CISA Meeting Focuses on Current Business Climate, Supplier Needs/Expectations.

The Spring Conference of the Casting Industry Suppliers Assn. (CISA) in Naples, Florida on April 7-10 focused on the general business climate and opportunities to enhance successful foundry-supplier relationships. Keynote panelists Bill Barrett, president/CEO of Neenah Foundry Co., Neenah, Wisconsin, Dan Torzewski, senior corporate buyer, International Truck and Engine Corp. Engine/Foundry Div., and Don Huizenga, president/CEO, Kurdziel Industries, Inc., Muskegon, Michigan, shared perspectives as both buyers and suppliers. Nearly 70 industry officials attended the conference.

Barrett opened his comments by discussing the rapid changes taking place in the industry, as well as at Neenah Foundry, over the past two decades. He characterized the current environment for selling castings to OEMs, which might be described, at least from the buyer's perspective, as "leverage with a smile."

"At peak demand in 1999 and 2000, customers took a bold new approach by having their hand out and fully expecting their casting suppliers to offer year over year price reductions," said Barrett, who believes that this trend is not only here to stay, but is gaining steam. "Consider all the spinoffs, acquisitions and mergers that have taken place in the last few years by the major users of castings. A significant amount of this activity was accomplished by taking on additional debt. Now that the economy has relaxed, the interest payments have not gone away and those companies leveraged with debt must generate the cash to service that debt." One way OEMs see to improve earnings and generate cash is through supplier price reductions, and more specifically by attacking the casting price.

In addition to noting that customers often don't take the time to test cost-saving ideas submitted in prior years, Barrett shared how procurement is often only responsible for the casting's unit price, with all other issues (delivery performance, material consistency, scrap, etc.) the responsibility of manufacturing. "Very seldom do the two ever sit down and compare total cost out the door in an effort to determine what each supplier is really costing the product."

Following a discussion of his firm's adverse experience in reverse auctions, Barrett discussed some recent contributions by, and future needs of, suppliers. In particular, he praised cost-containment efforts and equipment innovations that included ergonomic features, automatic finishing equipment for short-run jobs, programmable controllers' contribution to mold line speed improvements, and real-time computerization on the floor and pouring deck. Further, he reiterated the importance of raw material consistency ("We're becoming extremely sensitive to very small variations from lot to lot," he said.) and shared his concern that the Internet's future role would diminish suppliers' technical service and expertise that Neenah relies upon.

In addition to sharing some of the initiatives underway at International Truck and Engine's Indianapolis Casting Corp. and the Waukesha Manufacturing Facility, Torzewski described the firm's approach to purchasing and supplier development. The mission, he said, is to procure quality products and services that meet customer needs at the lowest total cost, continuously improve the supply base capability/performance and launch new programs to exceed customer expectations. "Our purchasing strategy is to develop mutually beneficial, long-term, single or concentrated sourcing with key suppliers," he said.

The process, he said, is driven by these philosophies: "First, greater supplier involvement from the onset of a new program to drive simultaneous engineering, target cost achievement and supplier technology integration. Second, ensure that suppliers continuously improve their capability/performance and stay aligned with us.

Expectations of suppliers from this program, he said, are annual cost reductions based on continuous improvement in product, process and service; participation in the firm's product design and development process; implementation of electronic data interchange; use of preferred carriers for shipments; packaging that protects but minimizes waste; and full governmental compliance.

"Once you are a supplier to International, the business is yours to lose," he said, noting that quality, delivery and economics are all weighed heavily. "Economics will come into play only if they're significantly differently from the market."

Wrapping up the panel, Huizenga discussed his business climate and the new order of business that is being shaped both in the foundry and foundry supply businesses.

Like Barrett, Huizenga detailed how aggressive the cost-reduction programs of his major customers are, which ranged from 3.5-7% annually. "Nearly all our major customers have cultivated foundry sources in Third World nations and have told us they will go there. One of the customers has told us, Of course there is a double standard. We're looking at a foundry in a developing country as a project. We will give them time to improve and we will help them by sharing your technology to improve their performance.'"

Every major customer, he said, is focusing on leaner, quicker and cheaper methods by which they can achieve maximum manufacturing efficiency in getting their product to market by eliminating as much waste as possible to obtain the fattest bottom line.

One of the themes of Huizenga's comments was the speed factor (speed of delivery, speed of product development and speed of developing quality manufacturing programs) and its role as the new catalyst. "The speed culture is a new mindset that engages chaos and ambiguity rather than form and stability and succeeds within a world of alliances," he said.

Noting that cooperation, not "command and control" will be the rule for tomorrow, he shared several examples of how Kurdziel has veered from the traditional business model to compete. Recognizing these decisions are not always popular with the supply base, he said, "We can't fight each other, but must find ways to achieve what the marketplace is demanding."

"We as suppliers have to adapt to a new order of business," he said. "We can complain about the auto industry tactics and others of the world, but if we are going to prosper in this changing world, we are going to have to change our approach."

The meeting also featured a presentation by Gary Mosher, AFS, who provided the group with an environmental/legislative update.