VOLUME 30, NO. 12

The Gem Equipment Memo published in December always serves as a Christmas greeting.  In addition, this Memo is devoted to prices of goods and services purchased by this company.  This discussion is triggered by a significant increase in the price of plastics used in food processing equipment over the past eighteen months.  From June of 2010 to December of 2011, the price of ¼ inch thick UHMW has increased from $4.20 to 5.43 per square foot.  In the same period ¼ inch thick Teflon has increased from $42 to $60 per square foot and 1-1/4 inch thick Peek from $804 to $945 per square foot.  Gem Equipment uses a lot of UHMW, some Teflon and Peek only for high temperature applications, such as wear strips in appetizer fryers.  It is a relatively hard material and capable of handling temperatures well over 400 degrees F.  The following table shows prices of materials used in food processing equipment and the price of health and workers compensation insurance over the last 40 years.

                                                      1970/71      1981     1985       1991       1994      1997      2004      2008        2011                

Type 304 ss – 10 gauge sheet           .70       1.09        .92        1.30        1.16       1.11       1.51       2.25        1.77
1/4 inch plate               1.07        .80        1.05         .99        1.00       1.30       2.16        1.72
Bearing for Gem 1-15/16 Eccentric  26.00     67.96    90.72      86.10      90.57    123.19   130.29   159.76    207.00
1-7/16 Ball Bearing Pillow Block        7.58     12.75    18.15      24.43      27.00      30.68     38.43     49.64      57.11
72-24-16 Type 304 ss Wire Mesh   12.00     12.00    12.00      12.00      15.00      12.00     15.00     30.00      33.00
2-15/16 Roller Bearing Pillow Block  76.88   281.56  335.59    468.17    503.98    583.97   773.57  1170.00  1326.88
5 HP 1760 RPM TEFC Motor         106.11   168.44  180.85    188.57    227.42    259.00   372.00    540.00    693.00

Health Insurance /Mo. /Employee     28.00     83.44   153.08   261.57    362.65    411.69   813.52  1118.81  1213.69
Ind. Acc. Per $100 of Payroll            3.50       7.73       7.55     10.22        4.47       4.64       4.93        5.94           4.73

The table understates how volatile stainless steel prices have been over the last few years.  The common thicknesses of type 304 stainless steels peaked out at slightly under $3.00 per pound.  (As this is being written stainless steel prices are slowly trending down,)  Excluding health insurance, the large roller bearing pillow block shows the biggest price increase over 40 years.  Low unit volume compared to smaller bearings is undoubtedly a factor.  High volume stimulates automation and other productivity improvements, which help keep the price increases down on smaller bearings.  Design changes can also help impede the rate of price increases. 

It is probably no surprise to Memo readers that health insurance has the highest rate of price increase over the 40 years.  Premiums shown are for a family of four under a preferred provider organization (PPO) plan.  While PPO plans are almost phased out at Gem Equipment, that plan is shown in an attempt to maintain continuity.  Most Gem Employees are covered by a high deductible plan with a monthly premium of $954.08 for a family of four.  This plan coupled with a Health Savings Account provides much more flexibility and value for employees.  Gem pays the full cost of the insurance and encourages employees to put their own before tax money into their personal Health Savings Accounts.  Money not spent for health care accumulates in these employee owned accounts.  WE WISH ALL MEMO READERS A MERRY CHRISTMAS AND A HAPPY PROSPOROUS NEW YEAR.