CEOs voice concern for foundry industry in 2000.

A survey of AFS member foundries and suppliers identifies industry weak spots as metalcasting heads into the 21st century.

By the year 2000, foundry industry chief executive officers (CEOs) hope to make several significant management changes to secure their place in tomorrow's marketplace. While production and operations remain vital to success beyond the turn of the century, these leaders concede marketing and human resource disciplines will become keys in the not-so-far-off future.

These and other attitudes were registered as part of a recent survey conducted by the AFS Marketing Committee. The survey was mailed to 559 AFS corporate member CEOs. There were 147 surveys returned, or a 26% response rate. Since mail surveys typically average a 5-10% response, results of the survey are a valid representation of foundry leadership opinion.

Moving toward 2000

In part, the survey required CEOs to rate the importance of various business disciplines at different points in time--1980, 1990 and 2000. In reviewing the results, it is important to consider the state of the industry at each of the three times selected.

In 1980, the foundry industry had just completed the highly successful decade of the '70s, when demand for castings in a number of areas outstripped supply (a seller's market), major casting users were adding captive capacity, lead times were long and customers were more interested in production of castings than quality.

In 1990, the foundry industry emerged from a tremendously difficult decade marked by shakeout and retrenchment. Supply in most areas was significantly higher than demand (a buyer's market), although 30-40% of iron capacity was closed. Foundries that survived the '80s did so by focusing on quality and customer service, improving efficiencies and cutting costs.

By 2000, a new, leaner foundry is expected to be in place, with businesses that are strongly customer-oriented, but with supply and demand more closely in alignment. Quality and constant improvement continue to be in focus, yet marketing and human resources will take on new levels of importance.

Survey Results

The first question on the survey asked CEOs to rank the impact on business competitiveness of five key business functions: production, marketing, engineering/technical, finance/administration and human resources. They were required to rank their impact in 1980, 1990 and 2000.

As can be seen in Fig. 1, production and finance/administration stayed relatively flat during the periods covered. Production, however, is consistently rated as having a major impact on the business and finance/administration as having a relatively low impact.

On the other hand, human resources and marketing showed the greatest growth impact--about 40% each from 1980--while engineering/technical also grew but at a lesser rate--about 31%.

According to CEOs, the key by 2000 is marketing, which they believe will have the biggest impact on company competitiveness.

The second question asked CEOs to rate the impact of the same areas on their jobs. Their responses are summarized in Fig. 2.

Like question 1, production is rated as important in 1980, 1990 and 2000. Clearly, metalcasting is a manufacturing business and operations will always be a key part of that business.

Once again, marketing (32%) and human resources management (43%) showed significant growth in impact over the period. In fact, marketing was seen as having the most significant part of a CEO's job in both 1990 and 2000--and at a wider margin than in question 1. CEOs recognize that the skills needed to operate a successful foundry are changing. A president or general manager must be broader based today than 10 years ago.

The third question asked CEOs to explore a somewhat different issue. They were asked to rank the impact of 18 company departments or functions (such as customer service, quality control and sales management) on their company's competitiveness. At the same time, the CEOs were asked to rate their company's proficiency in each area.

Table 1 shows the responses. The higher the number in the "impact" column, the more impact a function has on the company's success. Therefore, service and sales support at 3.61 is seen as having the highest impact of all the functions listed. The highest possible score is 4.0.

The higher the rating in the "proficiency" column, the more skillful a CEO rates his or her company in that activity. In this area, production rates the highest of any function. Again, 4.0 is the highest score possible.

The column titled "difference" is calculated simply by subtracting the proficiency rating from the impact rating. The bigger the positive number, the greater the gap between the importance or impact of the function and the ability of the company to perform the function well. The negative numbers mean the proficiency ranks higher than the impact.

For example, marketing/strategic planning is rated at a 3.31 impact, which means it is one of the most important functions. However, company proficiency to perform marketing/strategic planning is only rated at 2.28--a difference of 1.03. This indicates a strong need for metalcasters to improve in this area.

This question is consistent with the first two in that the functions of marketing almost all rank high in impact. More disturbing is the evaluation by the CEOs that, in many cases, their companies are not as well prepared as they should be to carry out those functions critical to business success.

Finally, the last question was an attempt to prioritize the marketing TABULAR DATA OMITTED committee's plans for the future. CEOs were asked to rank a wide variety of marketing/management programs that committee members suggested. The top priorities are arranged in rank order in Table 2 as the CEOs evaluated them.

Impact of the Survey

What is the survey telling us? Despite consisting of only four questions, there are some strong messages.

First, the CEOs say the change that began in the '80s will continue in the '90s. Traditional management and foundry skills are not enough.

Second, while production will always be critical in our manufacturing business, the development of new markets and our customer orientation as a total approach will be the keys to success in the next century. Further, human resource skills are growing in importance.

Third, the survey is saying metalcasters are not well prepared to accomplish some of the areas that CEOs see as crucial to success. In particular, the industry is not as competent in marketing/strategic planning, new sales development, process improvement, sales management planning, quality control training and customer service as it ought to be.

Fourth, the managing job is growing in complexity with the need for direct involvement in marketing and selling of the product as well as the development of human resources. Yet production remains essentially stable in importance.

The survey also validates AFS' move to strengthen management and marketing areas. Primarily known as a technical society, AFS, through a variety of programs, has long been on the forefront of developing skills needed by the foundryman.

The opportunity indicated by the survey is to bring the same strengths to help member firms develop the marketing and human resource skills that will be required to survive the next decade.

While training programs in sales and sales management have already been presented through the Cast Metals Institute (CMI), AFS staff and members of the marketing committee are working to develop more definitive programs.

The bottom line?

By 2000, we will all be marketing focused if we want to lead the way into the next century.

Table 2. Top Priorities for Marketing Committee Programs

1) more and better education and promotion of the industry to the government and public

2) a videotape or series that describes/promotes the casting process

3) more management and marketing-related articles in modern casting

4) a report on how to create and sell conversions to castings from other processes

5) an annual U.S. forecast of casting demand

6) a set of classes with course materials for foundries to use to educate engineers and purchasing agents 

7) profiles of U.S., Canadian and Mexican industries and companies that use castings

8) technical training for salespeople through seminars, CMI courses, etc.

9) larger and more effective distribution of the AFS Casting Source Directory