Global Fastener News

2001 FIN – Distributors Told: "Don’t Wait for the Customer"

June 06
00:00 2013

April 16, 2001 FIN – Distributors at the Southwestern, Southeastern and Western fastener association conferences this spring were told not to wait for the customer to make supply chain or strategic alliance decisions.

“If you wait for your customer to tell you, you’re probably too late,” Larry Bogo of Tampa, FL-based Safety Equipment Company told the joint conference of the Southeastern Fastener Association and Southwestern Fastener Association. “If you are not getting to that vice president, president or owner, you don’t know what is going on. One has to go up the ladder. Historically, buyers and storekeepers do not know upper management is considering an integrated supply arrangement. “Customers will not stop looking for ways to reduce costs – can you afford not to?” Tim Underhill of Underhill & Associates asked the Western Association of Fastener Distributors. “Your customer will figure out the way to reduce the cost if you don’t first.”

More than a quarter of most companies’ gross margin dollars are wasted and could be used to reduce costs, consultant Underhill told WAFD.

And a slowing economy may offer a good time to act, because many companies are particularly looking to cut costs.

Underhill cited the example of an oil company drilling wells. The process totaled 33 steps for the supplier, distributors and customer. “Only eight of those steps were unique,” Underhill said. For example, each had to pay the next step in the supply chain.

Underhill suggested segmenting customers according to willingness to work with you on cost reductions and the cost reduction capabilities. The best opportunities represent only about 2% of the customer base, Underhill finds.

The most frequent barrier to forming effective supplier partnerships is “too many competing initiatives,” Underhill said. Other major problems, in order of importance, are inadequate monitoring and control systems, lacking data supporting analysis, lacking cross-function cooperation, doubt, lacking cross-business cooperation, comfort with existing relationships and lacking experience to manage improvement.

Underhill said 62% of customers participating in supply chain management are in it to lower costs. The next priority – quality improvements – is far lower at 27%, followed by enhanced sales at 5% and access to new resources at 3%.

“At Wal-Mart turnover in inventory is measured in hours and not days, weeks or years. Wal-Mart may not be a perfect parallel to your business, but look at how they changed the market.”

A fastener supply chain panel agreed on the need to reduce costs.

“Customers are going to force you,” Andy Cohn of Duncan Bolt said. “Is it in our interest for them to do it? Do we wait for them?”

“The reality is we do have to reduce costs,” Barry Porteous of Porteous Fastener Co. said.

Jay Hebert, formerly with a fastener manufacturer and now with master distributor Porteous, noted that a barrier to high-tech supply chain management is that fasteners “are historically low-tech.”

Bill Muehlbauer of Faspac described his company’s role as “providing enabling tools for supply chains.”

“It is hard getting eight groups together with different motives who ask if you can do something with the system that won’t cost time or money,” Muehlbauer reflected.

Kelly Cole of WCL Co. suggested an early step is identifying the customers most likely interested in working with you. “It is about the partnering,” Cole said. “If you have a relationship, that is what it is all about.”

Porteous noted that supply chain management requires a special relationship between the partners, and traditionally “there is a lack of trust going to the next level.”

Cohn observed that another problem is that OEMs frequently don’t put emphasis on fasteners, because it represents only 1.5% of their market.

Suzanne Dukes of Hayes Bolt & Supply said she approached her top 10 suppliers to develop supply chain savings, and only two were successful. The process wasn’t easy, but those two yielded “more sales without more people,” Dukes reported.

A key element is to not let the difficult process “affect the trust level along the way.”

A third company in the audience heard Dukes’ comments and approached her after the conference to begin discussions of how to work together to cut costs.

Porteous said distributors should be asking, “How do you do things differently? If we are not looking today we will be causalities of the future.”

Underhill urged distributors to initiate cost-cutting measures. “Somebody has to start it. You guys are great at selling, so go sell it to them.”

Integrated Supply: Who Does Business Like You?

Larry Bogo of Safety Equipment and the World Wide Integrated Consortium defined “integrated supply” as “where all or portions of a company’s acquisition, possession, and application of equipment and supplies are consolidated” or “a means by which a larger company takes away my business.”

Bogo prefers a third definition: “An opportunity for me to secure my current business and to gain more business.”

Tampa, FL-based Safety Equipment joined a consortium because “strategic alliances are necessary to protect independent distributors from the Graingers of the world.”

Distributors do have advantages over such companies as Grainger, Bogo pointed out. In a study of MRO cost management, the most significant potential savings were in cost of application, and that is where specialized distributors can beat the Grainger competition.

For example, there are numerous types of safety gloves, but the wrong type will melt if used with chorine solvents, Bogo explained. Single-source suppliers don’t have the expertise to solve such problems.

Bogo has walked into plants and seen back supports used more to hide a paunch than to protect from back injury.

“When we sell back supports, we will go out and train people,” Bogo explained. “The large total integrator can cut price, but those great savings taper down ©2001/2013 Fastener Industry News.

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