Faced with a slow, sluggish recovery for their companies' products, more than half (53%) of the nation's nonferrous metals buyers are reducing suppliers this year. A year ago, a similar study of steel buyers found 63% of them eliminating suppliers as a cost-cutting measure. However, with 2002 market prices for nonferrous metals already at three-year lows, cost reduction isn't the key reason for nonferrous supplier cutbacks. Instead, a new PURCHASING magazine survey finds these suppliers are being axed for two calculated reasons:

• Attempts from buyers to accelerate strategic sourcing and partnering programs with existing suppliers who are chafing at two years of purchases at below-normal levels at below-normal prices, and
• Attempts from buyers to improve negotiating leverage on price and delivery for 2003 supply contracts with existing or new suppliers.

PURCHASING magazine's poll was conducted at a time in late summer when economic data was mixed, showing declining consumer confidence, some strengthening in consumer spending on automobiles and homes, slipping retail sales, faltering industrial production and growing new weekly claims for unemployment benefits. There was considerable uncertainty about the timing of a measured pickup in manufacturing. A large number of responses pointed to attempts at finding single-source suppliers to meet corporate cost-control goals.

Yet, "while price, delivery and service remain important tactical issues, we also have to pay attention to our future sourcing strategies," according to the purchasing manager of a metal fabrication firm in Indiana who annually sources millions of pounds of aluminum mill products that become parts for motor vehicles.

"Higher order volume to a smaller supplier base should result in better pricing, but the real reason I'm cutting back is to improve my metals supply relationships for the future," says the purchasing agent for a precast concrete buildings firm in Oklahoma who sources aluminum and zinc as well as steel. He and some others say they are reevaluating the future use of long-time distributors, and moving supply toward providers with value-added processing services. "We already have tighter quality control. If we can save money and guarantee long-term supply of second- or third-stage processed nonferrous metals, that's just more of a good thing," says the purchasing director of a programming machinery firm in Alabama. "Now it's time to develop tighter cost control."

"Aluminum and manganese pricing and delivery times are very important to us," says the materials manager for a locomotive servicing plant in Kentucky. "Hopefully, the manufacturing economy will improve next year. We don't want to be caught without enough metal or with overpriced metal. That's why we're adjusting our supply base and supplier relationships this year."

A Michigan-based producer of turning, milling, threading and other metalworking machines uses about 1 million lb annually of value-added aluminum mill products that cost more than three times as much as commodity grades. "In fact, most of the nonferrous metals purchased by this company are low-volume high-service products," says the materials supplier development manager. "We are finding fewer mills willing to manufacture such low-volume work, so we are contracting with a small number of specialist facilities to produce the specific products."

PURCHASING magazine's readers buy more aluminum mill products than any other nonferrous metal, followed by copper and the copper alloys (brass and bronze). This meshes with marketplace realities that steel, aluminum and the coppermetals account for 73% of all metals purchased annually in the U.S.

The domestic nonferrous metals marketplace has been fragile since manufacturing went into a slide in early 2001. Demand this year has been somewhat better than last year, but not much. So, it's no real surprise to see the buyers' survey reflecting slightly stronger buying so far this year for aluminum but reduced buying of copper, brass, bronze, lead, nickel, zinc, manganese and beryllium. Also, overall flat buying is reported for tin, magnesium, titanium, cobalt, molybdenum, tungsten, mercury, the minor metals and the ferroalloys.

Here are some other key findings from the buyer survey:

• While nonferrous metals buyers still source a goodly amount (49%) from processing distributors, that's down from 64% five years ago. More buyers are sourcing through mills and mill depots (33%) than in the past (23%), and have increased slightly their use of merchants and traders. Looking ahead, the buyers forecast slight (6%) decline in the use of mills, merchants and traders—which will be picked up by sourcing on the Internet.
• Nonferrous metals buyers aren't accelerating their demands for preproduction processing, as only 32% say they are requiring more value-added work on mill products during this period of reduced manufacturing.
• Communications with suppliers continue to rely heavily on the telephone (95%) and facsimile machine (84%) with face-to-face conversations important to 53%. These tools have grown slightly in importance in the past five years, and so has the use of electronic data interchange (EDI). However, the fastest-growing tool is the Internet, which has risen from no use in 1997 to 37% today.
• Still, electronic procurement is just as big a bust in nonferrous metals as it is in steel. Only 11% of the nonferrous buyers polled are involved in e-buying activities. Even the proponents of e-commerce are hesitant to make more than 49% of their nonferrous metals purchases via the Web.
• Nonferrous metals buyers don't like change. Nearly two-thirds (63%) are using the same purchasing systems that they used five years ago. And more than half (53%) don't plan to expand their involvement in e-procurement programs over the next five years.
• Quality is important. Buyers think 94% of what they receive from domestic and foreign suppliers meets their quality specifications, even though nonferrous metals specs have tightened for 68% of those polled. Interestingly, only 56% have continuous supplier improvement programs for their nonferrous metals suppliers.