Building business relationships with strategic partnering.

Confronted with new customer needs and a changing marketplace, some foundries are rethinking traditional business relationships.

The new realities of the metalcasting industry are requiring foundries to alter their traditional approach to how they conduct their business operations. Among these new realities are:

* tighter delivery schedules to meet changing customer requirements;

* just-in-time delivery of raw materials to reduce inventory costs and conserve plant space;

* companies actively reducing their supplier base;

* accelerated movement toward single-sourcing within product catagories;

* need for improved technology to meet more exacting quality standards;

* growing overseas foundry capacity and inexpensive labor;

* challenging pricing from major domestic OEM manufacturers;

* re-examination of relationships with customers and suppliers.

Building Alliances

Some American metalcasters have reviewed these realities and are taking steps to use them to promote present and future growth and development. Integral formation of strategic business alliances allow them, their customers and supppliers to work more closely to achieve mutually beneficial objectives.

From basic pricing agreements to preferred supplier arrangements, and on through any number of customer certification programs, some foundries are exploring the benefits of creating these longer-term relationships. The most recent entry into the alliance lexicon is the term "partnering," generally understood to indicate an in-depth, more formal approach to working together.

Blackhawk Foundry & Machine Co., Davenport, Iowa, is adapting to the new realities of the metalcasting industry through participation in business alliances. The foundry is building customer/supplier alliances with its customers and suppliers to obtain true business improvement partnerships to the benefit of all.

Blackhawk, a 180-person operation, has participated in programs that led to its certification to supply castings to a variety of customers in the engine components and agricultural and heavy industrial equipment industries. Recently, it entered into its first formal partnering arrangement with a major suppliers.

Larry Helm, company metallurgist, said changing customer requirements are behind Blackhawk's attitudes toward cooperative programs.

"We're aligning ourselves to support changing customer needs as they become apparent," he said. "Strategic alliances are rapidly becoming an essential factor for us. As a result of our ability to work more closely with customers, we are one of the many preferred foundries that they see doing business with down the road."

Access to Training

A positive benefit that can accrue from alliances is access to customer or product supplier technical experts who can provide in-plant support, training and seminars.

"We used several suppliers to provide us with training programs during the past year," Helm said. "For example, we put on a three-part sand seminar for a broad cross section of our shop, lab, office and other personnel. It really didn't cost us much to have over 20 people exposed to a great deal of information. If suppliers are able to come in and hold these seminars, it is a big advantage for us--especially when resources are tight."

Berlin Foundry Corp., a 400-425 person operation in Berlin, Wisconsin, turned to a supplier-partner for technical updating in gating and risering.

"Our supplier brought in its experts who put on a successful seminar," Berlin's technical director David Wirth said. "The result is a better understanding of general principles, and our foundry people are focused on the same procedures and appreciate the opportunity to question experts. This type of training has promoted much more employee involvement in our business."

In relationships where technical assistance is available, some suppliers can help avoid processing problems as does a premix vendor partner "who understands and is responsive to our continual improvement needs," Wirth said.

Berlin has been participating in customer and supplier relationships for several years, particularly in the areas of pricing and long-term price commitments.

The simplification and cost reduction program implemented after indepth technical assistance from a supplier, reduced Berlin's costs, while maintaining, if not improving, casting integrity.

Even companies with reservations about partnering now are recognizing that the right technical assistance program can improve processing operations and solve production problems.

Clow Water Systems, Coshocton, Ohio, is a leading manufacturer of ductile iron pipe. According to Melting Superintendent Thomas Dean, gaining access to a top-notch metallurgist and other technical help was the primary reason for joining a long-term partnership program. "We receive unique assistance," he said, "and have no other supplier where we can direct a total service inquiry."

Process studies and lab analyses of pipe test samples led to a series of recommendations that initiated a task force study and an ongoing action plan for process and product improvement.

"Our partner was able to perform more precise experiments with our samples than we could," Dean said. "They also optimized our cupola operation, using their proprietary computer profiling system. It enabled us to become more competitive in our marketplace."

Additional Alliance Benefits

Foundry spokespersons surveyed for this article agreed that, in addition to technical assistance and training programs, the types of customer/supplier business relationships that best meet their companies' needs are structured to provide for:

* more direct communication between appropriate parties;

* product quality assurance;

* greater sharing of information and technical expertise, including special problem application data when warranted;

* partner's commitment to improving a foundry's business and processing operations;

* a high degree of commitment/responsiveness in meeting delivery dates backed by guarantees;

* fast, accurate information concerning the marketplace, raw materials, pricing/demand, available equipment, variances and forecasting;

* troubleshooting expertise;

* quick materials sourcing for fast order turnarounds;

* a voice for foundries to help shape the future of the relationship.

The Pricing Factor

While pricing will always be an important issue for foundries, a price-only approach to working with customers and suppliers (unless offset by the provisions listed above) will only erode quality and arrest technological improvements on the processing floor.

In practice, closer arrangements with suppliers already are indicating that price is not the sole criterion for doing business within a partnering framework.

"There's a change of attitude under way, a transition from price-buying to partnership," Wirth said. "We prefer to move away from the price comparison mode and buy on competitive supplier merits--not just price. But realistically, if the price isn't close, I may get out voted on the vendor's value."

Helm's opinion is: "Pricing is important, but in some cases it has become too important by being the only factor considered by purchasing. For example, castings in the U.S. market are considered by some manufacturers as a commodity, with price overriding all other factors. But what really needs to be looked at is through pricing--the final cost of putting that item or material through the manufacturer's process."

Helms added that "foundries need to be doing the same thing, looking not only at initial cost, but the effect the purchased item has on final production costs. Final cost control is important for foundry survival. Anything that improves competitiveness, and, at the same time, gives you equal or better quality, is worth pursuing.

"Partnering can help, provided it's the right kind of partnering. It can not be focused on price only, but, rather, on tangible product, service and quality enhancements."

Communicating Directly

With more tasks to do and less time to do them, business alliances and partnering programs can help direct timely communications between a foundry and its customers and suppliers.

Berlin Foundry is very specific when informing its customers who should be called directly for answers to various questions.

"Traditionally, we have dealt with our suppliers' salespeople," Wirth said. "but now we know whom to call direct for fast, accurate information, and that's a major benefit. Basically, I view partnering as development of a longterm relationship resulting in better communication and understanding of mutual objectives."

Blackhawk finds partnering helpful for inventory management, materials procurement and delivery dependability,

"Our lead times get shorter all the time," Helm said. "We need quick response when we need supplies because maintaining and improving customer deliveries is an essential. Anything that tightens the entire system is useful, and a partner who allows you to do that is a valued asset. That is continual improvement."

For Eljer Plumbing, a cast iron operation in Salem, Ohio, entering a partnership relationship with a major supplier has proved so beneficial that the company is exploring similar arrangements with other suppliers.

"The attention you get as a partner is an important benefit," said Paul Patterson, general manager of the Salem plant. "We're getting technical support we never had before, and the best-value pricing concept from our partner saves time otherwise spent in price negotiation."

Types of "Partnering"

Partnership arrangements should be reviewed carefully to determine actual benefit potential. Is the arrangement simply a pricing or service pact? Does it represent real commitment for both parties? Is it a thinly veiled marketing tool that would better serve the supplier? Does it allow the option of going outside the partnering agreement when terms or conditions deem it prudent? Are there value incentives for both parties that relate to process improvements? What are the tangible benefits and limitations?

Since the concept of formal partnering is still new to the foundry industry, some metalcasting companies will be looking for answers to these questions as they examine their present and future competitive status.

For those who are, or will be, considering partnering arrangements, consider this comment from Blackhawk's Helm:

"In the two years I've been with Blackhawk, six foundries within a 150-mile radius have gone out of business. That's a sobering statistic. Properly structured alliances with customers and suppliers must make Blackhawk more competitive in the coming years. And if you're not going to be more competitive, you're not going to be around."

One Suppliers' Approach to Strategic Partnering

Strategic Business Support (SBS), a comprehensive supplier/customer partnering program developed exclusively for the foundry industry, was introduced last spring by Miller and Company, a Chicago-based national supplier of metalcasting products.

The program became effective on August 1, 1992, yet already has advanced partnering as a concept far beyond conventional business relationship programs based on quality, service or pricing agreements.

To prepare for SBS, the company was totally reorganized over a two-year period, which required a substantial commitment in time and money, according to Peter J. Goodwin, the firm's president.

The company analyzed the foundry industry and the challenges to foundries' profitability, such as noferrous metals or other materials being substituted for metal castings, increasing operating costs, overseas competition and other factors. SBS represents a complete change in how Miller and Company now does business, and dedicates the company's total knowledge, technical expertise and product resources to helping foundry partners improve their business.

The program addresses specific asssistance required by foundries to improve their process efficiencies and operations cost-effectiveness. It commits every company employee to providing the highest levels of support and service to foundry partners.

Elements of the program include:

* Market Center: a telephone service that provides up-to-date information on product supply/demand status, product pricing/availability, delivery schedules, and billing inquiries. Trained product analysts, sales and data coordinators staff the Market Center.

* Market Center Newsletter: Issued monthly, it focuses on economic trends and their impact on foundry markets, potential sales and profitability.

* Guaranteed Best-Value Pricing based on current market conditions.

* Guranteed, On-Time Deliveries or the company pays for related production losses.

* Technical Support/Assistance in solving processing/production problems, via an 800 telephone line.

* TECH TALK, a publication that provides Miller's partners with technical solutions for solving foundry processing problems.

* SBS National Convention to obtain partner input to assure continual program improvement. The first convention will be held in the fall of 1993, and will feature workshops, roundtable discussions and keynote speakers. Technical, management and purchasing issues will focus on new levels of process and production improvements.

* Potential SBS-Plus Partnering, which will provide benefits in addition to those offered with SBS.

Foundry partners do not have to purchase any materials from Miller, but do agree to call the company first, complete a partner profile and permit an on-site practice review by a company representative. Only 5% of the first 125 foundries presented with the SBS program said "no" to becoming partner members.