Global Fastener News

1998 FIN – Supply Chain Management: It is About Partnering to Cut Costs

February 18
00:00 2011

October 29, 1998 FIN – Supply chain management is an opportunity to take costs out of doing business and “play this game to win rather than to not lose,” consultant Michael Markstold the fastener industry.

In a panel discussion of supply chain management distributor Richard Schwind of Simco/Hillman said obsolete inventory was an incentive for his company to partner. It was an answer to how to carry less at-risk inventory while still serving the customer, Schwind told a joint session of the Industrial Fasteners Institute,  National Fastener Distributors Association and Western Association of Fastener Distributors autumn meetings in San Francisco.

Schwind explained that Simco/Hillman chose to become aggressive in partnering as one part of a company strategy. They deliberately cut sales from $19 million to $12 million in three years in order to grow a different business. It worked: Sales are now $35 million with the same number of employees, Schwind declared.

Manufacturer Jerry Begue of Lake Erie Screw Corp. said it was a problem rather than a partner that started Lake Erie in supply chain management. Begue said Lake Erie was looking for the best solution to a steel coil problem. They were trying to calculate “what it cists the manufacturer to solve this and what it costs us,” he explained.

Steel supplier Bob Ralston of USS Kobe acknowledged that Kobe was “dragged into it” by customers, but added the corporation has since invested substantiality in software to increase partnering benefits.

Richard Long of Iowa Mold Tooling Co. Inc. acknowledged that supply chain management was “imposed” on his firm because of financial troubles.

 

Getting Started

Ralston suggested a likely place for partnering to begin is discussion of how to eliminate costs in

Schwind suggested a strong potential first partner is where value-added services would reduce costs.

When distributors know their customers’ inventory they can give suppliers “more accurate information so I don’t have to carry as much inventory,” Schwind said.

That kind of information on a daily basis has allowed Simco/Hillman to hit a 98% on-time delivery mark.

Schwind takes some of his customers to visit partnering customers to demonstrate what can be done. Schwind even leaves them alone to talk. “You’re pretty much at risk,” though the situation does yield feedback, Schwind admitted.

Begue said that establishing a positive supply chain management with one good customer encourages other customers to participate and “think about what else we can do.”

Schwind suggested that a place to start discussions with customers is to ask, “What can we do to take costs out of doing business?”

Long cited an example of a value-added service. “You can’t hire engineers in North Central Iowa.” That makes partnering with staffed distributors or manufacturers valuable. “We are buying not only their hardware but their brains.”

Marks of Indian River Consulting Group described that as a case of “doing what you do best and buy the rest.”

Developing Trust

Supply chain management requires a high level of trust among participating companies.

Begue observed that “opening the books is not the first place for trust to start. Find a common ground to start partnering.”

The trust has to be company wide rather than just between golf partners. They guys on the dock have to understand what the others need.

Ralston acknowledged problems in starting, such as unions or ingrained management. “We had to fire some people,” he noted.

“It is getting all the people involved,” Ralston observed. Kobe found it helped to get “even hourly employees out to customer’s plant, and now they have more understanding.”

Distributor Schwind added that supply chain management for his firm has evolved to the point that “we share operating expenses with customers.”

Cutting Rush

Long observed that one of his production and inventory problems is that 70% of orders have been “rush”.

Developing supply chain management can reduce that, Long pointed out. Forty-five Iowa Mold distributors have a potential of 12,000 customers.

However, Long lamented that he feels like he is “pushing on a string in dealing with distributors.”

Begue noted that “you lose business opportunities by not being able to react.”

Ralston said that the vast majority of customers have standing contracts, and orders with short lead times mean “somebody made a mistake.”

Large orders or contracts give opportunity for improving. Begue observed that a 20-ton lot of steel means “whoever takes that to the next level wins.”

In the long run the trust relationship depends on performance, Long concluded “It is not what you say, it is what you do.”

The Chain Beyond Fasteners

Partnering doesn’t end with the raw material supplier, manufacturer, distributor and end user. A majority of Iowa Mold’s sales are through distributors, which makes it both the last link of the panel and the first link of a subsequent chain.

Part of supply chain management is “looking at your customer’s customer,” Ralston said.

Solving a problem through supply chain management is just the first step, Long remarked.

Simco/Hillman successfully sold a key customer on how value-added services would cut costs. But Schwind said as successful as the relationship was they lost the account a few years later because “we failed to continue to bring him more value-added services” and a competitor did.

“The better you get, the greater the demand is,” Long noted. “Look at what we are doing today compared with 20 years ago.”  ©1998/2011 Fastener Industry News

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