DISTRIBUTION Q & A
By Tom Stundza -- Purchasing, 10/7/1999
Purchasing's editors thought aluminum-buying readers might be interested in what aluminum service centers have been doing to meet the needs of buyers in the OEM? We asked some of them how they thought they were serving buyers better. We also asked how they thought they were handling business these days and still servicing buyers. Answering our questions are: J. T. Wright, VP/Sales, Reynolds Aluminum Supply Co. Richmond, Va., division of Reynolds Metals Co.; J.S. (Sandy) Nosler, president, Pacific Metal Co., Portland, Ore., division of Metals USA.; and Andrew Cordell, marketing manager, J.M. Tull Metals Co., Norcross, Ga., division of Ryerson Tull Inc.What are your service centers doing to improve the quality of the aluminum mill products you buy, process, and deliver to customers?
Wright: Implemented a supplier development system to facilitate communication, cooperation, and document progress. Quality systems are being updated to current technology to exceed customer expectations; employee performance standards have been revised to include customer-satisfaction metrics.
Nosler: Purchased high-quality processing (cut-to-length, blanking, shearing, slitting) equipment that is capable of improving mill-quality coil to meet tighter and tighter customer specifications (i.e., flatness and dimensional tolerances). Monitor, evaluate, and measure mill performance to provide feedback to mills to improve quality and delivery.
Cordell: We are working constantly to improve the overall quality of the aluminum we supply. We have specific criteria that our mill suppliers must meet. We also are working internally to upgrade and improve existing processing equipment.
What are your service centers doing to improve the quality of the services you provide buyers to ensure adequate stocks, properly processed material, and prompt (or just-in-time) delivery?
Wright: Upgraded inventory management software, utilized interior and exterior customer-satisfaction surveys, established performance measures on delivery performance, implemented Total Productive Manufacturing systems in processing centers, implemented warehouse automation and delivery systems.
Nosler: Implemented an ISO quality system that includes specific work procedures for each customer order, working closer with major accounts to obtain better forecast data, using an inventory-replenishment software package to deliver product to the customer per his forecast, expanded delivery fleet between interbranch locations to shorten leadtimes to customers.
Cordell: We are making commitments to ensure our performance. We also have procedures and programs in place to track our performance.
What specific processing services have you had to add recently to meet customer demand?
Wright: Blanking, slitting, cut-to-length capacity, plasma cutting equipment.
Nosler: Cut-to-length and blanking line, surface-critical light-gauge slitter.
Cordell: Cut-to-length line.
What role are your service centers playing in the promotion and marketing of aluminum to compete against other manufacturing materials?
Wright: Providing technical services to assist in selection of materials and metal fabricating.
Nosler: Efforts are being made in this area. However, we find that good customer communication during product development is met with resistance due to the confidential nature of many projects.
Cordell: We conduct training meetings, using our mill suppliers to enhance our product and marketing program knowledge so we can "sell the advantages" of aluminum.
One NAAD member has said recently: "Everyone is attempting to drive capital out of the system by reducing inventories. This particular idea has caught on in every segment of the metals supply chain--especially at the end-user level. Our customers and our customers' customers are trying to drive their inventory back to their suppliers. That's us." What are you doing to operate efficiently in this environment, and still efficiently provide metal to the customer base?
Wright: Investing in software systems to improve efficiencies in inventory management and get redundant inventories out of the supply channel. The issue is to have appropriate information in a user-friendly electronic system that will allow all parties in the supply channel to perform their function to zero-defect standards, on time and at a lower overall cost to the consumer.
Nosler: A major key is to improve mill on-time delivery. All of our flat-rolled suppliers consistently run at less than 75% on time. Some mill that steps up and delivers 98% on time is going to have a bonanza in new business opportunities. New cut-to-length, blanking, and slitting gives us more flexibility in providing finished product to customers and allows us to reduce inventory investment.
Cordell: Controlling our inventory is very important. We use such programs as VMI (vendor-managed inventory) to aid in this area. Also, strict supply management and attention to detail helps control stocks.
What are the electronic capabilities your service-center company now must have in order to compete in the marketplace?
Wright: Direct connections with suppliers and customers. Intranet capabilities to communicate and transact business. Ability to complete all steps in the business transaction electronically. Warehouse and delivery automation. Why? To reduce cycle times, reduce costs, reduce errors, and improve communication with all concerned parties.
Nolser: Metals USA's Internet Product Catalog, a fully functioning e-commerce Web site.
Not all that long ago, there was a lot of discussion about partnering, buyer-supplier alliances, and strategic partnerships. Nowadays, there's not much discussion. What happened? Are they out of fashion? Or, not worth the time, effort, and cost?
Wright: Acronyms have been replaced with action plans to lower total costs and improve value to compete in a global marketplace. Customers are looking for customized creative initiatives to address their specific strategic initiatives. Some partnerships were dissolved due to a lack of appropriate performance measures, value was not measurable, and/or pressures on purchasing to reduce unit costs.
Nolser: No, they are not out of fashion. There may not be a lot of discussion in this area but strong buyer/supplier alliances continue to be maintained and expanded. We have a number of key pieces of business that tie an end user/service center and mill together. Factors contributing to these alliances include quality, delivery, price, and technical assistance.
Cordell: I would have to disagree. We continue to promote these types of partnerships. Also, with the increasing demands to control costs, more companies' buyers are reducing their supply base to reach their
Do you think the aluminum industry would consider supply chain alliances (as are in place in the steel industry) joining producers and processing distributors in ventures to market specific products or boost aluminum's market share in some end-use industries?
Wright: Blanket answer would be too speculative. Each opportunity would need to be evaluated on its variables and the decision would most likely be determined by the potential for rewards for the individual participants.
Nosler: This already is done in major markets such as aerospace and auto industries. There is less interest in some of the more fragmented markets like high-tech fabrication.
Cordell: We actually are doing this with a few specific products.
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