel plate through retailers, suppliers and mills.
Overview: Retailers, Suppliers & Mills
When sourcing raw steel plate, purchasing managers have three primary steel plate sources: retailers, suppliers (also known as distributors) or mills.
Retailers include everything from big-box chains – such as Home Depot – to independent metal specialists, in-stores and online. With retailers, customers can simply walk into a store or browse a website, select an item and purchase the item at will.
Suppliers are “material middlemen.” They buy steel plate in bulk from a mill at discounted rates, store it in high quantities in warehouses and then sell the material to buyers with medium or high quantity needs.
Suppliers often sell by the “truckload”, or between 20,000 lbs. and 40,000 lbs. Suppliers offer a greater selection of steel plate product at lower per-hundredweight cost than retailers, since they deal primarily in bulk.
Mills are the producers of steel plate materials and offer a varied selection of steel plate product. In most cases, mills only sell direct to buyers in need of very large volumes of steel plate.
Service centers are another common source for processed steel plate (such as plate cut to specific sizes or shapes), but we will not focus on service centers in this article due to the variety of metal processing service options.
Choosing Between Retailers, Suppliers & Mills
So which steel plate source is best for you? The answer depends on buyer needs surrounding five primary factors:
- Convenience: how quickly and easily do you need access to steel plate material?
- Product variety: are the grades and sizes you need common or specific?
- Price per hundredweight.
- Volume: how much product do you need?
- Inventory risk: can you buy in bulk and store excess? Or do you need smaller orders delivered over time?
Understanding your specific needs in each category will help determine which sourcing method(s) may be best for you.
The most distinct difference between buying from retailers, suppliers and mills is the degree of convenience offered by each source.
Retailers are highly convenient. They carry very few steel plate products, but have these products readily available at all times.
Suppliers are significantly more convenient than mills, because they often have deep inventories and multiple inventory locations. They can respond to steel plate needs quickly (sometimes even within the same day), whereas mills usually require more than a month lead time on an order.
Additionally, suppliers usually have experienced in-house teams that understand how to deliver large steel plate orders, which is an important convenience for many medium-to-large volume buyers.
Mills offer the lowest level of convenience, as they fill their production “books” (AKA: schedules) months in advance. Suppliers and retailers can handle these longer lead times due to large on-hand inventories, but buyers typically cannot. This is why only large buyers with specific, known material needs tend to purchase steel plate directly from mills.
Convenience of Credit
Retailers usually accept cash, check or credit card payments at the time the order is placed, making them highly convenient for smaller buyers.
Suppliers and mills almost never accept credit card payments due the large value of the average order. In fact, most suppliers and mills require buyers to undergo a business credit evaluation before the buyer can even buy.
Once a supplier or mill extend credit limits, buyers do have the convenience to place orders in advance but pay when material is received. In these situations, mills adhere to a strict 30-day payment window.
Suppliers have dedicated credit evaluation teams to assess credit risk and can therefore offer more flexible payment windows (i.e. 45-60 days), making them more convenient for medium-to-large buyers.
Mills, of course, offer the highest degree of product variety, as they can produce-to-order hundreds of grades across a wide range of thicknesses, lengths and widths.
Suppliers may not carry as wide of a variety of grades as mills, but they can often quickly procure whatever grades and sizes are needed because they buy from a network of mills. In these situations, suppliers offer a service to customers by doing the sourcing leg-work for them.
Price Per Hundredweight
Steel plate is priced per hundredweight – or cwt. Retailers offer significantly higher cwt than suppliers and mills as a tradeoff for the convenience of immediate product access and easy cash or credit payment.
Suppliers have stronger buying relationships with mills that allow them to buy steel plate at more competitive rates than retailers and most large buyers. Additionally, suppliers usually have lower operational overhead, as they have fewer facilities and greater fulfillment efficiencies, since their orders are larger in volume.
Mills can sometimes offer a lower cwt price than mills (depends on the grade), but they only sell to very high-volume buyers, and orders can take months to fulfill. What buyers might get with cost savings, they lose with convenience and speed.
Average Order Volume
The volume of a buyer’s need often helps narrow the choice of supplier. Retailers specialize in handling low-volume needs, especially orders less than 200lbs. Orders under 200lbs. can be shipped via standard ship methods, unlike heavier order that require freight transit.
Suppliers’ sweet spot is any order greater than 20,000 lbs./10 tons (about half a truckload) up to whatever inventory limitations the supplier has for the requested grade and size.
It’s not that suppliers would never fulfill a low-volume need, it’s often that they simply do not have small-sized material. Most steel plate stocked by suppliers is 8-10ft wide by 20-40ft long. This would be well beyond the volume need of many retail customers, who typically request plate under 2ft wide by 2ft long.
Mills, on the other hand, thrive on high-volume orders. Mills produce heats – or batches – of steel plate products, usually in quantities of 120-150 tons per heat. When mills supply to direct buyers, they are usually supplying one or more heats multiple times per year.
One huge advantage of buying steel plate from suppliers or retailers is reduced inventory risk. Buyers can receive the exact inventory they need, when they need it, and not have to worry about running short or not having space to store excess material.
Suppliers offer the lowest amount of risk related to inventory levels, since they themselves have healthy levels of material on-hand and have a network of mills from which they purchase. If one mill delays an order, suppliers can turn to other mills for the material.
Retailers also offer low inventory risk, but have less demand visibility than suppliers (who often sell a bulk of their orders via contract, and can predict demand). For this reason, retailers have higher inventory depletion risk than suppliers.
Purchasing through mills comes with a lot of inventory risk. Buyers typically must buy larger loads of material and store the material until depleted. This requires ample storage facilities and the ability to move and manage steel plate (i.e. overhead magnetic cranes).
Additionally, mills are more at risk of running behind in production. These delays in inventory could leave a buyer scrambling to find material to bridge the gap between depletion and the next mill delivery.
Weighing Your Options
With each steel plate supply source, there are strengths and trade-offs. Determining how important each factor is for you – as well as any other factors important to your business – will help guide you towards the right steel plate supply source.
Leeco Steel is the largest supplier of steel plate in North America and services clients big and small with a wide range of volume and delivery needs. We would be happy to quote your next project and would be honored to be your steel plate supplier of choice. Submit an inquiry here.