Steel buyers don't use lowest price as the primary criteria for choosing suppliers. It's all about quality. And they aren't all that happy these days because mill product quality—especially sheet steel surface quality—has been erratic. They also are less than pleased with delivery performance by the domestic mills, the stocking programs by some distribution chains and lack of supply base feedback on the real state of the steel market.

Steel plate and pipe buyer Dennis Broecker at Landmark Structures in Fort Worth, Texas, says he "needs and expects continued impeccable quality, continued depot inventory on A-list items and 97% or better on-time-delivery on mill production orders." Since his expectations aren't always met, the buyer at the manufacturer of water towers and tanks adds: "What's needed is more discipline throughout the supply chain to reduce steel quality volatility and keep purchasing costs low."

Earlier this year, a Purchasing survey of buyers found they were most interested in seeing their service center suppliers expand and upgrade processing capabilities and increase such value-added services as inventory management and cost-control programs. Buyers use metal service centers to shape large metal mill products into usable shapes, assemble small metal pieces into components and provide various supply chain management services. In a more recent survey of steel buyers this summer, it was clear they still want their steel suppliers—mills and service centers alike—to refocus production efforts on product quality.

In the survey, 92% of all the buyers polled wanted to see improved and consistent quality from their steel suppliers. That's a huge percentage, especially since the next top "steel buyer wants" are compliance with promised delivery times (52%) and, then, competitive prices (42%) and availability of needed products (40%).

"It's the old three-legged stool of quality, service and price," says Eric Johnson, purchasing manager at Titan Air in Osseo, Wis. "All three elements are needed for the stool to stand; loose one leg and the stool becomes wobbly and may fall."

Titan Air annually uses a large amount of galvanized sheet steel to manufacture industrial and commercial heating, cooling and ventilation equipment. "We must have consistency of spangle—that is, surface appearance—as well as consistency of supply," says Johnson. So, his service center suppliers of hot-rolled, galvanized and galvannealed sheet maintain inventory of the sizes needed by Titan that are pre-leveled and ready for shipment, "so we don't have to maintain a large inventory." Johnson says. Still, he admits he pushes his service centers to "press the steel mills for consistency of material."

Quality also is a must for Ron Freiberg at Reinke Manufacturing in Deshler, Neb., where his buys of carbon and stainless steel sheet and plate are delivered to become mechanized irrigation systems in a Lean manufacturing system. So, he also is concerned about keeping costs down and works to buy at prices that are competitive internationally for material that is delivered "so we can maintain no more than a week's worth of in-plant inventory."

Steel sheet buyer Sandi Shunkwiler at the ABB electromechanical control equipment parts maker in Florence, S.C., would appreciate quicker response times to order placements and "weekly updates without asking on material shipments." She says that since her company expects the motors, switches and controls market to grow, "we need our steel suppliers to be more flexible with forecasting changes and responsive to procurement adjustments, while still meeting delivery-date promises."

Ron Stowe, a buyer at the Primary Steel service center in Chicago, points out that "on- time delivery performance by the mills allows us to improve our inventory turns and increase available cash for other purposes." And Mike Branigan, vice president of corporate purchasing at the Macsteel Service Centers USA processing and distribution chain headquarters in Newport Beach, Calif., ranks "exceptional delivery performance" right after "fair pricing" as key wants from his mill suppliers.

Also, "timely updates to inquiries and resolutions of issues" are important to flat-rolled steel buyer Brian Ptashnik at Tower Automotive in Novi, Mich., a producer of automotive body structures. In fact, he uses "timely" consistently to discuss customer service and delivery desires. "The market will dictate pricing; so, to differentiate themselves, suppliers must excel in the quality and service areas."

And it's not just flat-rolled material that's impacted by delivery issues. Kimberly Hartshorn buys various types of steel bars—rounds, flats, angles and channels—and pipe and tube for Finn Corp. in Fairfield, Ohio. "The ripple effect for late deliveries can be crippling during busy season" for the landscape and irrigation equipment manufacturer, she says, "so we need to have quick responses to our orders; delays can shut down our production bays."

Also, structural steel mills also need to understand that this is a global economy, even structural steel can be shipped into the U.S. and foreign supply could cut them and us out of the marketplace, says Ed Braig, vice president of purchasing at Central Texas Iron Works in Waco, Texas, a structural steel fabricating firm. "Our suppliers need to become as keenly aware as we are of the growing foreign supply—which is what makes reliable delivery, quality product and competitive price by them so important."

Steel buyer Larry Gursky, the purchasing agent at the Shredder Company in Canutillo, Texas, buys all kinds of metals and steel products such as round and flat bars, angles and channels to plate, I-beams, pipe and square and rectangular tubing. "What we need from suppliers is that they keep the types of metals we use on hand in their inventory," he says, "since you can't work JIT (just-in-time) without those stocks."

Of course, pricing is a concern to all steel buyers—especially the price of stainless steel sheet, which has exploded by almost 150% over the past two-plus years. "Of course I want quality material delivered on time but, when it comes to stainless steel sheet, competitive and reduced prices need to be achieved," says Herschel Pritchett, purchasing agent for Fowler Products in Athens, Ga.

His company uses numerous grades of stainless—and 6000 series aluminum sheet—to make high-speed capping machinery and cap sorting and feeding systems, high-speed bottle rinsing and air cleaning machines and leak testing equipment for use by the beverage, food, pharmaceutical, chemical, personal care, household goods and distilled spirits industries. "Stainless steel CEOs have let fuel and nickel surcharges get out of hand over the last couple of years," Pritchett says, adding that it may be time for the government to step in to regulate the stainless steel mills in the U.S.

Hartshorn at Finn Corp. says she realizes that "metals are considered a commodity item, but pricing can kill the bottom line and create a huge headache for buyers." In her company's case, that's because "we set pricing on our equipment once a year, so it is very important that pricing be controlled as closely as possible."

Most of the steel buyers who report being content with their supply base are those who have ongoing partnering programs. They also suggest their purchasing colleagues "always be clear" when communicating with suppliers—whether it's an order, a compliment or a complaint. In fact, buyer-supplier partnerships were cited as opening the door for those buyers seeking more flexibility in credit arrangements (7% of those polled) or the development of online procurement programs (4%).

"Reliability and consistency are the watchwords for sheet steel quality, delivery, technical service and competitive pricing," says Herman Graff at Mauser Group in Woodbridge, N.J., the maker of steel drums and other industrial packaging products. Reason: "Only by understanding that they must meet these requirements do our steel suppliers keep us competitive. Alternates to steel are on the move and looking for opportunities to take our business away on a permanent basis."

In a nutshell, "the successful suppliers are those who understand our needs and their own core competencies, and have worked with us to develop collaborative alliance-style business relationships," agrees Dru Rachaner, purchasing manager at Milbank Manufacturing in Kansas City, Mo., a producer of electrical metering and associated products.

This buyer of galvanized sheet steel and his supply base annually review and adjust their long-term business plan "to achieve the desired bilateral objectives that match up our vision, goals and objectives." Only in that way, can any meaningful cost-reduction programs be implemented, he says, noting that this procedure also is used in buying flat-rolled and extruded aluminum and copper strip and bars. Rachaner adds: "If I had the ear of the CEOs of my metal supplier companies, I'd simply say, 'Check your ego at the door and let's work together to be successful.'"

Broecker at Landmark Structures in Texas says that partnering programs have made on-time deliveries of high-quality wide steel plate and pipe more consistent "yet have allowed for product or delivery flexibility when our needs have changed."

Among the materials bought to make electronic and assembly hardware products at Seastrom Manufacturing in Twin Falls, Idaho, is stainless steel, which buyer Carla Critchfield says continues to have issues with consistent quality, availability and pricing. So, she is spending time and effort "engaged in the creation and maintenance of a business relationship that would guarantee consistent on-time delivery of quality product with guaranteed competitive pricing."

"Since quality, price and delivery are givens, we need to see continual improvement in communications," suggests John Wydick at Means Industries in Saginaw, Mich., a manufacturer of sophisticated automotive clutches. That's because he believes "failure to meet delivery schedules of ordered flat-rolled carbon and stainless steel products is caused by a failure to communicate."

Johnson at Titan Air explains that "as the consolidation of the steel mill market increases, opportunities for improvements and positioning by end users will decline." While he understands that "everybody needs to make money in this circle—from the mills to the service centers to the end user—the rules of supply and demand must be followed and not artificially manipulated by such events as mill consolidations."

That's why he pressures his service center suppliers "to become more active in applying pressure to the steel mills as to what is acceptable on quality, leadtimes and price on behalf of the end user/customer. It is too easy to throw their collective hands up and say, 'there's nothing we can do, we are trapped in the middle', but that's unacceptable."