Cutting tool maker answers wake-up call.

Consider this scenario: you produce a mature product line in a market that is characterized by oversupply and low demand and your primary markets take a downturn after years of comfortable stability.

That is exactly what happened to cutting tool manufacturer Fansteel/VR Wesson, a fully integrated manufacturer of carbide insert tools and holders, milling cutters, and specialty alloy metals located in Plantsville, CT.

In 1991, the company's key customers, aerospace and defense companies, took an economic nosedive that dramatically impacted its sales."We saw it coming," says Bill Jarosz, GM of the Plantsville facility. "Looking back, the downturn served as a wake-up call, forcing us to analyze every element of our operation. We identified our strengths and weaknesses with T-Charts and chose manufacturing, engineering, and marketing as our initial focus areas," he explains. A comprehensive review of its competitors, which range from giant, fully-integrated, multinational companies to a growing number of smaller regional fabricators, was conducted as the company tried to decide where to start.

"The first step was realizing that every aspect of day-to-day operations gravitates back to the simple truths of price, quality, delivery, and development," says sales manager Jim McMahon.

Fansteel decided thai the "ground-up" approach--putting its core character on the line--would make it successful.

On Price Fansteel was determined not to rewrite the natural price/demand rulebook, explains sales administration manager. Lou Cipriano. The company has taken the route of "cautious flexibility" in the current over-supplied marketplace. As a result, Fansteel customers have seen minimal price changes for standard products but more competitive adjustment for custom orders.

On Quality "It has never been a negative issue with our customers," says manufacturing manager George Wallace. "You can't service the aerospace and defense markets for very long with poor quality, and we've been in those markets for 40 years."

On Delivery "Product availability," as the Fansteel/VR Wesson team prefers to call it, was an area where strengths that were noted on the T-Chart analysis could be put to work immediately. One obvious plus was the financial strength of its parent corporation, NYSE-listed Fansteel Inc of North Chicago, IL.

Going commercial

The company realized almost immediately that if it wanted to expand its non-government commercial business, it would have to build inventory, explains inventory control specialist Ken Demirs. "Building inventory is a tough sell these days, but with the principles of JIT being applied to indirect materials by end-users and our distributors, we learned that someone at the front end would have to carry the inventory."

To remedy any problems with product availability, a near-theoretical ABC analysis was applied to decide build levels fur standard commercial products. Standard product inventories were adjusted based on sales history and future estimates using the 80/20 approach, Mr Demirs explains.

The application of ABC analysis and the extra inventory investment paid off handsomely in 1993, as Fansteel/VR Wesson recorded a 92% standard product fill rate, nearly reaching its goal of 95%.

But the team still had its work cut out in delivering custom product--about half of the Plantsville factory's volume--on time. An IBM AS-400 computer was purchased to run a new business control software package, and existing software was modified.

"The new software will help us reach our goal of 98% on-time delivery," explains Rob Stagis of Data Processing. "There's a long learning curve of about a year to 18 months, so we're currently operating with modified software and a skilled group of people and are accomplishing 92% on-time deliveries. However, it will be even better when the new program is fully operational in early 1994." The final element of the team's short-term mission was an evaluation of the Plantsville facility's current commercial product lines and the specific marketing methods used to support those lines.

It became apparent to Fansteel that any company that remained stagnant with its product development would watch its sales slowly decline until there would be nothing left, says John Abetz, manager of technical development.

Fansteel accordingly spent most of 1993 narrowing down almost two dozen product ideas into three which are either on the market already or will be introduced this year. Included arc ambitious sales goals for its new grooving tools, PCD and CBN-tipped tools, and new strip metal edge conditioners.

"We've always been active in product development, but one of our past sins against commercial products was their silent introduction into the marketplace," says Lou Cipriano. The company hopes to generate customers who will consider Fansteel for all of their tooling needs.

The Fansteel/VR Wesson Plantsville team admits that the change in company direction was not easy in the beginning. "Once convinced, however, ideas came from every corner of the factory on developing new business," says GM Bill Jarosz. The process continues. The company's mission has been redefined 10 provide long-term growth and security through servicing its customers.