Gibraltar's Wagner trims metal supply chain
There's a modern new look in supply chain management at Gibraltar Industries
By Tom Stundza -- Purchasing, 9/1/2005 2:00:00 AM
John E. Wagner is corporate vice president of supply chain management for Gibraltar Industries, Buffalo, N.Y. He has a bachelor of science degree in manufacturing and material management from Rochester Institute of Technology's College of Business and a masters of business administration degree in supply chain management from Arizona State University. Throughout his more than 20-year career, Wagner has worked for large multinational companies recognized as leaders in procurement and supply chain management. Most recently, Wagner was working for United Technology's Carrier Division in Indianapolis, Ind., where he was director of supply chain management of Carrier's North American Residential Business Unit, a $2 billion business. There, he oversaw strategic global sourcing and material spending for multiple Carrier locations. At Gibraltar, Wagner reports to Henning Kornbrekke, president and COO of the billion-dollar company. Wagner has total supply chain responsibilities for direct and indirect material, including transportation and logistics. The company has a total material spend of $690 million per year with the majority in steel (about $390 million) followed by finished goods, transportation, aluminum, MRO goods (for maintenance, repair and operations), copper and utilities.
Q. What is your supply chain management strategy? Does it differ from traditional purchasing and supplier management programs?
A. Our goal is to address 100% of the spend with short-term and long-term sourcing strategies developed and implemented across Gibraltar, in addition to supplying the tools required to enable the divisions to consolidate spending while driving supply chain synergies throughout the organization. In the short amount of time I have been with the company (since September 2004), we have implemented such corporate-wide programs as the use of an e-sourcing tool to bid $15 million of spending on corrugated and freight; the formation of key commodity teams to develop sourcing strategies for steel, aluminum, transportation and utilities; the implementation of surplus asset disposition process; the implementation of corporate travel and entertainment and purchasing cards; the completion of an inter-hardware sourcing project; the completion of lift-truck manufacturers, maintenance and leasing company sourcing. We also are currently working on such supply chain initiatives as shared distribution centers in our building products group; RFQs on paint for all aluminum and steel-coated products; e-sourcing projects in progress for an additional $8 million (for wood, pallets, labels and freight); travel services RFQs distributed to short list of travel service providers. We also are working on a comprehensive steel-sourcing strategy for our 700,000-ton annual buy, plus developing finished goods sourcing consolidation (with low-cost sourcing strategy in development), the consolidation of ocean freight across the building products divisions; a comprehensive utilities sourcing strategy across all divisions, the finalizing of a sourcing decision on e-procurement of MRO materials and the finalizing of a sourcing decision on a total spend analysis tool.
Q. What's your mission as supply chain chief?
A. To leverage total spend across the organization, establish and implement sourcing strategies for all key commodities, with extensive focus on the steel spend. Duties encompass monitoring the market, sourcing strategy, inventory management and mill relationships. We have a small staff of corporate commodity managers and a support staff of nine people and are matrix-managed with another 30 dotted-line-reports from the divisions—purchasing directors and staff.
Q. How is the current slow growth in the manufacturing economy affecting business conditions for your company and your efforts and/or tactics at supply chain management?
A. It has been a real challenge for everyone in the industry. Our inventory, along with other manufacturers, went above our target levels with the slower-than-anticipated manufacturing growth this year. We spent a considerable amount of time in the first half of the year addressing the inventory and have made significant progress getting our numbers back in line to target levels. Of course, this has given us an opportunity to develop and document some key strategies around inventory management going forward.
Q. What are the key challenges affecting your supply chain strategies?
A. The volatility with the global steel market is our biggest challenge. We certainly need to work much closer with our suppliers to create a more flexible and lean supply chain that is able to react quickly to both our aggressive growth plans and the ever-changing global economic conditions that challenge all of us in the supply chain function.
Q. What will it take for you to have a purchasing and supply chain management success in 2005 and 2006?
A. Finalizing our short- and long-term sourcing strategies for key commodities, continuing to address company-wide spend through e-sourcing projects to drive supply base rationalization and ability to leverage our total spend, optimize our freight and logistics across the company—we are making some very good progress in this area. Extensive focus will be on steel as we leverage our total volume with significant focus on inventory management.
Q. What efforts are you making to improve your firm's purchasing and supplier-management performance?
A. We are in the process of putting key dashboard metrics in place that will enable us to monitor the success of our initiatives and become much more proactive in our management approach. We have also developed a very comprehensive supplier screening process for our e-bid projects which has significantly improved our supply chain agreements and overall supplier performance.
Q. What are your views on the role of the Internet—today, and tomorrow—in supply chain management?
A. I believe Internet opportunities will continue to present themselves with a continuous flow of new capabilities to enable significant productivity gains around supplier communication, sourcing, project management, linking data sources to drive better automated dashboards, e-procurement, travel, e-sourcing, etc. I believe you can drive a clear competitive advantage without all the complexities of legacy systems that were required in the past.
Q. Did the drastic steel-price increases and raw-materials surcharges of 2004 affect your supply chain team's ability to do their job?
A. As discussed earlier, it was certainly a challenging year. It is always difficult when market conditions dictate your strategy regardless of the time and effort you may have spent negotiating pricing for your material spend. We reacted very quickly to the market conditions in 2004 and engaged in continuous negotiations with both the mills and our customers so everyone stayed whole. Our matrix-managed organization allows for quick reaction time to communicate effectively to the entire organization via frequent purchasing council and sub-commodity team meetings.
Q. Have your overall steel-buying patterns and inventory strategies changed because of the pricing spikes of 2004?
A. No question, inventory is getting a lot more attention. Information and communication is key, those that can react quicker will have a competitive advantage. We are focusing on the entire supply chain for opportunities to improve our cash cycle.
Q. Are other commodities causing problems for supply chain management?
A. Base metals (aluminum and copper) are up, which is of concern to everyone. We are working on various strategies to reduce our exposure in these volatile markets. I only see opportunity in the rest of the commodities to consolidate spending and rationalize the supply base with focus on lowest total global cost.
Q. Will the mill consolidation underway in the steel market impact the way you source steel?
A. Absolutely, developing and maintaining relationships with the mills are more important now than ever before. The more global consolidation and production discipline by the mills would make all of our jobs a lot easier in regard to managing price. It would be nice to focus on our value- added operations and continue our effort on optimizing the supply chain without having to manage the steel-price volatility in the global market. At the end of the day, steel pricing will dictate price adjustments in OEM products. If the price level settles too high due to the consolidation we may see more composite replacement materials for select applications.
Q. What are your views on a possible steel futures exchange?
A. It will be challenging to implement given the significant variations in steel types. If implemented correctly, it will allow buyers such tools as futures, options and the like to minimize the risk of price fluctuations with their steel purchases. Given the current volatility on the LME and other global markets with current base metals I believe a steel futures exchange would drive more steel pricing volatility due to market perception driven by hedge funds vs. market fundamentals of supply and demand.
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