September 2007- The global marketplace has taken root and grown like a weed. For companies like Summit Stainless Steel, North Brunswick, N.J., an illustrious global history allows them to take full advantage of the current market growth.
Matt Shibata, vice president, notes that the Summit Stainless’ history began when a Japanese company called Kanematsu started KG Specialty Steel in the 1960s. "KG Specialty then became a master distributor of stainless in the U.S. market," he says.
Becoming a master distributor has been an integral part of the company’s business model. Currently the company is one of the leading master distributors in the marketplace. It moved away from a 90 percent dependence on offshore product to buying almost 25 percent of its products from domestic mills. Otherwise its business model remains unchanged.
"We sell only through distribution because if we were to sell to end users and OEMs, we would be selling to our customer’s customer," says Elkin. "Through all the years of our history, we’ve respected this policy." About 20 percent of customer orders ship direct. He says that today the company’s adherence to this strategy is "even more significant because there are other master distributors that do sell to the end user, as well as some mills in the United States that go after end users."
The company bolsters its reputation as a master distributor because it has the ability to carry a large inventory. "We’re a very financially sound company backed by the Sumitomo Corp., which is a worldwide trading company, so we have the financial wherewithal to carry a large inventory," says Elkin. "Bringing our inventory into our locations to service our customers is what we do. We live and die by our inventory, and in order to do that today, you have to have financial resources."
The backing of the Sumitomo Corp. also allows the company to have a finger on the pulse of the global marketplace at all times. Elkin says that with this support, the company has the ability to have offices overseas and a long-standing relationship with vendors, something the competition often finds difficult. Shibata says that now that the Asian market has the biggest production area for steel, "it’s an advantage that our parent company has many locations in Asia, as well as a headquarter location in Japan."
These global connections give the company stability in an up-and-down market. "We are privy to certain information through our parent company’s overseas affiliates," says Elkin. "If something is going on in the market overseas, we find out about it immediately." In addition, many of Summit Stainless’ purchases are through "our parent’s affiliates, which have offices in a lot of the countries we deal in and have a very close relationship with the mills. All of this facilitates our purchasing."
A real-time connection to the market also allows the company to feel comfortable about its purchasing and inventory strategies. "Needless to say nickel is a key component of stainless steel, and there is a direct correlation with the price," says Elkin. "We have a process whereby we review the inventory in each location on a regular basis. Each product that we carry has a product manager. That product manager reviews the requisitions, and then it goes to purchasing. We have a number of people that partake in the purchasing decision and we get input from our parent overseas. When we make a decision to buy, we are comfortable that we are buying at the best price at that particular point in time."
An obsession with quality keeps customers coming back to Summit Stainless time after time. The company has a very strict process that it uses to ensure that every product shipped out the door meets its standards.
"First of all, we visit a mill and inspect their processes for manufacturing and traceability of the product," says Elkin. "We would normally only give them a trial order to begin with. Then, if the mill test reports are what they should be, we would do spot checks on the material as it came in."
However, most of the mills the company deals with are part of long-standing relationships, says Elkin. "We deal with some of the biggest stainless mills in the world. I think it’s very safe to say that our customers know that if we’re carrying a particular mill’s product, then that product meets our quality-control standards. As a result, they are comfortable buying that product."
Summit Stainless Steel’s emphasis on quality has helped it become a trailblazer when it comes to introducing Chinese and Japanese products to the market.
Part of the company’s reputation comes from carrying "Japanese and Asian products that were better quality than domestic material," says Shibata. "But, there was a time when the Japanese products became very expensive and customers looked for cheaper products elsewhere," adds Elkin. "So we really pioneered the introduction of a lot of other countries’ products into the United States. I can tell you that today we buy products from India and from China, and these are now accepted in the market by everyone."
Elkin says that many customers are hesitant to accept a new manufacturer from a new country. "But as they see more of this product coming in, that the prices are competitive and that there haven’t been any quality issues, the reluctance seems to dwindle and then it becomes accepted in the marketplace."
The emphasis on quality doesn’t just apply to the company’s product line. "We’re 100 percent customer oriented," says Elkin. "We pride ourselves on the fact that a customer can call us on any given day and, if necessary, pick up the material in a matter of hours. Beyond that, we normally don’t need more than 24 hours to process a customer’s order and get it shipped." Customers really appreciate this kind of service. "We deal in live time," Elkin notes. "Customers need product immediately."
An important component of that fast service is experienced people. "Many of the employees have been with us for more than 20 years," says Elkin. In addition, those knowledgeable people are assisted by a state-of-the-art computer system. "It’s custom-tailored to our needs," Elkin notes. This means that the system assists the company with everyday tasks--processing orders, quoting material and checking on prices.
"It’s helped us enormously over the years," Elkin says. "We continue to refine it, but it’s been one of our strongest assets as far as training employees and providing prompt answers to customer inquiries." For instance, he says, anyone that goes on to the system has access to all the branches’ inventory with everything online immediately. "Real-time access is so important because we stock 24 different kinds of products, and with the different sizes and alloys, we have more than 10,000 different items that we carry in inventory. And we can check any item in our system in a matter of seconds."
The company currently serves customers out of seven locations and is set to open its eighth in October. But this expansion isn’t just a shot in the dark. "We see Florida as being a very important market in the stainless industry," says Elkin. "We did research in that market and found that we weren’t able to provide enough immediate service to our customers shipping out of our Atlanta location."
Elkin notes that the Florida market is unique. "There’s a lot of exporting that’s done out of the Miami area and, just like anywhere else, the customers need the material immediately. Overnight service from Atlanta wasn’t enough to capture that important market."
This strategy of locating near customers has worked for the company in the past. "The proximity to the customer base that we serve is paramount in our decisions to open other locations," says Elkin.
Shibata adds that prior to the company opening its Portland, Ore., branch, the Los Angeles branch covered the Northern Pacific area and received about 20 percent of its business from the region. "Immediately after we started the Portland branch, its service was approximately three times as much as the Los Angeles branch. That means it is very important to locate near customers," he says.
The company also gives added value to its customers by looking for products where there is large demand. "That led recently to the introduction of stainless plate and Japanese NSSC 180 sheets, which are a substitute for Type 304 stainless," says Elkin. "What we provide by adding a product that they use on a regular basis is picking everything up at one location. No one mill makes the wide range of products that we carry. For Summit Stainless to carry all these products under one roof, we make it much easier for our customers to give us a list of different products, and they only need to place one order and they can pick it up in one location. If we don’t have it all in one location, we can certainly provide it from one of our other locations."
When a company has a successful past, it makes sure to draw inspiration from its prosperity. Summit Stainless Steel will continue to open locations close to its customers and choose products that complement its current line. There will surely be no shortage of customers, at least in the near term, as the market for stainless steel in everything from kitchen appliances to structurals continues to boom. MM
By Lauren Duensing, from the September 2007 issue of Modern Metals.