MARKETING MATTERSCEO JOURNAL
C’mon Man I
DAN MARCUS, TDC CONSULTING INC., AMHERST, WISCONSIN
n the 1980s, Caterpillar launched an enlightened approach to casting supply chain management, which
it called “partnering.” Te concept was a radical departure from the prevailing industry-wide approach of hop-scotch- ing from supplier to supplier chasing the lowest piece price and pretending the goal really was quality, service and the lowest total cost. Partnering ap- peared to be a sincere adaptation of the Japanese approach to vendor manage- ment, and the goals actually seemed to be close, long-term relationships, service excellence, and lowest total cost inclusive of casting price, quality costs, hassle costs, life-cycle service costs, and so on. Partnering was a very hopeful concept, but, alas, it didn’t last. Nowhere was this sad
shed metalcasting capacity and simi- larly shutter captive machining and other operations. It seemed vertical integration had ceased to be a viable strategy in the globalized economy, as it had resulted in bloated, non-cost- competitive, debt-ridden, money los- ing behemoths in an era where focused and cost-effective competitors with strong balance sheets were prospering. Yet the presenters, representatives
of some of those same OEMs, told conference attendees that they now prefer to buy castings from suppli- ers with the capability to produce a complete product, parts that are
seamlessly integrate those capabilities, remove all hassles (quality and other- wise) from the OEM purchasing expe- rience and, at the same time, deliver to customers a ready-to-assemble product that had been magically produced at a lower cost and sold at a lower price than that of the lean, focused facilities these OEMs (until now) preferred to buy castings from. C’mon man. While today’s casting buyers are
U.S. metalcasters were being encouraged to walk directly
fact more on display than at a conference I attended recently, where the casting buyers who spoke came off as so self-serving and other- wise un-enlightened that my friend and fellow attendee Eric was moved to lean to- ward me and mutter “C’mon man.” While I immediately registered his scorn at what was being presented, it was only after he explained the genesis of his comment that I fully compre- hended his contempt. It seems there is a segment aired just before the start of NFL football games which highlights ignominious behavior by the league, an official, coach, player, or fan. As each example of offensive or idiotic behavior is described and each list of grievances is recounted, the host calls out the perpetrator in a tone dripping with derision: “C’mon man.” So what was it that so irked Eric and me? Consider first that OEMs have for decades been rolling back their strategy of vertical integration and, in so doing, have been shedding manufac- turing capabilities, plants and workers. In the 1970s and 1980s, scores of cap- tive metalcasting facilities were closed. In the years since, OEMs continued to
into the exact same investment cash trap from which these very OEMs had so recently extricated themselves— vertical integration.
machined, heat treated, painted and otherwise ready to assemble. We were told that competitors in Europe, Asia and elsewhere already had moved in this direction, and that North Ameri- can suppliers need to follow suit in order to remain viable alternatives. In other words, U.S. metalcasters were being encouraged to walk directly into the exact same investment cash trap from which these very OEMs had so recently extricated themselves—verti- cal integration. C’mon man. Consider next that the presenters
went on to tell their audience, with straight faces, that U.S. metalcasters should move expeditiously to bankroll and develop those diverse manufactur- ing and service capabilities, take on single-source responsibility, invest in the people and processes needed to
more sophisticated than their prepart- nering “three quotes and a cloud of dust” predecessors, their new message needs to be seen for what it really is, an updated variation on an all-too- familiar theme. Sadly, some purchasing departments have failed to learn history’s lessons and still want suppliers to give in to the siren song of volume, invest bravely in so-called value adding capabilities, and then magically find success by sell- ing those expensive capabilities cheap. Instead, in this as in all things, metalcasting CEOs need to maintain a laser focus on profitability rather than vol- ume, avoid the mature industry cash trap, and target compatible accounts whose requirements match the product and service
capabilities their businesses already possess and, importantly, who are willing to pay a fair price for the value they receive. And if your business already hap- pens to be an integrated one-stop shop of the sort the conference presenters now say they prefer, steer away from the unenlightened and focus on the compatible accounts that need and will actually pay for the unique capabili- ties, services, convenience and other benefits only a legitimate single source can provide. Tose target accounts are out there right now, and more are see- ing the light every day. And if anyone tries to tell you different, you know just what to say: C’mon man.
Keep the conversation going. Reach the author at
tdcmetal@wi-net.com to comment on this or any CEO Journal column or to suggest future topics.
April 2013 MODERN CASTING | 41
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