Sourcing is an Art

Most inquiries you get will be easy - check stock and quote OR, log on to MSO, find suppliers, send an email or call to get prices, markup and quote. This will probably represent 80-90% of the RFQ's you see. The other 10-20% are potential opportunities, but it takes skill to decide whether or not they are profitable opportunities.

Anyone can source metal - it takes a true master to profitably run down the tough ones.

The truest definition of a master sourcing professional is a person who intuitively knows when to take the time to quote an alternative. Developing that intuition takes time as well as a sense of just what can and can't be reliably produced to meet a clients needs.

 

Keys to Outsourcing Success

 

Round Bar is NOT Round Bar, Pipe is NOT Pipe

A round bar is nothing more than a solid cylindrical piece of metal, pipe is nothing more than a cylinder with a hole in it. When facing a challenging sourcing challenge, be creative and think of how that round bar or pipe can be produced - forging, sawing, grinding, casting, etc....

Study & Learn the Alternate Production Methods

Becoming a sourcing pro takes time and effort. The best of the best know intuitively just what is and is not possible. Make the time to learn each and every process - what sizes can be economically produced by an open die forge shop, centrifugal caster, precision saw cutting company, etc.

I HIGHLY recommend a physical visit to one of these companies to fully understand how they operate and what they can do to make you a better out-sourcing pro.

Ask Lots of Questions

Deciding which RFQ's are worth pursuing is key. The only way to make the right decision is to get as much information as possible.

If the customer asks for a 12" round bar and the maximum available in the industry is 6", ask how long his parts are, how many he's making, what specification he needs it certified to and how much time he has - could this be cut from plate?, Forged to size?

If the client wants 24" OD welded tubing and the maximum stock size is 20", again, what’s the spec, cut length, required lead time - this could be rolled and welded, if plate is available at the wall thickness he requires, it could be centrifugally cast if the wall thickness is too heavy for plate, it could be forged as a mandrel ring - if the ID is tiny in relation to the OD, could it be bored from a solid round bar?

Learn When to Say No

It really comes down to pre-qualifying the client as well as the RFQ. Here are some client pre-qualification questions:

Is this a client that you know?

Do they buy from you regularly?

Does the client have an order to place and if yes, how did they initially quote the job if the metal in question is simply not available from stock?

Does the client have a shut-down or AOG (aircraft on the ground) situation?

 

SRM

As important as CRM is to a winning relationship with a client, SRM (Supplier Relationship Management) is equally important.

Develop a solid, friendly relationship with a specific person at each supplier company and try to only deal with that person. Document conversations, their likes and dislikes, any information that you can to build the relationship - especially important if you only contact that company occasionally. What sports teams do they like, hobbies, etc....all very important

Every time we get an inquiry for a non-stock item, we must make a decision.....do we regret or do we go for it? The decision should be based on a variety of factors which, for the experienced sales professional, has become a matter of muscle memory.

For the beginner or, as a brush up for more experienced salespeople, here is a quick guide to help you make the decision....

Pre-Qual Methodology

If the RFQ is received by email, it will often be tough to answer all the questions, but over the phone, we can develop a series of simple unobtrusive questions that will help us develop a score for the requirement.

Pre-Qual Decision Making Questions:

The Customer - Are They....

Repeat/ return customer – add 20 points

New, small customer – add 1 points

Another metals distributor - subtract 5 points

New/ Notable (GE, ITT, Lockheed, Boeing, etc...) – add 5 points

Purchasing Agent or buyer – add 5 points

Engineer – add 10 points

Student – subtract 5 points

From the Middle East – Iran, Israel, Turkey or former Soviet Union countries – subtract 10 points

 

Notes: In order to score this section, you will have to ask questions of the buyer and probably Google their company

 

The Metal, is it.....

 

In stock with one of our best suppliers? - add 5 points

Common grade and form (More than 20 distributors stock it) – subtract 5 points

Odd Size - add 5 points

Odd Grade – add 5 points

Odd Form – add 5 points

Notes: To score this section, you will need to run the RFQ in the MSO database. Take care to consider whether or not we can cut, open die forge, bore or otherwise fabricate what the client needs especially if their score from section 1 or 3 are high. IE – return customer or notable, with a rush requirement.

=====================================================

The Delivery Required.....

 

Need it yesterday/ plant shutdown/ AOG – add 10 points

Just quoting – subtract 5 points

Notes: AOG is an aircraft industry term that means Aircraft on the Ground – essentially an emergency situation.

Pre-Qual Scoring

 

0-10....REGRET

11-25....MAYBE IF YOU'RE NOT TOO BUSY

26-40......LOOKS GOOD

41-60.....SLAM DUNK!!!! GO FOR IT!!!

This method can and will be tweaked by you and your sales manager and team. It represents a framework that you can use to build an in-house system of prequalification to optimize the time spent and profitability of buyouts.

 

For the average metal service center, buyout business represents about 10 % of your annual revenue yet, if you are like most, you have no formal policy around how to handle it.

How crazy is that? 10% might not sound like much but for many companies we're talking about millions of dollars in business and yet you have no set policy and provide no training.

Metal Suppliers Online is a website containing the searchable inventory of every known distributor, mill, extrusion and forge shop in North America. Using it, our clients average over 20% buyout business.

If the time is taken to create, train, implement and measure financial results year on year, many benefits can be achieved. Among them:

1.) Increased revenue....and not just in buyout sales. Properly handling buyout sales results in saved time, which in turn result in improved inventory turns. Your inside sales staff will begin to be seen as the "go to guy" for your clients...."these guys really know their business".

2.) Improved client relationships. If your staff is educated in the broader availability of metals in the US market, they will become perceived as the first one to call on any metal requirement. And, with a consistent policy on markups, they will be providing a fair price every time.

We advocate the development of formal policies for handling buyouts. The topics should include:

1.) Pre-qualification. Specifically, what sort of company and what sort of metals do we go after?

2.) Sourcing. How do we locate the metals and which vendors are qualified. Metal Suppliers Online can certainly help here.

3.) Markup. What is the markup percentage? There should be clear direction here with qualifiers...latitude for special situations.

4.) Order Entry. How is the paperwork handled on the items?

5.) Warehouse. When buyout Metal is received, how is the warehouse supposed to sanitize the metal....removing all supplier tags and markings to prepare for shipment.

These are the basics that must be addressed in order to create a sense of order, consistency and direction to your buyout policy.

If properly addressed, a policy such as this will have a solid impact on your bottom line. Give me a call if you have an interest.

Alan Gamble....603.329.0101 ....metals@gmail.com

The Alchemy blog is a collaborative space where we will discuss how to convert one metal form into another, using the resources available in the US market. If you need a metal form or size that does not exist....and you need less than a mill is willing to sell, with a delivery they can't offer, we can help.

If you need an odd sized tube...welded... we'll talk about the shops who can take flat sheet or plate and roll/ weld/ test to the dimensions and specifications required.

If you need an odd sized pipe....seamless...we'll introduce you to trepanning, boring and honing shops who can take a solid round bar and turn it into the most beautiful pipe you've ever seen....up to 40 feet long.

If you need rectangular parts in a size that nobody stocks, we'll introduce you to a shop who can take round bar and cut rectangles...we'll talk about how rectangles can be cut from plate, flat bar and forged billet.

Bottom line, this blog is about solving problems that you're having in sourcing metals. Most importantly, if you can find a way to source a metal and your competition cannot, then you may well find yourself as the sole source, winning a very profitable job.

To me, alchemy has always been about change....transformation. The common definition speaks to a chemical process that would turn basic iron into gold.

In my mind, we in the metals industry are all alchemists, metaphorically speaking.

This blog is intended for distributors, machine, fabrication, welding and stamping shops, as well as OEM's....anyone who turns metal into gold.

I've been an alchemist for over 40 years and I've learned lots of tricks that I want to share....but I know that others have so many ideas of their own and I hope that you'll share with us here.

LETS GO MAKE SOME GOLD!!