Purchasing bridges communications gaps in the coatings supply chain
Buyers at coatings makers help leverage the knowledge and capabilities of their suppliers to develop cutting-edge coatings products.
By Alan R. Earls -- Purchasing, 10/15/2009 2:00:00 AM
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In a business as competitive as the coatings industry, controlling costs is always a critical component in purchasing decisions. However, there is a growing recognition that along with controlling costs, purchasing can also play a role in facilitating knowledge transfer between suppliers and new product development.
Buyers need to be on the lookout for suppliers that are actively looking to engage in deeper relationships. Michael Dutt, global sourcing manager at Wickliffe, Ohio-based Lubrizol Corp. says any time suppliers ask questions about new products or processes, he's quick to prod the supplier for more information and then get his own R&D contacts involved. "With a newer supplier we tend to act more as gatekeepers because we don't want a lot of people calling R&D but if a supplier has an established relationship there is no reason to play the role of middleman because we know they will keep us informed and work through our processes if they need help with contracts and pricing," he explains.
On the other side of the process, Dutt says R&D or manufacturing often identifies problems or issues they are trying to solve. His own role is then to convey those concerns to suppliers to see whether they have expertise or specific products that could help.
But purchasing doesn't have to serve as the bridge in all cases, says Dutt. "If the R&D people have a relationship with the supplier they can also contact them directly," he says. In fact, at Lubrizol purchasing has not instituted any effort to quash such contacts. "We do not have a written guideline putting limits on them but they know that their role should be strictly on the technical side and shouldn't involve purchasing aspects," he says. "They strictly work on the technical level."
Dutt says in the past Lubrizol has formed informal strategic partnerships with suppliers in which R&D people on both sides of the table successfully cooperated to create new coatings products. In other cases, however, similar results were obtained through a simple "buy and sell" relationship in which there was an exchange of information between supplier and manufacturer without the trappings of an active partnership.
Steve Strongosky, purchasing manager at paint giant The Sherwin-Williams Co. in Cleveland, says that deeper and longer-term relations with suppliers can be an important element in differentiating his company from its competition. Thus, Strongosky, who is an engineer by training, works closely with both R&D internally and outside suppliers to try to spot promising areas of cooperation.
"We look for a robust commercial relationship with our partners focusing on price and quality but we also take into consideration what they have to offer us in terms of product innovation," he notes. In fact, particular attention is paid when a potential innovation is offered by a supplier to Sherwin-Williams first or exclusively.
In general, most supplier relationships fall along a spectrum ranging from pure commodities and "toll" relationships (where a supplier is asked to produce a raw material to Sherwin-Williams specifications) to the more intense relationships where a new or breakthrough material, which can confer an advantage, is at stake. Still, every relationship is different, and Strongosky says the exact nature of the cooperative relationship is developed on a case-by-case basis.
"Across the board we try to work with the top one or two suppliers in a category that meet our business objectives," he adds.
Meanwhile, despite its own vast research and production capabilities, another giant in the coatings field, BASF, also finds it desirable to foster collaboration with its supply chain partners. For example, the company's Automotive OEM Coatings group, part of the worldwide BASF Coatings Division, delivers a wide range of coatings to the major auto makers and their suppliers in North America as well as to the auto repair market.
To produce its range of base coat paints and coatings, BASF relies on global and North American suppliers for materials going into pigments, solvents, resins, epoxies and a host of special additives that help differentiate its products. "Some of those items, particularly pigments and resins, come from internal BASF suppliers," explains Joseph Donahue, director, chemicals procurement for BASF in North America. However, he adds, the make or buy decision is based on an analysis of cost and strategic factors that gives few advantages to internal suppliers.
More to the point, suppliers are expected to respect and cooperate with BASF's procurement structure, whether it's a matter of pitching a new ingredient or offering suggestions for a technical process innovation. "We have suppliers calling on our procurement function in Florham Park, N.J., on our laboratory in Southfield, Mich., and at our production sites in the U.S. and Canada," says Donahue. And while purchasing doesn't try to stifle those different avenues of approach they expect to be included in the dialog in a timely fashion. In addition, Donahue says factors like quality and reliability are of paramount importance since a tiny problem with a coating could potentially lead to a plant stoppage at a customer operation.
Donahue says links between R&D and innovation also tend to appear along the quality and reliability axis. "The suppliers that meet criteria for reliability and quality tend to have stronger analytical abilities, product testing, and R&D support," he says. Then there is the people factor. "We like it when the people who call on our formulators aren't just sales guys with a data sheet but actually have technical knowledge and the ability to add value," he says.
"It probably sounds like we want everything—high quality, consistency, the lowest cost, and innovation," says Oliver Cullmann, director of chemicals procurement for BASF in North America. "That's because we do."
While Cullmann says BASF has not gone to the extent of putting formal incentives in place or devising recognition programs for suppliers, the company is anxious to innovate with partners. "We like to see contacts between the technical people at the supplier and with our R&D organization. It is something that we encourage as part of leading the relationship," he adds.
"In another sense, this is part of our suppliers showing us they have a vision of the future and of where they are going," says Donahue. "If they don't have that vision the odds are they won't be selling to us in five years because the requirements are always evolving," he adds. "If they don't bring innovation to us they may watch the business goes away simply because of the nature of the product lifecycle. If they don't innovate they will lose," he explains.
For example, he says OEMs are anxious to reduce their costs and coatings that require simpler handling or that cure faster can save energy and speed production. "That's all very critical, in fact at Ford, Green is the top issue driving procurement," he notes.
In fact, Craig Mitchell, marketing director for Celanese Emulsion Polymers, Americas says the drive for Greener products is one of the biggest spurs to innovation at his company and at the coatings makers he supplies. "Today, the largest topic of interest for many paint producers is environmentally-friendly," paints, he says.
"There are two drivers for this: increasingly stringent regulations and marketing advantage. As regional VOC regulations continue to tighten and as Green certification criteria continue to evolve, paint manufacturers are continuing to move forward with low- to no-VOC paints," he says. And, he adds, his company often partners with its customers in the coatings arena around such issues.
For coatings makers, the incentive to appeal to customers and the ultimate consumers will likely drive continued cooperation on product development. "In the eyes of the consumer, coatings are very important to the perceived value and desirability of a product in the showroom as well as in terms of its long-term value and durability," says Donahue. With that, in mind, he says, "There will need to be a constant dialog between us in procurement and the suppliers as well as between us and our laboratories." In fact, that's the formula for success.
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