September 2010- Increasingly, companies are scrutinizing not only their operations but also those of suppliers and partners in a growing vetting movement spurred by the difficult economy. Companies want to ensure there are no potential hiccups in the supply chain and that their business partners are stable, says Dan Kendall, president of ABC Metals Inc., Logansport, Ind.
The service center credits its financial stability, its TS 16949 certification and its relationship building as factors that helped its business grow throughout the recession.
"Especially in 2009, there were companies that didn’t file--they just went out of business," says Kendall. This left customers and business partners with little hope of recouping losses. Because of this, some companies have become hesitant to enter new business arrangements without first reviewing a company. ABC Metals, however, has used its stability during the recession to gain clients and build additional relationships in markets that are growing for the company, such as automotive.
ABC Metals specializes in precision-slit metal products and also provides tension leveling, traverse winding, cutting to length and commercial tinning. It works with clients that require stainless steel, aluminum strip, brass, copper and copper-alloy strip such as beryllium copper or phosphor bronze. As the economy started to falter, "we immediately started talking to all of our suppliers to give them information on how we were doing," says Kendall. "That was to put them at ease, as much as anyone could be at ease in that economy, but also to strengthen relationships."
A step ahead
ABC Metals’ TS 16949 certification demonstrates to other businesses that the service center has a robust system that meets specific standards, says Kendall. It also gives ABC Metals an advantage because potential clients can begin conducting business with the company quickly without having to conduct their own investigations to ensure the systems meet certain requirements, he says.
Based on ISO 9001 requirements, the TS 16949 certification "defines the quality management system requirements for the design and development, production and, when relevant, installation and service of automotive-related products," according to the International Organization for Standardization, Geneva, Switzerland. It applies to sites that manufacture customer-specific parts.
ABC Metals gained TS 16949 certification at its Logansport, Ind., facility in 2005 and at its facilities in El Paso and Pharr, Texas, in 2007. It recently completed a recertification process to continue its compliance with the standard. "We’ve had it not only for a full three-year cycle, but we’ve recertified again," says Kendall. "When [companies] look at our qualification records, they know our system has been aligned to TS for five years," he says, noting the automotive sector has been an area of growth for the company.
As supply chains condense and evaporate, some companies need to move quickly to find other businesses with which to work. "When ABC would demonstrate that we had our TS certificate, then that made the process" move more quickly, says Kendall. The company can show its certificate and certification results, allow the other business to perform a production-part approval process and the transition can happen "in just a few days," he says, noting companies are relying more on certifications now than they were three or four years ago.
"We don’t have to go through this long, drawn-out approval process," says Kendall. "We show them the TS, and that already puts us a step above many of our distribution competitors."
ABC Metals has been supplying Shallco Inc., Smithfield, N.C., with brass and copper coil and strip for more than 12 years, says Kim Lee, a Shallco buyer. ABC’s certifications help ensure Shallco receives exactly the product specifications it needs.
"Certification means the procedures are in place to ensure we receive the correct material on time with the necessary documentation for the order from ABC Metals," says Lee. "Although price and delivery are important in purchasing, knowing the material received will be to our specifications is critical."
In the last few years Kendall estimates ABC Metals has gained more than a dozen clients in part because of its certification. Not having TS certification would be a "showstopper" in many conversations with potential clients, he says. After negotiating with a company, "they say, ‘You are TS, right?’ And if we said, ‘No,’ they would have gone, ‘That’s a problem.’"
Having the certification allows ABC Metals to differentiate itself because "after you go through that exercise, the next time [that company] needs something, now they are coming to us," says Kendall, noting few businesses hold TS 16949 certification. "You have to be required by one of your customers to have TS so you can qualify. In other words, unless you are invited to the dance, you can’t even come if you want to."
Another aspect that has contributed to ABC Metals’ continued success is its solid financial standing throughout the difficult economy. The company maintained positive numbers in 2009, which "helped preserve the overall value of the company" and positioned it in a favorable place for further growth, says Kendall. Remaining financially viable also helped set ABC Metals apart from competitors, some of which had a difficult time during the recession.
"We have seen more requests for our customers to see something about our financials," says Kendall. "We get asked with some frequency for our Z-Score."
A Z-Score is a mathematical formula for predicting bankruptcy developed by Edward Altman. It uses financial data, including a company’s assets, earnings, revenue and market value, to estimate how solid a company is financially.
"Throughout this whole ordeal, we preserved our ability to borrow, and it’s been enhanced further," says Kendall. "Now that the economy has started to take off, what happens is people buy more metal, so your accounts payable climbs because you are buying more metal, but also your receivables climb because more people owe you more money. With their market prices climbing up from their low in last January or February of 2009, now we are in a position where we have the money by which we could finance our growth."
ABC Metals also is adept at building supply-chain teams, says Kendall. "It’s very important for the relationship between the producer, call them the mill, and the distributer and then the end user to be recognized," he says.
The service center is able to work with different customers’ preferred mill chain partners to satisfy each client’s business needs.
"What we are about is breaking bulk and putting things into the form that best suits our customer," says Kendall. "We have a level of independence" because ABC Metals isn’t mill-owned, he says.
The company also has fostered strong relationships with its supply chain partners by working with the Copper & Brass Servicenter Association Inc., Overland Park, Kan. "This really helped us weather last year’s economic storm," says Kendall, noting ABC Metals is a member of the organization.
"Due to our relationship with CBSA, we began to be viewed as a well-connected market participant. Our counsel was sought by market participants in various facets of the supply chain regarding a multitude of survival strategies," he says.
Ultimately, relationships and a company’s stability have become even more important in the metals industry because of the recession. Businesses are looking at all different aspects of a company from certification to financials and more, says Kendall. "We get into a discussion about our certification and then also get into a financial discussion," he says, noting that he believes the industry increasingly will require more in-depth vetting of business partners. MM