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Castings: commodity or component?

The era of the 70s, when foundry backlogs exceeded capacity and prices were set in a strong seller's market, is past. It gave way to the trauma of the 80s and now in the 90s, foundries again face the need to adjust to formidable global competitors that threaten U.S. metalcasters.

How American foundries choose to market castings surely will determine their long-term viability. The choice? Simply sell metal shapes for whatever price it takes to beat out the competition or market castings as high-value, engineered metal components.

This is the message that Lawrence S. Krueger, chairman and CEO, Pelton Casteel, Inc, Milwaukee, will deliver when he presents the 1993 Charles Edgar Hoyt Memorial Lecture during the 97th AFS Casting Congress.

His chief contention is that foundries must opt for the component mentality to overcome the inclination to consider castings as a commodity. Foundry marketing success in the 90s, he claims, will be a leading indicator of the financial health of the industry well into the next century.

Developing a component mentality to replace commodity thinking will take a major change in attitude and a change in how customers perceive foundry products in the marketplace. Foundries must move from volume to value and value added. The value-added concept requires that sales of castings be sold on a unit or part basis. In addition, a cost system must be in place that assures that castings are properly priced.

What else are customers looking for beside price? Krueger says that some considerations are obvious after eliminating the price factor. Vendors who offer consistently high quality, short lead times, fast prototyping services, on-time and complete deliveries, engineering assistance and collaboration, continuous improvement and better communications are the ones who will survive.

He offers that putting these attributes into action will mean, for many foundries, a sea of change in corporate culture. It will require letting go of unilateral decision-making authority and allowing people to make more basic decisions on their own. This translates into personnel training and creating an environment where people will be much more aware of strategic business plans that relate to customer satisfaction. It will require a much flatter organization with fewer layers of management.

Industry changes are already happening, he said, because successful foundries have recognized that the real problem is not one of creating new ideas, but, rather, escaping from old ones. He offers a number of suggestions for positive change.

CEOs, he says, must be deeply involved with customers and be able to sell the engineering advantages of metal castings in terms of offering foundry-initiated and controlled added value services.

Krueger also stresses the need for constant innovation. The beneficiaries of short-term marketing advantages brought about by the good fortune of special market situations may well be tomorrow's downfall if opportunities for change and innovation are ignored in favor of accepting the status quo.

Just-in-time delivery is a customer expectation. Years ago, a cleaning room or finishing department was often a bottleneck in the casting production process. Today's standard should be to keep inventories at an absolute minimum and turn them over quickly. Reducing lead time from order entry to delivery must be a constant priority.

Avoiding time and talent to quote components that a foundry cannot or is not qualified to produce requires a clear understanding of capabilities and limiting sales people to those capabilities.

He adds that the single focus of every foundry must be on their customers. Those who own and operate foundries must be willing to subordinate personal objectives to the health of the industry by strengthening their companies. Being content with a company that operates with substandard profit margins cannot be the norm. Anything less than the best is a disservice to our most important external asset, the customer. We must do what we can to make our markets grow and use our qualified existing capacity.

If we can do this, Krueger believes, the foundry industry is poised to move forward with a strong metalcasting industry able to meet any competitor in the global marketplace.
COPYRIGHT 1993 American Foundry Society, Inc.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:CastExpo '93: 97th AFS Casting Congress, Chicago
Publication:Modern Casting
Date:Apr 1, 1993
Words:673
Previous Article:Welcome to Chicago! Welcome to CastExpo '93!
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