Success
Strategies for Job Shops
A veteran casting buyer lends his view on cultivating a business that can weather any
economic storm. SERGEY ERSHOV, D.ENG., MBA, SIEMENS AG ENERGY SECTOR, POWER GENERATION DIVISION, DUISBURG, GERMANY
rising labor costs, quality problems and lack of qualified personnel pose chal- lenges for executives. Daily work must not distract them from the main task: long-term survival and growth. After years in a metalcasting plant and then as a casting buyer on the global mar- ket, I have observed six main criteria that are vital to the long-term success of a job shop.
M 1
Serve different market segments and diversify your customer base.
Successful metalcasters serve
different markets and have a wide range of customers. Over the years, these companies have conquered new market segments. At the same time, they did not drop old customers just because it was possible to earn more money in new markets. Often, jobbing metalcasting
facilities are overexposed to one certain 34 | MODERN CASTING July 2014
etalcasting is a tough business. Price pres- sure from customers and competitors,
market. For instance, if 70% of sales go to different customers in the same field, then it might become danger- ous when that segment drops. Should this market stagnate for longer than expected, banks may cut credit lines and the metalcaster will go bankrupt. An example for such a sales strat-
egy occurred in Europe from 2006 to 2008. There was an overconcen- tration in the market for large duc- tile iron castings for wind turbines. Large iron casting providers took bank loans to expand their capacity based on expectations that market growth in this segment would last forever. Huge overcapacities were built. Several metalcasters signed capacity agreements with customers guaranteeing a certain sales volume until 2013. Back in 2008, it seemed like a very long time. Today, these agreements have expired, the bank loan is not yet fully paid back and the market for heavy iron castings is still down. Of course, these newly built shops will not disappear, they will only change owners, but it is
not a positive situation for owners, employees or casting buyers. At that same time, many customers
acting in markets such as conventional heavy machine building or energy equipment faced serious troubles because of the bottleneck on the sup- ply side. Former suppliers reduced their share, explaining it as a change of strategy toward concentrating on producing components for wind tur- bines. So, casting buyers served by these metalcasters were forced to establish a new supplier base. When the market for wind turbines dropped, the situation changed dramatically, but it was too late. Casting buyers continued to buy from the suppliers who supported them in difficult times and did not come back to old vendors. Interestingly enough, family-owned
metalcasting businesses in the third or fourth generation were more disci- plined in that market situation than businesses owned by several stakehold- ers or financial investors. Tey had already survived multiple recessions and had a main strategy to ensure
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