November 2007- "We're an unusual company," says Jeff Larson, vice president of marketing and development for master distributor Ta Chen International Inc., Long Beach, Calif., in part because of the extensive array of stainless steel products it can provide its metal service center and wholesale supply-house customers. This includes numerous coil, sheet, bar, plate and pipe products, as well as valves, fittings and welded tubing.
"We're a subsidiary of Ta Chen Stainless Pipe," explains Larson. Founded by Robert Shieh, the company began manufacturing pipe and other stainless products in Taiwan in 1986, establishing Ta Chen International as a master distributor in Long Beach a few years later. "We started by selling products that we--that is, Ta Chen Stainless Pipe--made, so we were kind of our own customer. As things evolved we added more stainless product classes. Now we offer 40 different product classes of stainless, producing about 15 to 20 percent of what we sell.
"Most master distributors specialize, maybe in long products or in tubing and pipe, or perhaps they position themselves primarily in the flat-rolled business, but we brought all these stainless categories together under one roof, which is a plus for many customers."
Well, not one roof--more like seven. In addition to its original Long Beach location, Ta Chen International now has facilities in Houston, Chicago, Burlington, N.J., Atlanta, the Tampa/Orlando metro area and, most recently, in Seattle.
"Perhaps the biggest difference between ourselves and other companies in our field was rolled out in 2001. That's when we introduced our online ordering system, www.tachen.com, and that has really changed the way we do business." Today, 68 percent of all the orders Ta Chen receives are generated online. In the media-savvy Los Angeles area that figure is 85 percent.
Opening virtual doors
"We have, in effect, opened our doors to our customers," Larson says. "Our complete inventory is always available to our customers any time of the day or night. For customers who have become familiar with using the Web, and today that means nearly all of our potential customer base, it's very easy. You do it on your own time, when you need the information. You are never put on hold and you never have to wait for a salesperson to call you back. It's very clear-cut with no ambiguity and no need to negotiate."
Visitors to the Web site can review inventory, test reports, sourcing, chemistry and pricing. Once the online order is placed, customers are able to check their shipping status and tracking with the peace of mind that comes from purchasing in real time. The price that's quoted online is always the best price that Ta Chen is offering.
"Some people say that this clear-cut, open pricing is a disadvantage because a competitor can simply view the price that Ta Chen is offering and then peg their price a few cents lower," Larson acknowledges, "but I don't think you gain a lot of business like that in today's world. It's true that while we may not always offer the best price, we feel we offer the best value, since today's customers don't have time to shop all over the place, wait for salespeople to get back to them, exchange pleasantries and haggle over pricing. It's hard to put a price on time, but our customers know only too well that their time is a valuable commodity. For most of them, the time they save by dealing with Ta Chen is worth far more than the few cents a pound they may be able to save by dealing in the traditional way."
Moving to the new system entailed a sizable commitment in time, money and faith on the part of Ta Chen, and the jettisoning of long-held business practices. "For example, before we initiated our online business model you could have called three different salespeople and been quoted three different prices for the same item, a situation that is still quite common in the industry. In order for an Internet-based business to succeed, though, you need consistency, so we had to establish simple and consistent procedures and guidelines for our own and our customers' benefit, and that included a consistent pricing mechanism across all of our facilities."
That consistency also applies to credit authorization, an area that can sometimes be marked by time-consuming and patience-testing disputes and negotiations. Not at Ta Chen, says Larson. "Here, too, we keep things very black and white, very simple. Authorization is quick and there's no ambiguity for the customer. That's because you are basically dealing with a computer program, not with a credit department. The program checks the basic things that you would expect a credit department to check--whether the customer is over their credit limit or if they are past due, those sorts of standard things. You are never waiting for someone to get back from lunch to consider the matter, it all takes place at computer speed, and if the basic criteria are met, then the credit is approved and the sale can be swiftly consummated. Again, simplicity, clarity and speed are the watchwords."
Often, the implementation of a new business model becomes mired in inertia and turf wars, with progress occurring only on paper during periodic project meetings. But that's not the case at Ta Chen. "Our management structure is very flat. That's because of our president Robert Shieh. He comes from a manufacturing background. He knows the business and is very results-oriented. When I approached him with this idea back in 2000, he thought it was a good business model for a master distributor. After all, we do very limited processing, we do some saw cutting, but that's about it. We are basically making inventory available to people and then putting material on a truck. So he bought into it, and when that happened implementation occurred relatively quickly."
Curiously enough, Larson became an evangelist for the Internet and the power of interactivity not because he had a computer background, but because he was a fisherman.
Not just a fish story
"About 10 years ago a friend of mine and I launched a hobby fishing report site," Larson recalls. "Our plan was to write reports about our fishing trips, which we thought would be of interest to other fisherman who wanted to fish the same waters or go after the same type of fish that we did. After writing up one or two reports we saw that this was shaping up to be a lot more work that either of us had bargained for. Then we thought, why not simply invite other fishermen to share their experiences? So with the aid of some freeware that we downloaded off the Net, we implemented a system that allowed people to access the areas they were interested in and add or read content. The obvious implication was that if people could so easily access very specific types of information about fishing conditions, they could do it with stainless, as well."
As successful as Ta Chen International's Internet-based business model has been, Larson stresses that improvement remains central to the company's outlook. "There's still a lot of room for improvement in all aspects of our business, including our Internet-based business model. Because we have been successful with it, some of the competition is now working very hard to catch up and find new ways to use the Internet to add value for the customer. Fortunately we have a lot of strength in the information technology area."
That strength is provided by Ta Chen's IT team in Long Beach and the IT team at its parent company in Taiwan. "When it's quitting time in Los Angeles, it's morning in Taiwan, so they get a lot of stuff done for us while we are sleeping. Having this sort of talented and almost around-the-clock support system has been a significant part of our success."
Larson stresses that the company is committed to continued investment both in new inventory and in its physical plant. To underline his point, he notes that Ta Chen recently added 10 new grades of stainless steel plate, among other new stainless items, to its product mix. But for Ta Chen it's not just stainless anymore--in 2005 the company added aluminum products to its inventory.
"We now sell common alloy aluminum flat rolled as well as heat-treatable aluminum plate and tread-brite," says Larson. "Our aluminum program is growing and it's very complementary to our main line because many of our customers sell these common alloy aluminum products. So there's a natural fit for us as there is with the nickel flat rolled that we've just added to our product line."
Helping cut costs
"The more our customers can rely on Ta Chen for inventory," he adds, "the less they need to stock themselves, which of course cuts down on their inventory costs."
Helping customers reduce their freight costs is another area in which Ta Chen seeks to add value, and this is where new warehouse construction comes in. "Our new Seattle facility will greatly reduce freight costs for our customers in the Northwest who were formerly served out of our Long Beach plant." It's a model which Ta Chen plans to replicate in other areas of the country, with a satellite warehouse in the Cleveland area planned for the near future.
Reducing the cost of warehouse operation is another priority for the company, with its Chicago facility serving as the model in this respect. "Chicago was the first facility that we were able to design and build specifically to suit our needs. It's a high-tech operation with a heavy investment in material handling. As a result, the cost per ton to move product in and out of that building is very low by current industry standards. This is an obvious benefit for both Ta Chen and its customers, and it's a path we plan to continue to go down in the future."
Larson stresses that Ta Chen, like the Internet, is a work in progress. "Both are constantly changing and developing, and we are not afraid to reinvest in order to help our customer base operate more efficiently." MM
By Greg Farnum, from the November 2007 issue of Modern Metals.