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

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