Printer Friendly

Castings: commodity or components?

The real choice is to sell on price or market on value. That decision will be an important lead indicator for the long-term health of the U.S. metalcasting industry.

It is truly an honor to be invited to present the AFS Charles Edgar Hoyt Memorial Lecture. Others before me have wrestled with the difficult problem of selecting the subject matter for this prestigious lecture, and I must confess, I, too, have struggled.

We are near the end of a millennium in an industry that has been in existence for over five millenniums. I think that most of us would like to be omnipotent and be able to foresee the future for our industry. However, it is probably fortunate that we cannot do that. Not that we wouldn't like what we see.

The problem we face as we look to the future is trying to envision how large we will be as an industry, what will be the structure of our industry and will each of us still be a part of it. Let me assure you that I cannot answer any of those questions nor will what I present this morning answer them. Hopefully, what is presented will generate some debate and, in turn, some actions for change!

As many of you know, I am first, last and always a steel foundryman, and I would love to extol the many virtues of steel castings. However, today you will be spared, as I plan to direct my comments to the management of our foundries.

I want to especially discuss the marketing of our products and try to address what I personally consider the pluses and minuses of our current situation. Then, I would like to attempt to suggest where we have to go to improve our position for the remainder of the '90s and into the beginning of the next millennium. In my opinion, what we do during the remainder of this decade will be a very important lead indicator for the long-term financial health of the metalcasting industry.

I've chosen to title my presentation today as "Castings: Commodity or Components?" because how we choose to market our product will determine the long-term viability of the American metalcasting industry. Will our choice be to simply sell metal shapes for whatever price it takes to beat out the competition or will we market our products as high-value engineering metal components?

As one who has spent his entire business life in the metalcasting industry, I have observed it from many perspectives, albeit from one company--from an initial role as an hourly employee, to management roles in personnel, engineering, manufacturing and ultimately ownership. It is the ownership role for the past 20-plus years that led me into a depth of knowledge in the areas of finance, marketing and sales. In good conscience, we have to admit that it has not been all fun and games since the advent of the '80s.

Unfortunately, we cannot return to the days when backlogs exceeded our annual capacities and pricing was established in a very strong seller's market. Is it safe to suggest we are probably more competent due to the trauma of the '80s? I think it is. Do we want to return to the era of the '70s? Perhaps we would once again like to experience a seller's market for old times sake. However, it is probably wishful thinking to assume that will occur in the foreseeable future.

If our experience of the last 13 years portends the future, we are faced with the need for change. We must develop a component mentality and eliminate any thoughts that tend to consider our products a commodity! We must move our orientation from volume to value and value added. For many of us, this will be a major change in attitude.

In addition, it will require a need to develop a way to change how our customers perceive our products in the marketplace. Selling our product by the pound or hundred weight must be eliminated. The value-added concept requires that we sell our castings on a unit or part basis. By this time, we ought to know how to calculate the weight of a component with enough accuracy to price the part. We must also be absolutely sure we have in place a cost system that guarantees we are properly pricing the components we are selling.

Capacity & Utilization

First, let's take a look at what has been happening to the number of foundries, the capacity of the foundries and utilization of that capacity. This analysis is vital to understand why we must consider changing our approach to the marketplace. While attrition has occurred in the number of producers and in the capacity of the remaining producers, we still have excess capacity on-stream. While excess capacity exists, there can only be a buyer's market. If this is true, and it is, what are our options? Frankly, our options are very limited and not always the easiest to consider.

To begin, let's take a brief look at the history of our industry. In 1955, there were 6000 foundries producing the entire spectrum of castings in the United States. By 1988, that number had been reduced to 3300, and by 1990 that number was down to just under 3100. This reduction in the number of producing units has no relationship to metals produced or to the size of the foundry.

In fact, the output per remaining producer has been reported to be higher than the benchmark data of 1955. This only indicates that the attrition in producers has eliminated a fair number of small companies, although there has also been substantial closings in what our industry would define as large foundries.

What about capacity and capacity utilization? For practical considerations, let's look at ferrous casting data as a means to study capacity utilization. In 1978, ferrous casting shipments hit their high point of 18.5 million tons and, based on personal experience, it is fair to suggest the U.S. ferrous casting industry was running full bore at that time. Four years later, in 1982, shipments dropped to 9.5 million tons or 51.4% of the peak year. By 1986, ferrous casting shipments had decreased to 8.6 million tons or 46.5% of the peak year of 1978.

Concurrently, there were foundry closings occurring in the ferrous casting industry, so capacity utilization is extremely difficult to pinpoint. Most people who have studied this scenario suggest the ferrous casting industry was operating at no more than 50% of capacity in the mid-1980s.

Other metals may or may not have followed the same pattern, depending upon technical developments in their segment of the industry. In spite of that caveat, we can safely assume that other cast metals did indeed follow the pattern of the ferrous casting segment. Most adjustments or changes in capacity utilization can be attributed to a switch in the metal specified or to offshore purchasing in the form of imported castings or imported finished products.

Today, imported castings, as such, are not a major factor due to currency valuations. However, the same cannot be said for the importing of finished goods that have cast components. We should never lose sight of the value of the U.S. currency in relation to other currencies. In a global economy, it will be relatively easy to move the source for castings to where economics dictate. This will become especially true with the growth in concepts, such as ISO 9000 and the European Common Market, whenever that finally occurs.

Before we leave the subject of capacity, we also need to look at where we were in 1992 in our capacity utilization. Once again, most knowledgeable people indicate the industry has reached a plateau of about 65-75% of optimum capacity in the early '90s.

There will always be individual companies that are doing better or worse than the averages. However, this level of capacity utilization indicates a need to exercise a choice between only two basic options: one, eliminate capacity or, two, increase our markets for cast metal components.

Elimination of capacity is an ongoing phenomenon and, in a free economy, must be allowed to take its own course. We all recognize this is an extremely slow process and dying companies take forever to become terminal. However, underutilized capacity will gradually go off-stream. This turtle-like reduction in capacity cannot be allowed to be the solution to the cast metal industry's underutilized capacity problem because if we accept this solution, we will lose some of our very best metalcasting facilities in the process.

Unfortunately, there are casting facilities that should exit the marketplace. These are the producers that have a sub-par level of quality. These producers perpetuate the false concept that there is an inability on the part of our industry to create a product of very high integrity. The axiom that one bad apple can spoil the barrel seems to be especially true for many engineers' perception of the metalcasting process.

While there is no easy solution to this situation, it may be time for all of us to recognize that there exists a need to identify our good, tough competitors and stop trying to drive them out of business! This should not be construed to mean that the large attack the small or that the strong attack the weak. Rather, the intent must be that the quality producers work to eliminate the nonquality producers that destroy our image in the marketplace.

The long-term solution to the excess capacity problem does not lie in the closing of foundries, even though there will be closings and attrition in our industry overtime. If it were, we would be in some state of equilibrium after a decade of underutilization. Therefore, option two mentioned earlier is where we must look to find the right solution to the capacity utilization problem. That solution is in how we go about marketing castings as an engineered component.

The Marketing Solution

Sophisticated designers and purchasers of engineered components recognize the tremendous value inherent within the casting process. Designers from industries such as aerospace, truck and trailer manufacturers, suspension systems manufacturers and automotive continue to realize that the casting process offers the greatest opportunity to put material where design considerations indicate it should be.

Currently, they are leading us to where they want to go in the casting process, and are stretching our vision in manufacturing concepts.

What today we are tempted to suggest is impossible: the metalcaster with vision will be successfully producing tomorrow! But to reach tomorrow will require change today!

This change has to begin with a major adjustment in how we approach the marketplace. As a beginning, we must recognize the difference between marketing and selling. Today, these two concepts are not synonymous as they were many years ago. Gurus from our ivory towers have separated these two management functions into separate and distinct entities. From a management perspective, marketing could probably be defined as a corporate culture, whereby an entire organization is attuned to its customer base.

In addition, marketing is usually assigned the responsibility of studying market segments, potential customers within a market segment and identifying market niches. If one accepts this very general definition of marketing, then the sales function becomes one of executing the marketing plan as it pertains to the identification of specific market situations and goals.

For years, we have heard the philosophy that people are our most important asset. To be an organization that is truly marketing oriented, it may be necessary to rethink that philosophy. It is certainly true that people are a very important asset to any organization. However, it may be that, in truth, our customers are our most important asset.

Another way of expressing this dichotomy of asset importance is that perhaps we can agree that externally our customers are the most important asset. While, at the same time, we manage our businesses internally so that our people are the most important asset. This is an acceptable means to handle this dichotomy if we not only believe it but also diligently practice it. Phoniness in dealing with our people or our customers are readily discernable and will only lead to serious problems.

What are today's world-class customers expecting from their vendors? Quite a bit, with a constant ratcheting up on their demands. For the foreseeable future, we can anticipate demands for more, for better and for less. More services, better quality for less money. How our industry responds to these demands will go a long way in defining our future. And how we mutually define these demands with our customers will be critical to the long-term, well-being of the cast metals industry.

Someone might be tempted to suggest that all potential customers may not become world class. However, we can be sure, regardless of how one defines a customer, the demands placed upon us by them will not be any less.

World-Class Performance

The metalcasting industry has made substantial progress in improving its quality image in the marketplace. However, what has been accomplished to date is just not enough. We can no longer benchmark our performance against our immediate competitors unless we are currently competing in a worldwide market situation. Today, the major users of our products are much more sophisticated, and can and do make comparisons with world-class producers.

Total quality in today's lexicon refers to much more than the component part's quality as a unit of production. While the component, as a unit, remains important and must meet increasingly tighter standards of measurement, it is only one segment of a total quality system.

To guarantee that individual components can meet today's standards requires a total corporate commitment to a program designed to involve every employee. From the CEO to the lowest rated job in the company, everyone must share a total commitment to the constant awareness of customer service and customer satisfaction!

To manage the change required in one's corporate culture of the magnitude necessary to become a world-class metalcaster is filled with pitfalls. Change will require letting go of unilateral decision-making authority and allowing people to make more basic decisions on their own.

To accomplish this will require training of our personnel in much more than SPC procedures. It will require creating an environment where people will be much more aware of our strategic business plans--especially as the plan relates to customer needs. It will also require a much flatter table of organization where there are fewer layers of management.

Total quality management must imply providing a full service of what the customer deems is necessary. While all customers will not make identical demands, vis-a-vis the ancillary services required to provide satisfaction, it will be wise to unilaterally have all services available for all customers.

If we choose to provide the customer services on a selective basis, the opportunity for error will increase and dissatisfaction can result. We can see the wisdom in treating all customers equally to eliminate the inherent risk of reducing the level of satisfaction, especially when errors of omission will invariably occur with our best customers. Will we ever be able to escape Murphy's Laws or the Peter Principles?

Earlier, it was pointed out that today's customers are seeking higher quality, better service and lower costs. One of the critical parts of their needs as it pertains to our industry is lower costs. We must develop a definition of costs within our markets to create an awareness of backdoor costs versus front-door costs. Purchasing is very cognizant of quoted prices and much too often that is the decision number. As an industry, we should be doing whatever we can through our sales efforts to educate our customer base to consider the true costs of components, which must include their internal costs in addition to their initial cost.

All too often, our industry is penalized by the poor-quality metalcaster with the low price. In many cases, this solution does not lie with the casting industry, but actually lies in the purchasing decision of the customer. We cannot paint all casting buyers with the same brush, just as we cannot paint all metalcasters with the same brush. Where intelligent purchasing decisions are reached by only using qualified sources, the initial pricing structure should be a primary criteria.

Total Quality Management

While cost was presented first, as to the customer's concerns, it should not be considered the only concern, nor should it be accepted as the only concern. Unfortunately, price is usually in the foreground when we look at opportunities for sales.

Most top management of progressive companies that use castings are completely attuned to a total quality management approach. However, this does not guarantee that the philosophy of total quality management has permeated to all the functions within their company.

In truth, we can cite many situations where top management is espousing a total quality philosophy while their people are doing business as usual! These are companies where quality, service and price become price, price, price in their purchasing departments. Diplomacy requires a very careful approach in addressing this situation. But we must address it if we are going to be successful.

What are customers seeking besides price considerations? How can we take advantage of other considerations to ameliorate the pressures of our constant concerns about the quoted price?

First, let's look at what else the customer may be considering in the selection of vendors in the next few years. Some of these are obvious after we eliminate quoted price as the only factor. It appears the marketplace will be seeking vendors who can offer very short lead times, extremely fast prototyping capabilities, constant on-time and complete deliveries, engineering assistance and collaboration, continuous improvement and proactive communications.

Some of these attributes lend themselves to some form of measurement, while others fall into the category of how the performance is perceived by the customer.

Measurable attributes are relatively easy for the customer to employ to compare vendors. It is these attributes that do not lend themselves to a measuring system that creates the greatest opportunity for differentiation between vendors and, therefore, the greatest opportunity for increased sales and an increase in price differential!

The attributes that are not quantifiable except by subjective measurements are items such as engineering assistance, continuous improvement, proactive communications and a very important attribute not previously mentioned--inter-company personal contacts.

As outside industry observers have suggested, there is room for substantial improvement in these subjective attributes. It has also been suggested that if we do indeed improve in the subjective attributes, it is highly likely that we can increase market share with better-than-average product pricing.

Engineering Assistance

Today's young engineer has very little exposure to the metalcasting process in his formal education. In many of our top engineering universities, the majority of design engineering students get only a brief exposure to metalcastings.

At the same time, this student is exposed to other metalforming processes in much greater depth. Today, our engineering colleges are seeking ways to shorten the hours to attain a bachelor's degree in engineering in order to guarantee a four-year educational program. This concept of reducing credit hours from about 135 to 120 will probably further reduce the exposure in college to the casting process.

Also, many senior engineers in our customers' plants who have many years of experience and who head up the product design groups have had some negative experiences with castings. These negative experiences are very difficult to overcome, but we must constantly expend our efforts to win back the confidence of these senior engineers. For them, the proof of the pudding can only come in the eating!

Our problem is to get them to recognize the advancements made in the casting processes and to again willingly design components to be cast. If an engineer's company buys strictly on price, without regard to the qualifications of the source, we are exposed to the risks of failure. This fact alone is sufficient to justify the need for eliminating poor-quality producers!

Today's world-class producer of cast components must be computer literate and should provide computer-aided design at the foundry. We are at the point in time where the designer of castings and the foundryman are communicating casting geometry by telefax and between computers. Progressive metalcasters are already doing this, and our industry needs much more of this to create more opportunities for the use of castings.

We can successfully compete with other methods of production, especially when we can demonstrate how we can place metal where designs indicate metal is required. What is much more important is when we can demonstrate through engineering cooperation how we can reduce the weight and unit cost of a component. This concept does not indicate a lower price for the foundry; it indicates a lower cost to the customer. Isn't this what both the foundry and customer are seeking?

Value added through engineering in competition with other methods of production is the best way to utilize the capacity available in our industry. As an industry, we must cease limiting our sales efforts to what is out there and begin to create new uses for castings. Commodity selling is going head to head with a competitor on a price basis without any programs to increase casting markets. This approach of limiting our vision to what someone else puts on the table will work for awhile. However, the ultimate result will be extremely detrimental to margins and ultimately could lead to failure.

Acceptance of a sales approach where we only quote what the customer requests or what our good competitor is currently producing, leads to a chaotic market--a market where ultimately no one generates the correct margins on the products he is producing. We have far too many sales executives in our industry today who are very content to perform their sales function in this nongrowth environment, to the detriment of the entire metalcasting industry.

Continuous Change

The word "change" usually connotates trouble to many people and is often interpreted as something bad has to happen. Nothing could be further from the truth when it comes to our relationships with our customers. Looking ahead, change will be essential for the health of our industry. One of the ways to create a competitive edge in today's marketplace is to anticipate what our customers are looking for from their vendors and to provide it. It is not impossible to actually create a service for your customer before he realizes he needs it.

We must recognize the need to operate our plants to provide a very high level of customer satisfaction. Quality is an area that has been going through a period of continuous change, and we have not yet seen the end of it. How often have we heard a foundryman say, "We have been providing them with quality castings for years, why do I have to install all this paperwork for a quality system?"

Some have even refused to install a quality assurance system almost to the point of losing their valuable customers! Those metalcasters who have installed a total quality program in their companies can testify to the value received from successful programs.

Another customer service going through continuous change is adding value by providing painting, machining and assembly functions. Customers are actively seeking any and all means that can reduce their end costs. A very fertile field that is growing for our industry is the creation of value-added services to the casting component.

When the foundry has the responsibility for machining as a value-added function, the quality level of the original casting increases. (It must be stated that machining is often used as a quality control crutch in our industry.) When this type of value-added service becomes significant in sales income for a foundry, it should follow that the quality level of all castings produced would increase. Our experience has shown that this is true.

A final area that is going through substantial change on a continuous improvement basis is that of dimensional tolerances. Geometric tolerancing is the latest engineering concept in this area. It is so new that many of the very engineers who are specifying geometric tolerances on their drawings do not understand what the concept is or what the consequences are in specifying its use.

What is even more disturbing is the lack of knowledge in our industry on this subject! Foundries are quoting components where geometric tolerances are specified and they do not have the slightest idea of what it means in the production of a particular component. In many cases, the engineer's lack of knowledge will become the foundryman's problem when first articles are being submitted for approval.

Continuous improvement cannot be taken lightly and requires a constant vigilance to stay abreast of what changes are occurring. We cannot be negative about the changes that are happening, but we do not have to accept all changes carte blanche. Where a need exists for a dialogue to create change that can be accomplished, and which is acceptable by both parties, that dialogue must take place. Where we find others performing successfully and where improvements are occurring, we should look inward to create the capability to meet the competition. Resistance for resistance's sake must be avoided.

By the same token, some improvements are cost reductions for the customer and, in turn, cost increases for the producer. Therefore, the producer is entitled to share in the cost reduction. We must strive to obtain prices that cover our costs when we create cost reductions for our customers. Diligence by our salespeople is essential to ensure we always play on as level a playing field as possible.

Proactive Communication

Good customer relations cannot exist where poor communications exist. Everyone recognizes that good communications is a two-way street. Where communications is a one-way street, it is very important that the one-way street is from the foundry to the customer. We are always better off to over-communicate information than to fail to communicate.

Customers want to know when a problem is developing in order to cope with the problem. Keeping the customer well informed on the status of his components in your operation is an excellent marketing tool. On-time and complete deliveries can eliminate most communication problems. The occasional lapse in delivery performance communicated to the customer well in advance of the required date will do much to create that elusive marketing edge we are all seeking.

How many CEOs and senior officers call on their customers? I cannot stress strongly enough the value of these contacts. From personal experience, I can assure you that it pays dividends for the top executives to have face-to-face contacts with customers in the customer's office. In addition, and again from personal experience, I can assure you that not enough of these contacts are occurring on a regular basis.

A CEO who spends time with his customers can learn a great deal about the effectiveness of his sales organization. Another plus in these contacts is the opportunity to observe his company's products firsthand in his customer's plant, and get direct feedback from operators and assemblers on how they perceive the castings from his plant. Incidentally, the line personnel in our customers' plants carry a fair amount of clout when customer evaluations are made on suppliers.

There are marketing consultants who advocate that a CEO should be spending a minimum of 25% of his time in direct customer contacts, either in person or by telephone.

A second major consideration for the CEO today is to seriously consider whether he is leading his organization or just managing it. Once again, by relying upon personal observation, we see a very limited number of leaders and too many managers. This is, unfortunately, true even when the CEO is the principal owner.

Strategic Focus

In today's environment, it will prove to be disasterous not to have a strategic focus. If a metalcaster does not have a well-defined plan or strategy, his organization is like a ship without a rudder. His people will not act in a predictable fashion and they will make decisions that do not always respond to the needs of his customers. This lack of cohesiveness in the decision process only adds confusion in the customer's mind.

Once again, referring to observations of consultants in marketing, they indicate that many foundries lack a sense of direction and, in turn, fail to see customer problems as their own. As an aside, this observation is not restricted to any one metal being produced or any particular size foundry. The observation covers the entire spectrum of metalcasters.

Sophisticated buyers look for vendors who are focused on a well-defined strategy. With today's audit procedures by teams from our major customers, it is relatively easy for them to identify vendors who lack direction or who are misdirected. They are looking for vendors who exhibit a good working knowledge of the customer himself, of their own production capabilities, of their internal control systems and of their management's dedication to what is espoused as their performance standards.

While paperwork and records are often stressed in audit procedures, it is the nonstructured subjective observations that usually play a very important role in the final success or failure of an audit of this type.

The Sales Role

The role of sales is an area that is extremely difficult to address in complete candor because it is felt that there is a major deficiency in how the majority of sales personnel in our industry approach their markets.

I would like to place a qualification in subsequent remarks to the effect that it is unfair to assume that all sales personnel are lacking or that all sales executives have not changed as the marketplace has changed. Unfortunately, those who have signed on to their company's new direction and adjusted their approach to the new order in the marketplace are decidedly in the minority.

This is not too different in magnitude from the foundries that have failed to adjust to the changing requirements of their markets. It is highly possible that where the company has neglected to adjust to the changing market, its sales efforts have also failed to adjust.

A very serious question can be raised as to which function in an organization should have been responsible for the initiation of change--sales input or manufacturing input? We can make a very strong case for the initiation of change coming from the sales function because it should have been getting signals from its customers that satisfaction levels were declining in our markets and that conventional responses were not adequate.

Increasing the utilization of the existing foundry capacities requires a basic change in how most of today's foundries approach their markets. There is a fundamental need to develop a closer relationship with our customers, especially their engineering groups. Most of us readily acknowledge this is much easier said than done.

However, we must get beyond the purchasing department to open up opportunities for increased use of cast metal products. We cannot be content to wait for the engineers to send drawings to their purchasing departments to obtain quotations from their qualified sources. Relying upon this approach is what creates a commodity mentality.

We have a lot to offer our customers with the casting process! But we have not done a good job of communicating the advantages we can bring to the table. These advantages include weight reductions, cost reductions through designs that are best for the casting process, and reproducibility with reliability.

We must get to the engineer when he begins the design process to give the casting process its proper share of the components being designed. Today, we are losing market share through our own inability to properly sell our product. When offering design assistance, we must always focus on the economics of the component under consideration. In addition, it is perfectly proper and reasonable that, for providing engineering time, the foundry be protected from competition on the component for some period of time when and if the component becomes a production part.

We would be remiss not to suggest that our inability to get close to a customer's engineers results in those same engineers designing components with very fragmented knowledge about the casting process. Very few industries that use castings have engineers who can do an excellent job in casting design. Those industries that have recognized their needs in casting design have knowledgeable people in the loop--usually called liaison people--who know their industry and the casting industry intimately.

To demonstrate this, one only has to look at who is signing up for casting design courses at our Cast Metals Institute. We need to devise methods to get much more involvement by engineers from our customers at CMI design courses. Can we dare suggest that design courses be taken to the engineering departments of major users of castings at no charge to the customer? It may be time for this concept.

The New Sales Engineer

To be accepted in a customer's engineering department as a resource for design assistance will require a very special type of salesperson. We must provide sales personnel with qualified engineering backgrounds. They must also be well versed in their foundry's capabilities. In addition, we must create an environment in our foundries that allows this type of salesperson to function freely and across those subtle hidden barriers of turf that exist within our companies.

This type of selling takes above-average amounts of time from the start of a

project to its completion. However, the rewards are substantial for the successful projects. As an aside, this type of salesperson can also handle the routine servicing of customer accounts, since this will prove to be the source of leads for opportunities to become involved in cooperative engineering projects.

Another consideration today is the fast turnaround when receiving new orders. When new designs are under consideration, it is essential to have an ability to create test parts in very short periods of time. It must be a given that we are dealing with relatively high-volume production components before we consider such technologies as rapid prototyping as a service attribute. For smaller components, rapid prototyping means measuring time in days--usually less than one week--from drawing to casting. This is and can be done.

Meeting the Challenge

Looking to the future from where we are today indicates that change is not about to occur--it has already happened. And as an industry, we must accelerate our efforts to avoid being left in the lurch. The change we need to better utilize our excess capacity cannot be evolutionary; it has to be revolutionary. As we look ahead, we must recognize that our real problem is not one of creating new ideas, but rather to begin escaping from our old ideas.

Just as the casting you produced 10 years ago couldn't be sold today, how we approached the market 10 years ago will not suffice today. We do not need change for change's sake; we need change for improving the health of our industry.

First, we need leaders! We need CEOs to become deeply involved with their customers on a face-to-face basis. We need leaders to begin effective dialogue in our markets to extol the engineering advantages of the metalcasting process. We need leaders to recognize the futility of many of today's sales policies. We need leaders to realize that good competitors are vital to market growth. We need leaders who recognize that competitors who create negative attitudes in the mind of the customer create negative attitudes toward the entire cast metals industry.

Second, we need to create reward systems for our personnel that relate to customer satisfaction. How our customers evaluate our performance as an organization should be a part of any incentive system employed to compensate our people. These performance standards must be the objective ones used by our customers. To generate an internal attitude for customer satisfaction, what better way is there than criteria your customer is using?

Third, we need to eliminate what is currently described as a "values gap." A value gap has been described as the difference between what you stand for versus what you deliver. This is not something that is an exclusive characteristic of the metalcasting industry. This characteristic can be universally attached to all of industry.

Regardless of its universal application as a generic attribute of all industry, we must strive to overcome this stigma as an industry. No longer can we accept pontification on performance as an acceptable norm from leaders in our industry. We can accept no less than leadership that not only espouses performance, it must also deliver it!

Fourth, we need constant innovation as a way of life in our companies. Even though today's status quo may be helping one's sales volumes, we cannot afford to accept it. Public companies are often criticized for their short-term financial vision. But are we any different if we look at today's activity without regard for the longer term? There are some among us who are beneficiaries of short-term marketing advantages brought about by special situations in their markets that may be very tenuous at best. Today's status quo may well be tomorrow's downfall if we ignore opportunities for change and innovation.

Fifth, we need to reduce the lead times in our delivery performance. Just-in-time delivery has become what our customers expect from us. Years ago, a cleaning room or finishing department was known as a bottleneck in the casting process. A good supervisor was a good pile mover. Most foundries maintained an inordinate amount of product in their finishing areas.

Our emphasis today must be to keep these inventories at an absolute minimum and to turn over inventory in as few days as possible. Lead time from order entry to available delivery time must be substantially reduced from current levels.

Sixth, we need to stop attempting to quote components our company is not qualified to produce. We must determine our individual company capabilities, and then insist that our salespeople limit their activities within those capabilities. This does not mean we should never extend our horizons. But until we are able to perform up to market standards in a new market segment, we must be cognizant that our failures will be a strong negative to our entire industry.

Finally, we need to run our companies for the exclusive benefit of our customers. Those who own companies, and this is the majority situation in our highly fragmented industry, must be willing to subordinate their personal objectives to the health of the industry by strengthening their companies even if it means personal short-term sacrifice.

Being content with a very comfortable lifestyle while the company operates with substandard profit margins cannot be acceptable as a norm. Not only will your personnel suffer, in the longer term your customers will also suffer. The driving force must be customer satisfaction. Anything less is a disservice to our most important external asset--the customer.

In concluding, I recognize there are many from our industry much more qualified to make these comments than myself--individuals who could bring larger experiences to bear, individuals who have done much more for our industry. However, and perhaps unfortunately, not too many are around with as many years of exposure to our industry as myself.

It goes without saying that, as the proverbial optimist, I am extremely confident that the metalcasting industry is not a candidate for classification with the former buggy whip manufacturer. We must accept the challenge to eliminate any acceptance of a commodity approach to our markets in favor of an approach that defines castings as an engineering component.

We know there exists too much capacity for market demand with what we are currently offering. Therefore, we must consider means to make our markets grow to utilize our qualified existing capacity. We must cease commodity selling and accept constant innovation as the route to market growth.

If we can accomplish this, then I firmly believe we are an industry poised to move forward--poised to meet the challenges of the future and ready to make whatever changes must be made to maintain a healthy metalcasting industry in the United States.

The author wishes to acknowledge the following individuals for their help in preparing this paper: Dave Kanicki, modern casting magazine; Tom Gibson and Dan Marcus, TDC Consulting, Inc.; Mike Gwyn, Pelton Casteel, Inc.; John Kelly, CWC Casting Div./Textron, Inc.; Ray Witt, CMI International; and Raymond Monroe, Steel Founders' Society of America.

Mr. Krueger is the chairman and president of Pelton Casteel. In addition, he has served as president of the American Foundrymen's Society, Steel Founders' Society of America and the Foundry Educational Foundation.
COPYRIGHT 1993 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:1993 Charles Edgar Hoyt Memorial Lecture
Author:Krueger, Lawrence S.
Publication:Modern Casting
Article Type:Cover Story
Date:Jul 1, 1993
Previous Article:Shifting demands alter casting outlook for 1993-94.
Next Article:Ceramic foam filter technology for aluminum foundries.

Related Articles
"Best ever" CASTEXPO '90 attracts 13,595 to Detroit.
Castings: commodity or component?
A look into a promising future.
1994: the year in review.
Keith D. Millis: the father of ductile iron.
A Look back at the 20th century. . .
Special events.
Metalcasters convene at 107th casting Congress in Milwaukee. (107th AFS Casting Congress).
CastExpo '05: gateway to innovations.
110th Metalcasting Congress: April 18-21, 2006: Columbus, Ohio.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters