Pressed sheet steel products : a manufacturing opportunity in Georgia

Project B-209
PRESSED SHEET STEEL PRODUCTS A MANUFACTURING OPPORTUNITY IN GEORGIA
Prepared for The Georgia Department of Commerce
Jack Minter, Director 100 State Capitol Atlanta, Georgia
by
George W. M Orris, Jr
Industrial Development Branch Engineering Experiment Station Georgia Institute of Technology
July 1961

Foreword This report is the first in a new series in the metal products field to be carried out over the next several months. The four additional products identified in this study as offering manufacturing potentials in Georgia are only a few of many which deserve careful evaluation by manufacturers who are seeking locations for new plants. A directory of companies with metalworking capabilities covering key firms in nearby states as well as all firms in Georgia -- is one basic reference work in process. It will expand on data already collected as part of the five reports in the metal products field already completed. Requests concerning particular products about which readers would like information are invited. Priority will be given, where possible, to products or groups of products in which such interest has been expressed.
Kenneth C. Wagner, Head Industrial Development Branch
i

ACKNOWLEDGMENTS
The author expresses his sincere appreciation to all persons and organizations which provided information for this report. We are particularly indebted to the following for valuable information about the marketing and manufacturing characteristics of various products covered in the report:
Mr. Richard Hill, Corry-Jamestown Manufacturing Corporation, Mr. Charles J. Huckleberry, Henry Weiss Manufacturing Company, Mr. Robert Logan, Aurora Equipment Company, Mr. William MCGill, William McGill and Company, Mrs. P. A. Murphy, Office Equipment Manufacturers Institute, Mr. Ken Vargo, Lyons Metal Products Company. In addition, we are grateful to the Atlanta offices of Atlantic Coast Line Railroad Company, the Central of Georgia Railway Company, the Louisville and Nashville Railroad Company, and the Southern Motor Carriers Conference for valuable information on freight rates. Members of the Industrial Development Branch provided helpful assistance. Dr. Kenneth Wagner contributed many important ideas on the presentation of the report and also reviewed the final draft. Mr. J. R. Peterson, Research Engineer, provided many valuable suggestions during the course of the study and also reviewed the final draft of the report. Dr. Walter Kennon, Research Economist, gave valuable assistance in the preparation of statistical information for the study. Miss Mary McGlone typed the preliminary and final report drafts.
ii

Summary
The combined sales of steel doors and frames, window sash and frames, steel file cabinets, steel shelving, and steel toilet partitions in the southeastern regionl/ in 1960 were over $35 million. Sales of these products in 1965 are expected to approach $41 million. The 1960 figure represents approximately 10 per cent of the combined national shipments. Thus, there is a significant market for the products in the Southeast.
The market for all of the above products except steel file cabinets is characterized by a strong degree of price competition among the present manufacturers. Therefore, a producer who can manufacture the products at the lowest delivered cost to the customer will enjoy a significant competitive advantage in the sale of the items. While price competition exists in the market for file cabinets, it is not as significant as for the other products.
At the present time all of the major producers of these products are located outside of the Southeast. A plant located in the Southeast to serve the regional market would operate at a substantial cost advantage over the present producers because of the lower freight and labor costs. The freight cost alone would be approximately 50 per cent of the freight cost to the northern plants.
Georgia's central location within the market area and its proximity
to the raw material source (Birmingham),~/ makes the state an ideal loca-
tion for a plant. A national manufacturer of the products would gain the following
principal advantages by locating a branch plant in Georgia to serve the southeastern market:
1. A considerable reduction in freight cost paid by the customer and hence a lower delivered cost.
1/ The area is composed of Alabama, Florida, Georgia, North Carolina, South-Carolina, and Tennessee. The sales figures for steel file cabinets cover an eight-state area composed of the same states except North Carolina, and including Arkansas, Louisiana and Mississippi.
2/ The raw material source for steel toilet partitions would probably be Cleveland, Ohio, however, because of the 60-inch width of sheet steel required.
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2. A large reduction in labor cost per unit of output because of lower wage rates and higher worker productivity in Georgia.
3. Improved service to customers because of the proximity of the plant to the market area served.
4. Greatly improved sales position in the area because of the above three advantages.
The method of manufacture of each of the products covered by this report is basically the same. Each requires metal shearing, punching and pressing operations. The process does vary somewhat as to the type of fasteners used. However, because of the similarity in their manufacturing processes, all of the products can be produced by a single plant. In fact, at least five of the major producers of steel shelving also produce steel file cabinets. (See section on Steel File Cabinets.)
Therefore, a manufacturer who undertakes the production of any combination of the products on a fairly large scale in Georgia has a substantial market for the items and would operate his plant with significant competitive advantages over existing producers located outside of the Southeast.
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INTRODUCTION The purpose of this study was to survey a selected group of fabricated metal products to determine (1) the market for the products in the Southeast, and (2) the economic feasibility of their manufacture in Georgia to serve the southeastern market. The products were selected for study on the basis of the obvious market potential for the items in the Southeast, the absence of a large manufacturer in the area, and on the basis of the similarity of the fabricating processes. The report contains a separate analysis of the present and future market in the Southeast for steel doors and related items, steel shelving, steel file cabinets, and steel toilet partitions. In addition an analysis has been made of the potential competitive advantages to prospective Georgia plants in the manufacture of the above products over New England and midwestern plants.
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I. STEEL DOORS AND FRAMES, STEEL WINDOW SASH AND FRAMES

The Southeastern Market

Sales of steel doors, door frames, steel window sash, and window frames were in excess of $21 million for the six-state southeastern region in 1960.
The demand for steel doors in the region totaled approximately $9 million, of which $7.5 million was spent on doors for industrial, commercial, and institutional use and the balance for residential use. Sales of steel door frames in the area amounted to over $2 million. Purchases of both doors and frames increased an estimated 44 per cent from 1954 to 1958.
Sales of steel window sash and window frames in 1960 amounted to an additional $9 million. Demand for these products increased 10.76 per cent from 1954 to 1958.
Practically all of the business is handled by firms which manufacture in the northeastern and midwestern states. There is no manufacturer in the Southeast who serves a substantial portion of the market area. Among the major manufacturers of steel doors selling their product in the Southeast are the following:

Manufacturer

Plant Location

Amweld Building Products Company Ceco Steel Products Corporation Fenestra, Incorporated United Steel Fabricators, Incorporated

Niles, Ohio Chicago, Illinois Erie, Pennsylvania Wooster, Ohio

The market for the product is characterized by a strong degree of price competition. Therefore, a plant which can manufacture a quality product at the lowest price will enjoy a significant competitive advantage over other producers.
The future market for steel doors appears to be very good because of the present trend of sales and also because of the introduction of cheaper, lower quality doors into the industry. From 1954 to 1958, sales of the product increased an average of 11 per cent annually over the base year 1954. Based on the growth trend for non-residential construction in the

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Southeast, sales in 1965 will approach $11 million in the region. (See Figure 1.) The introduction of the cheaper doors into the market will probably increase this figure.
The future market for steel door frames should parallel that for steel doors. From 1954 to 1958 sales of the product in the Southeast increased at the same average as did steel doors -- 11 per cent annually. Based on the growth trend of nonresidential construction in the Southeast, sales in 1965 will approach $3 million. (See Figure 1.)
The future market for steel window sash and window frames does not appear to be as good as that for steel doors and frames. Aluminum window sash and frames are making sizeable inroads into the market and are expected to take over an increasing portion of the total. From 1954 to 1958 sales of steel window sash and frames increased an average of 2.69 per cent annually over the base year 1954. Based on the growth trend of nonresidential construction in the Southeast, sales of the products in 1965 would approach $12 million. (See Figure 1.) However, the increased competition from aluminum substitutes will probably produce a 1965 sales figure that will be considerably less than that projected. Advantages of a Georgia Plant Location
Four significant advantages exist for a sheet steel products manufacturer into the southeastern region, and particularly into Georgia the substantial reduction in freight costs, the large reduction in labor costs, improved customer service, and improved sales position.
Freight Savings The table below should provide sufficient proof of freight cost reductions to a southeastern manufacturer. Here the freight rates from a plant located in Atlanta, Georgia, to six southeastern cities are compared with freight rates from a plant located in Chicago, Illinois, to the same locations.
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Rail Freight Rates (min. wgt. 40,000 #) for Shipping Steel Doors

From

To: Atlanta, Ga. Birmingham, Ala.
Charlotte, N. c. Columbia, s. c.
Jacksonville, Fla. Nashville, Tenn.

Chicago $ .870 cwt
.870 .940 .960 1.140 .585

Atlanta $ .300 cwt
.315 .415 .375 .485 .445

Reduction in Cost $ .570 cwt .555 .525 .585 .655 .140

Average freight cost reduction on finished product 56.5 per cent.

Labor Savings

Wages are a significant portion of total costs in this industry. The value added by manufacture in the Metal Doors, Sash, and Trim Industry in 1958 represented 45.2 per cent of the value of shipments. Total wages of production and non-production employees accounted for 50.8 per cent of the value added. A plant located in Georgia could expect labor cost advantages over a plant located in the North in two areas: lower wage rates and higher productivity.
The average Georgia wage rate in 1958 of production workers for the Metal Doors, Sash and Trim Industry (S.I.C. 3442), of which steel door manufacturing is a part, was $1.59 per hour. The comparable rate in selected northern states was as follows:

Pennsylvania -- $2.00 per hour Illinois ------ 2.15 per hour Ohio ---------- 2.47 per hour

The ratio of the value of shipments to production man hours for the industry in 1958 was $12.37 for each man hour. If the present value of shipments of an Ohio firm into the six-state area was $500,000, the reduction in wages alone to a Georgia branch plant, based on the above wage rates, would be over $35,500. This amount was derived as follows:
= Number of production man hours required (for above sales volume)

$500,000 12.37

40,420

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Reduction in annual production wages (based on above wage differen-
tial) = ($2.47 - 1.59) (40,420) = $35,570
In addition, some reduction in wage cost of non-production employees could be anticipated. The average annual salary in 1958 for this category of workers in the industry in Illinois and Pennsylvania was $6,809 and $7,348 respectively, while the comparable Georgia salary for the same category was $6,580.
The greater productivity of the work force over that existing in midwestern and New England statesl/ has been attested to by many national firms which have located plants in Georgia. Typical are the following experiences:
1. A national automobile parts manufacturer experienced a 300 per cent increase in productivity in the Georgia plant over its other plants in the North.
2. A national foundation garments manufacturer obtained a 10 to 15 per cent increase in productivity over plants located in the Northeast.
3. A national manufacturer of paper products believes that the workers in his southern plant are more efficient than those in any of his other plants.
Thus the combination of wage reduction and increased productivity would provide an advantageous labor savings to a Georgia plant.
Customer Services The proximity of the Georgia plant to its customers would certainly provide better service to customers through faster delivery of the product and a better understanding of customers' needs. This should prove to be a competitive advantage of the local plant. The foregoing advantages should greatly improve a company's sales position in the region.
1/ See Charles H. Sewell, A Formula for Labor Productivity in Georgia, July l961.
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II. STEEL FILE CABINETS

The Southeastern Market

In 1960 sales of steel file cabinets in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, South Carolina, and Tennessee totaled ov~r $7 million. (See Figure 1.) The majority of the business is handled by firms which manufacture the product in northeastern and midwestern states. No important producers are located in the Southeast. The major manufacturers of steel file cabinets who sell their product in the Southeast follow:

Manufacturer

Plant Location

Art Metal Construction Company Cole Steel Equipment Company Columbia Steel Equipment Company Shaw-Walker Company Steelcase, Incorporated Yawman and Erbe Manufacturing Company

Jamestown, New York New York, New York Philadelphia, Pennsylvania Muskegon, Michigan Grand Rapids, Michigan Rochester, New York

Future sales of steel file cabinets should substantially exceed the 1960 sales. No substitute product provides any significant competition for steel files at the present time and none is anticipated in the foreseeable future. The effect of future automated office systems on the product is not known, but it appears likely that such systems will increase rather than decrease demand for steel files.
Based on the growth trend of non-residential construction in the Southeast, sales of the product in 1965 will be approximately $7,980,000. (See Figure 1.)

Allied Products Manufactured with Steel File Cabinets

Other products manufactured with file cabinets include metal desks, chairs, stools, couches and metal cases. In addition, the following manufacturers of steel shelvingl/ manufacture steel file cabinets:

Berger Division, Republic Steel Corporation

!/ See Section III for opportunities for manufacturing steel shelving
in Georgia.

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Borroughs Manufacturing Company DeLuxe Metal Products Company (Division of Royal Metal Manufacturing Company) Equipto Division, Aurora Equipment Company Lyons Metal Products, Incorporated.
Cost Advantages of a Georgia Plant

The two primary areas of cost reduction for a Georgia branch plant would be reduction in freight and labor costs.

Freight Cost Reduction

As an example of the potential freight cost reduction, the freight rates from a plant located in Atlanta to six southeastern cities is compared below to freight rates from a plant located in Rochester, New York, to the same locations.

Rail Freight Rates (min. wgt. 30,000 #)
for Shipping Steel File Cabinets

From

Rochester, N. Y.

Atlanta, Ga.

Savings

To: Atlanta, Ga. Birmingham, Ala.
Charlotte, N. c. Columbia, s. c.
Jacksonville, Fla. Nashville, Tenn.

$2.38 cwt 2.38 2.14 2.24 2.62 2.14

$ .30 cwt 99
1.22 1.14 1.34 1.26

Average freight cost reduction = 62.2 per cent.

$2.08 cwt 1.39
.92 2.10 1.28
.88

Labor Cost Reduction
The reduction in labor cost would come from lower wage rates and greater worker productivity rates in Georgia as compared with northern states.
The average southern wage rate in 1958 of production workers in the Metal Office Furniture Industry (S.I.C. 2522), of which steel file cabinet manufacture is a part, was $1.80 per hour. The rate in Georgia (outside the Atlanta metropolitan area) for the industry was approximately $1.51 per hour. The comparable rate for selected northern states was as follows:

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New York ----- $2.17 per hour Ohio --------- 2.62 per hour Michigan----- 2.65 per hour
The ratio of the value of shipments to production man hours in the United States for the industry in 1958 was $10.63 for each man hour. Assuming the present value of shipments of an Ohio firm into the six-state area to be $500,000, the reduction in wages alone of a Georgia branch plant, based on the above wage rates, would be $52,211. This figure was derived as follows:
Number of production man hours required (for above sales volume)

$500,000 $10.63

47,037

Reduction in annual production wages (based on wage differential) =

($2.62 - 1.51) (47,037) $52,211

Thus a considerable reduction in wage costs alone would be experienced by a Georgia plant.
A significant reduction in labor cost in a Georgia plant would arise because of the greater productivity of the Georgia work force over that
existing in midwestern and New England states.1-/ The greater productivity
has been experienced by many national firms that have located plants in the state. (See page 7 for examples of productivity experience of branch plants.)
The value added by manufacture in the Metal Office Furniture Industry in 1958 represented 60.7 per cent of the value of shipments of the industry. Total wages of production and non-production employees accounted for 49.5 per cent of the value added by manufacture. From these comparisons it is apparent that wage costs are a significant portion of total costs. Consequently, a significant reduction in wage costs represents a significant reduction in the total cost of the products.

1/ See Charles H. Sewell, A Formula for Labor Productivity in Georgia, July l961.
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Other Advantages The two additional advantages of improved customer service and improved sales position previously described (page 7) would be no less important to this segment of the industry.
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III. STEEL SHELVING

The Southeastern Market

In the states of Alabama, Florida, Georgia, North Carolina, South Carolina, and Tennessee sales of steel shelving (S.I.C. 2541135) totaled over $5 million annually in 1960. Sales increased approximately 43.3 per cent from 1954 to 1958.
The great majority of the business is handled by firms which manufacture the product in the Northeast and Midwest. No local manufacturer in any of the above states serves a substantial portion of the market area. The major manufacturers of steel shelving who sell their product in the Southeast follow:

Manufacturer

Plant Locations

Lyons Metal Products, Inc.
Borroughs Manufacturing Company DeLuxe Metal Products Company Berger Division, Republic Steel
Corporation Alan Wood Steel Company (Penco)

Aurora, Illinois York, Pennsylvania Kalamazoo, Michigan Warren, Pennsylvania
Canton, Ohio Oaks, Pennsylvania

The primary use of steel shelving is for industrial storage of parts, tools, and supplies.
The market for the product is characterized by a strong degree of price competition. This is true even though the product itself is not standardized. Therefore, a company which can operate at a cost advantage over its competitors would have a competitive advantage in the sale of its product.

Future Market

Sales of steel shelving in the six-state southeastern area in the next five to 10 years should increase substantially with the expansion of economic activity generally. In the opinion of national manufacturers' representatives and distributors, no influx of new substitute products into the market is expected. The only existing substitute is wood shelving, which has experienced a steadily decreasing percentage of the total shelving market.

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From 1954 to 1958 sales of steel shelving in the Southeast increased an estimated 10.8 per cent annually over the base year 1954. Based on the growth trend of non-residential construction in the Southeast, sales of products in 1965 should be approximately $7 million. (See Figure 1.)
Allied Products Generally Manufactured with Steel Shelving
The other products generally manufactured by a steel shelving plant include metal office furniture, storage equipment, wrap racks and in some instances, metal lockers. The exact product mix would depend on the products made by the individual company.1-/
Cost Advantages of a Georgia Plant to Serve the Southeastern Market
The two primary areas of cost reduction for a Georgia branch plant are in freight and labor cost.
Freight Cost Reduction
As an example of the freight cost reduction involved, the freight rates from a plant located in Atlanta to service warehouses in Atlanta, Birmingham, Greensboro, Jacksonville, and Memphis are compared below to freight rates from a plant located in Kalamazoo, Michigan, to service the same warehouse locations.
Truckload Freight Rates (min. wgt. 22,000 #) Steel Shelving

Atlanta Birmingham Greensboro Jacksonville Memphis

Kalamazoo 1.57 cwt 1.95 2.09 2.47 1.82

Atlanta .30 .90
1.26 1.22 1.36

Average freight cost reduction 49.1 per cent.

Savings 1.27 1.05 .83 1.25 .46

If the Kalamazoo plant controlled 10 per cent of the southeastern market (or $500,000 annual sales), the annual freight savings on the finished product alone would amount to 49 per cent of $50,000 or $24,500.

lf See Lamar White, Metal Lockers, A Manufacturing Opportunity in
Georgia, July 1958, Industrial Development Branch, Engineering Experiment Station, Georgia Institute of Technology, for an analysis of opportunities for metal locker manufacturing in Georgia.

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(Freight on steel shelving amounts to approximately 10 per cent of sales.) In addition to the freight savings on the finished product there
would be a small savings on freight on the raw material shipments. The closest points from which the Kalamazoo plant could obtain raw material (sheet steel) would be Chicago and Cleveland. The freight rates between these points and the Kalamazoo plant are greater than that from Birmingham to Atlanta.

Labor Cost Reduction

The reduction in labor cost could come from lower wage rates and from greater productivity of the labor force in Georgia over that in Michigan.
The average Georgia wage rate for the Partitions and Fixtures Industry (S.I.C. 2541), of which steel shelving is a part, in 1958 was $1.78 per hour. The rate outside the metropolitan area of Atlanta is now approximately $1.50 per hour. The comparable rates for selected northern states were as follows:
Pennsylvania ----- $2.18 per hour Michigan --------- 2.22 per hour Ohio ------------- 2.59 per hour
The ratio of the value of shipments to production man hours for the industry in 1958 was $9.39 for each man hour. Assuming the present value of shipments of a Michigan firm into the six-state area to be $500,000, the reduction in wages alone of a Georgia branch plant, based on the above wage rates would be as follows:
Number of production man hours required (for above sales volume) =

$500,000 $9.39

= 53,248

Reduction in annual production wages (based on wage differential) :
($2.22 - 1.78) (53,248) = $23,429.12

In addition, some reduction in wage costs for non-production employees could be expected. The average annual salary in W58 for this category of workers in Michigan, Ohio, and Pennsylvania was $7,222, $6,696, and $6,351 respectively, while the comparable Georgia salary for the same category was $5,348. Thus a considerable reduction in non-production

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wages would be obtained. A significant savings in labor cost for a Georgia plant would arise
from the greater productivity of the work force over that in midwestern or northeastern states.l/
This greater productivity of the work force in Georgia can be attested to by several national firms which have recently located plants in the state. (See page 7 for examples of greater productivity experienced by branch plants in Georgia.)
The value added by manufacture in the Partitions and Fixtures Industry in 1958 represented 55.9 per cent of the value of shipments of the industry. Total wages of production and non-production employees accounted for 61.9 per cent of the value added by manufacture in the industry. From these comparisons, it is apparent that wage costs are a significant portion of total costs in the industry. Consequently, a significant reduction in wage costs represents a significant reduction in the total cost of the products.
Additional Advantages The two additional advantages of improved customer service and improved sales position previously described (page 7) would be no less important to this segment of the industry.
l/ See Charles H. Sewell, A Formula for Labor Productivity in Georgia, July 1961.
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IV. STEEL TOILET PARTITIONS

The Southeastern Market

Sales of steel toilet partitions (S.I.C. 2542013) in the states of Alabama, Florida, Georgia, North Carolina, South Carolina, and Tennessee in- 1960 were in excess of $2 million. Sales have increased significantly since 1954, although the exact amount of increase is not known.
Practically all of the business is handled by manufacturers in the Northeast and Midwest. There is no local manufacturer in any of the above states who serves a substantial portion of the market area. The major manufacturers of steel toilet partitions which sell their product in the Southeast are:

Manufacturer

Plant Locations

Fiat Metal Manufacturing Company
Henry Weis Manufacturing Company Mills Company Milwaukee Stamping Company Sanymetal Products Company

Chicago, Illinois; Long Island, New York Elkhart, Indiana Cleveland, Ohio Milwaukee, Wisconsin Cleveland, Ohio

The product is used primarily by the construction industry for installation in new and remodeled buildings.
The market for the product is characterized by a strong degree of price competition. A company which can manufacture a quality product at the lowest price would therefore enjoy a significant competitive advantage over other producers in the sale of its product.
Sales of steel toilet partitions in the Southeast are expected to increase steadily during the next five to 10 years. Plastic laminated toilet partitions have taken over a small portion of the market in the coastal sections of the region, where corrosion is a significant problem. They are not expected to make a substantial inroad into the market in other sections of the Southeast, however, because their cost is 50 per cent higher than that of steel partitions. At the present time the plastic laminated partitions are the only substitute product in the market.
Steel toilet partitions are used primarily in such non-residential places as office buildings, schools, and industrial buildings. Therefore,

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sales of the product in a particular market area are believed to be highly correlated with the volume of non-residential construction in the area.1- /
When the growth trend of non-residential building in the Southeast'];../ is applied to existing data on sales of steel toilet partitions in the area, the derived sales estimate for the product in 1965 is in excess of $2,500,000. (See Figure 1.) This represents an increase of 27.8 per cent over 1958 sales.

Allied Products Generally Manufactured with Steel Toilet Partitions

The other products generally manufactured by a steel toilet partition manufacturer include shower receptacles and shower partitions.

Cost Advantages of a Georgia Plant to Serve the Southeastern Market

The two principal means of cost savings for a Georgia plant are freight savings and savings in labor cost.

Freight Cost Reduction

As an example of the freight cost reduction involved in the shipment

of the finished product, the freight rates from a plant located in Griffin,

Georgia, to six southeastern cities are compared to freight rates from a

plant located in Cleveland, Ohio, to the same locations.

~

Truck Load Freight Rates (min. wgt. 221000 :ff) for Steel Toilet Partitions

I

Cleveland

From

Griffin

Savings

To: Atlanta

$1.59 cwt

$ .39 cwt

$1.20 cwt

' I

Birmingham Charlotte Columbia

1.59 1.59 1.67

.75

.84

.95

.64

.89

. 78

Coral Gables

2.09

1.39

. 70

Nashville

1.35

.98

.37

Average freight cost reduction on finished product = 45.9 per cent.

1/ Sufficient data are not available to compute the exact statistical correlation between the two variables.
~/ The trend covers the states of Alabama, Florida, Georgia, North Carolina, South Carolina, and eastern Tennessee.

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If the annual sales volume of the Cleveland plant was $500,000 and the finished product freight cost was 7 per centl/ of sales or $35,000, the annual savings would amount to $16,065 (45.9 per cent of $35,000).
However, since the raw material for the product would have to be shipped from Cleveland to the Griffin plant because of the width of sheet
steel required,~/ the raw material freight costs would be greater for the
Georgia plant. This would reduce the above savings by approximately 50 per cent to a net savings of $8,465 annually. The net freight savings therefore would amount to approximately 1.7 per cent of gross sales.

Labor Cost Reduction

In this instance, by far the greatest cost reduction of a Georgia plant would be reduction in labor cost. The savings would come from lower wage rates and the greater productivity of the labor force in Georgia over that in northern states.
The average Georgia wage rate for production workers in the Partitions and Fixtures Industry (S.I.C. 2541), of which steel toilet partitions are a part, in 1958 was $1.78 per hour. The rate outside the metropolitan area of Atlanta is now approximately $1.50 per hour. The comparable rate in selected northern states in 1958 was as follows:

Indiana ---------- $2.14 per hour Illinois --------- 2.29 per hour Ohio ------------- 2.59 per hour
The ratio of the value of shipments to production man hours for the industry in 1958 was $9.39 per man hour. If the present value of shipments of an Illinois firm into the six-state area totaled $500,000, the reduction in wages alone of a Georgia branch plant, based on the above wage rates would be $27,156. This figure is calculated as follows:

Number of production man hours required (for above sales volume) =

$500,000 $9.39

= 53,248

Reduction in annual production wages (based on wage differential) =

($2.29 - 1.78) (53,248) = $27,156

l/ 7 per cent is considered by distributors to be a typical figure for the industry.
~/ Steel toilet partitions require 60 inch steel widths. The nearest steel plant to Griffin at which this width sheet steel can be procured is in Cleveland.
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In addition, some reduction in wage cost of non-production employees might be expected. The average annual salary in 1958 for this category

of workers in the industry in Illinois, Indiana, and Ohio was $7,214,

$5,419, and $6,696 respectively, while the comparable Georgia salary for

the same category was $5,348. Again, a considerable reduction in wage

cost alone would be gained by a Georgia plant.

A significant savings in labor cost of a Georgia plant would arise because of the greater productivity of the work force over that existing

in midwestern and New England states.l/ The greater productivity has been

experienced by many national firms who have located plants in the state.

(See page 7 for examples of worker productivity experienced by branch plants in Georgia.)

As indicated in Section III of this report, the value added by manu-

facture in the Partitions and Fixtures Industry in 1958 represented 55.9

per cent of the value of shipments of the industry. Total wages of pro-

duction and non-production employees accounted for 61.9 per cent of the

value added by manufacture in the industry. From these comparisons it is

apparent that wage costs are a significant portion of total costs in the

industry. Consequently, a significant reduction in wage costs represents

I

a significant reduction in the total cost of the products.

\

Additional Advantages

'

I

The two additional advantages of improved customer service and im-

proved sales position previously described (page 7) would be no less

' l

important to this segment of the industry.

l/ See Charles H. Sewell, A Formula for Labor Productivity in Georgia, July 1961.
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CONCLUSIONS From the analyses of the various products covered by this study it is apparent that (1) a large market exists in the southeastern region for all four products or for any combination of the four, and (2) a plant located in Georgia to serve the southeastern market for any combination of the product lines would have substantial advantages over existing plants in the manufacture and sale of the products. Present manufacturers of the above products can fairly readily determine the potential savings for their companies in freight and labor cost. By weighing this cost advantage and the other advantages in the sale of the product against the cost of building and equipping a plant in the state, a more exact determination of the economic advantages of a local plant can be determined. These should be significant.
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APPENDIX 1
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I N N I
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FIGURE 1 PROJECTED SALES- SHEET STEEL PRODUCTS

(BILLIONS)
$ 1 . 5 r - - - - - - - - - - - - - - - - - - - - - - - - - - - -. . . .

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(b)

SALES PROJECTIONS- 1965 (MILLIONS)
$10.81-$2.8 l-$11. 91-$6.961--$7.981-$2.5 7 1- 7.4

:::::>-<=

I _______(a)--------

8.51- 2.2 9.4t- 5.5

I- 2

8.0
1- 2.0

9.0 1- 5.0

.5l-

* IncIudes Alabama, Florida, Georgia, North Carolina,
South Carolina, and Eastern Tennessee.

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'IIIII

EXPLANATION OF FIGURE 1

The curve in Figure 1 indicates the total dollar volume of non-residential construction in Alabama, Florida, Georgia, North Carolina, South Carolina and Eastern Tennessee for the years 1950 through 1960. With the data from which the curve is drawn a growth trend has been computed by the method of least squares and plotted in Figure 1. The growth trend is then projected to the year 1965.

If it is assumed that a high positive correlation exists between the volume of non-residential construction

activity in the Southeast and the individual sales volume of steel doors and frames, steel window sash and

frames, steel shelving, steel file cabinets, and steel toilet partitions, the growth construction can be used to predict the sales volumes of these products for the year

1tr9e6n5d.1-7

f non This

-residentia assumption

l

has been made in projecting sales of the products indicated in Figure 1.

Before the prediction can be made, however, the units of the vertical scales for these products must be deter-

mined. Since the 1958 sales figures for steel doors and frames, steel window sash and frames, steel shelving

and steel toilet partitions have previously been determined (see appropriate section on the individual pro-

ducts), these figures are plotted on their respective vertical scales in Figure 1 at a point which is the same

height from the base of the chart as the 1958 plotted point for non-residential construction (line a in Figure 1

I N I.JJ

projects this point to the appropriate vertical scales). The 1960 sales figure for steel file cabi~ets was known

I

and was plotted at a height on the vertical scale for the product which corresponds to the 1960 plotted point

for non-residential construction (line~ projects this point to the appropriate scale). After the 1958 and

1960 points are plotted, the vertical scales for the products are then merely divided into appropriate units

between the zero point and the newly plotted points.

The 1965 sales projections can then be read from the respective vertical scales for the products at points which are the same height from the base of the chart as the 1965 projected point for non-residential construction (line in Figure 1 projects this point to the appropriate vertical scales).

1/ The statistical correlation between sales of the individual products and non-residential construction in the Southeast cannot be determined because of the lack of adequate sales data for the products over a period of years.

APPENDIX 2

The assumption has been made that the value of shipments, as specified in the Census of Manufactures published by the U. S. Bureau of the Census, very closely approximates U. S. sales of a product.

Ste~l Doors

The value of U. S. shipments of steel doors for all uses in 1954 and 1958 was obtained from the Census of Manufactures.
After totaling all national steel door shipments (other than residential door shipments) for 1958, the estimated sales of non-residential steel doors for the six-state southeastern region was derived on the basis of non-residential construction in the area by applying to national steel door shipments the percentage of non-residential construction in the sixstate area to national non-residential construction in 1958, as follows:

Non-Residential Construction, 6 S. E. States Non-Residential Construction, U. S. Total

X

(U. S. Shipments)

$$ 110,909458,303734,000000

X

$72 618 000

'

'

:

$7 261 800

'

'

The estimated sales of residential steel doors in the six-state southeastern region in 1958 was derived in a similar manner, except that the residential construction percentage for the area was used, as follows:

Residential Construction, 6 S. E. States Residential Construction, U. S. Total

x

U. S. Shipments =

$ 1,839,339,000 $14,695,531,000

X

$10,456,000 =

$1,308,672

The estimated total steel door sales figures in the Southeast in 1960 and 1965 were derived from the 1958 sales estimates by applying the growth trend of non-residential construction in the Southeast to existing data on steel door sales in the Southeast. (See Figure 1.)

Steel Door Frames

The total national shipments of steel door frames were derived from total metal door frame shipments (S.I.C. 3442141), specified in the 1958 Census of Manufactures. The percentage of national steel door shipments

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to total national door shipments for 1958 was applied to national metal door frame shipments to obtain the value of steel door frame shipments for the United States.
The 1958 estimated sales figure for the southeastern region for steel door frames was derived on the basis of non-residential construction figures by the method described under Steel Doors.
The estimated sales figures for steel door frames in 1960 and 1965 in the Southeast were determined by applying the growth trend of nonresidential construction in the Southeast to existing data on door frame sales in the area. (See Figure 1.)
Steel Window Sash and Window Frames
The value of U. S. shipments of this category of ~roducts was taken directly from the 1954 and 1958 Censuses of Manufactures.
The estimated sales of the products in the six-state southeastern region were derived from total U. S. shipments of the product on the basis of non-residential construction in the area. This was accomplished by applying to national shipments the percentage of non-residential construction in the Southeast to national non-residential construction for the two years.
The estimated sales in the Southeast in 1960 and 1965 were determined by applying the growth trend of non-residential construction in the Southeast to existing data on product sales in the region. (See Figure 1.)
Steel File Cabinets The sales figure for steel upright files for the eight-state south-
eastern region in 1960 was obtained from the Office Equipment Manufacturers Institute through the regional sales office of a national manufacturer of the product. The 1960 figure was in excess of $7 million.
The sales estimate for 1965 was derived by applying the growth trend of non-residential construction in the Southeast to existing data on product sales in the region. (See Figure 1.)
Steel Shelving The total value of shipments of steel shelving (S.I.C. 2541135) in
the United States, as specified in the Census of Manufactures, was used
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r

as the national sales figure for the product. In 1958 this value was $53,987,905, while in 1954 the value was $38,976,000.
The estimated sales total for the six-state southeastern region in 1958 was derived on the basis of non-residential construction in the area, as follows:

Non-residential Construction, 6 S. E. States Non-residential Construction, U. S. Total

x National Sales

$ 1,095,073,000 $10,948,334,000

($53,987,905)

= $5,399,870

The estimated sales for the six-state southeastern region in 1960 and 1965 were derived by applying the growth trend of non-residential construction in the Southeast to existing sales data for steel shelving in the area. (See Figure 1.) The projected 1965 estimate is $7 million.

Steel Toilet Partitions

The total value of shipments of steel toilet partitions (S.I.C. 2542013) in the United States, as specified in the Census of Manufactures, was used as the national sales figure for the product. In 1958 this value was $19,955,000.
The estimated sales for the six-state southeastern region in 1958 were derived on the basis of non-residential construction figures for the area as follows:

Non-residential Construction, 6 S. E. States Non-residential Construction, U. S. Total

x

National Sales

$ 1,095,073,000 $10,948,334,000

($19,955,000)

= $2,034,308

The estimated sales figures for 1960 and 1965 for the southeastern region were derived by applying the growth trend of non-residential construction in the Southeast (from 1950 through 1960) to the sales figure for 1958. (See Figure 1.) The 1965 estimate is thus in excess of $2,500,000.

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