Margin Excellence for
Metals & Fabrication
Steel swings. Aluminum spikes. Your surcharge formula is three months behind reality. Every day you quote on yesterday's metal costs is margin you never get back.
Metals is the most severely squeezed vertical in our benchmark — tariffs on one side, soft demand on the other, and a pricing mechanism that resets slower than the market moves. ADEXMA helps fabricators and machine shops close the gap between commodity volatility and pocket price, using the Margin Architecture™ diagnostic calibrated to conversion economics.
The index moves weekly; your price list moves quarterly
Four forces that compress fabrication margin — none of which a generic pricing project touches.
Your surcharge lags reality by 60–90 days
Hot-rolled coil moved 6% last month. Your surcharge formula resets quarterly on a trailing average. That timing gap costs 2–5% of material spend a year, and nobody flags it because the surcharge technically exists.
Yield loss is invisible inside your pricing
You quote material at 100% utilization. Actual yield on sheet, coil, and bar runs 85–92%. That 8–15% scrap is $500K to $2M a year on a $100M business, sitting in COGS where no quote ever sees it.
Commodity inventory swings own your working capital
Steel moves 15–25% a year and purchasing buys opportunistically. Finance sees $2–5M of working capital swing quarter to quarter and asks why. Nobody has a good answer, because there is no inventory policy tied to market signals.
Energy is 5–8% of revenue and completely unmanaged
Most shops cannot state their energy cost per ton. Competitors running the same equipment may be paying 30% less because they manage peak demand, negotiate utility contracts, and schedule shifts around rate windows. Benchmark is 3–5%.
Metals is the most severely squeezed vertical in our benchmark
Drawn from the Margin Quotient™ benchmark of more than 1,000 scored companies.
| Metric | Median | Top quartile | Your target |
|---|---|---|---|
| Gross margin | 21.6% | 29.3% | 25%+ |
| EBITDA margin | 14.0% | 18.4% | 15%+ |
| Inventory turns | 4.5x | 6.2x | 5x+ |
| DSO | 50.9 days | 40.0 days | under 55 days |
| Cash conversion cycle | 58.0 days | 38.5 days | under 60 days |
| Revenue per employee | $400K | $560K | $400K+ |
Exhibit — metals & fabrication benchmarks, Margin Quotient™ universe
Metals is currently the most severely affected industry in our benchmark — tariff exposure compounded by weak end-market demand.
Where we focus for metals
Three practices, weighted for a business where material is most of the cost and conversion is most of the value.
Pricing Excellence
Close the index gap
- Index-based surcharge automation on weekly or monthly resets, not quarterly
- Conversion value pricing that charges for complexity, not just material weight
- A fabrication price waterfall walked all the way from list to pocket
- Rush-order premium capture worth 1–2% of revenue in quick wins
Supply Chain Excellence
Position, do not react
- Multi-mill sourcing strategy targeting roughly 60% domestic / 40% import
- Position-based S&OP driven by commodity inventory, not last quarter's demand
- ABC-XYZ classification across bar stock, coil, and sheet
- Yield optimization programs targeting above 85% on sheet and coil operations
Sales Excellence
Govern the floor
- Conversion margin floor governance that blocks below-cost commodity orders
- Buy-out part margin targets held above 15%
- Quoting discipline for engineer-to-order work that captures full capability value
- Estimator-level variance tracking so pricing behavior is visible, not folklore
The KPIs that actually move metals margin
Six operating metrics most fabricators do not instrument — and every one is a line item in the diagnostic.
Material yield %
Actual utilization on sheet, coil, and bar against the quoted assumption
Surcharge recovery rate
Dollars of cost increase actually invoiced, over dollars incurred
Index tracking accuracy (R²)
How tightly your surcharge formula follows the underlying index
Buy-out part margin
Margin on resold components, where sub-15% work hides in plain sight
Energy cost per ton
The most-ignored variable cost line in a fabrication P&L
Conversion margin floor
The governed minimum that stops below-cost commodity work
Already delivered, before the platform
Discounts brought back inside one pricing structure
Building materials manufacturer · more margin
Tariff costs passed through, line by line
Aftermarket distributor · more margin
Value the customer pays for put back in the quote
Industrial manufacturer · more margin
Excess stock released through weekly S&OP
Healthcare manufacturer · more cash
Other industries we serve
Same four steps. Industry-specific benchmarks and KPIs.
Find your hidden margin in metals
Start by telling us where it hurts — the free Operating Pain Map — then the Margin Scan puts a number on it against more than 1,000 scored companies, with your surcharge and yield exposure named.