Supplier partnerships pay off for midmarket coffee equipment maker
Proactive partnerships with quality suppliers help Wilbur Curtis lower its direct materials costs.
By John Day -- Purchasing, 8/13/2009 2:00:00 AM
• Wilbur Curtis Company
Location: Montebello, Calif • Size: 240 employees • Business: Commercial coffee, tea, and specialty beverage brewing systems.
Proactive partnerships with quality suppliers helped Wilbur Curtis lower its direct materials costs significantly, says Ron Wilson, director of purchasing. His four-person team manages a $40 million annual spend for the family-owned firm, which manufactures commercial coffee, tea, and specialty beverage brewing equipment.
"Especially in the last two years, prices have been going up," says Wilson. "But we recently did a commodities analysis, and in eight of 10 cases, prices from our suppliers were lower than Bureau of Labor Statistics averages."
Wilson attributes the favorable materials pricing to strong supplier relationships based on the notion that loyalty is a two-way street. Take steel, for example.
"Steel is our number one spend," Wilson says. "Over the years we've morphed from our original steel grade to a lower-cost alternative metal, which is significantly less expensive with no loss in quality. We did it with help from our steel supplier. We were negotiating with them about the need to reduce costs, and they came up with ideas for changing the type of metal. It took about a year, but we switched a good majority of our steel spend to the alternative material and gained an astronomical saving."
Leveraging supplier relationships is always a priority for midmarket firms, but Wilbur Curtis has reaped big benefits from its collaborative efforts. A welding supplier conducted in-house training for Wilbur Curtis's manufacturing workers. An insulation supplier recommended the use of alternate materials that yielded additional cost savings. Another supplier stores Wilbur Curtis materials at the supplier's own facility at no cost until the materials are shipped to manufacturing. Another delivers materials to Wilbur Curtis on consignment.
"Those are benefits of our partnership philosophy," Wilson notes. On the flip side, Wilbur Curtis helps suppliers by placing orders or issuing letters of intent to help suppliers obtain financing.
"We don't do it a lot," he says, "but we've done it more frequently in the past couple of years because the economy has been so bad." Wilson reports that about half of the suppliers it offers to help are willing to accept the assistance. "The rest get a clear message that Wilbur Curtis places a premium on loyalty and that loyalty is a two-way street. They know that if we are willing to go to that length, it's a real partnership."
Wilbur Curtis found many of its critical suppliers through its membership in Prime Advantage, a buying group for industrial manufacturers. Vice president of operations Mike Curtis, grandson of Wilbur Curtis, who founded the company in 1941, says the firm has been a Prime Advantage member for 12 years, almost from Prime Advantage's founding.
"The advantage of being a member Prime Advantage is that we are able to work with better and better suppliers," says Curtis. Becoming a supplier member in the buying group requires the recommendation of a member company, a review session with a suppliers committee, and approval of the group's executive committee. And only 110 suppliers—no more than three per category—have made the grade.
Prime Advantage members and suppliers meet face-to-face at semiannual conferences. "The conferences are very helpful for getting qualification going at a faster pace," says Curtis. "Members issue quite a few RFPs." Members pay a one-time fee and agree to a minimum annual spend with endorsed suppliers. Curtis says members can earn back their membership fee quickly through discounts and rebates.
"We don't always go with the low bidder," notes Wilson. "We don't put pressure on our suppliers, and they appreciate that, but when times are tough, we expect them to come through for us."
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