Does Your Firm Meet or Beat the Market?

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With declining metals prices, metals buyers around the world might look like rock stars right now. But your CFO ought to be asking the question Is our firm beating the market? And the answer for most companies is a resounding NO. Why?

We would contend that companies either:

  1. bid out their requirement monthly (thinking that will allow them to beat the market at least on a monthly basis)
  2. believe their spend is too strategic, or critical to the operation ” therefore, it may be too complex to undertake a formal cost reduction initiative

Never has the pressure been so great to achieve cost savings above and beyond the current market price. For many companies their very survival depends on it. But most companies are missing out on additional single or double-digit savings opportunities that would still allow them to maintain relationships with high quality suppliers when growth returns.

What’s the catch to eking out every possible savings cent, you ask? It must take time, you say. That’s it — the problem is time to savings. Our spend is so complex it would take months, may be a year to see a return, you think? Is this right? Nope. Wrong, read on¦

You wouldn’t expect to be able to get faster, better cost reduction results with complex metals requirements, but if you find that your metals purchases match any or all of the following descriptions, you are likely an excellent candidate for a 120 day cost reduction ROI:

  1. Critical material for manufacturing operation
  2. Typically service center spend but can be mill-direct
  3. JIT/Kanban required
  4. 24 hour turnaround required
  5. Broad mix of metal products ” steel, aluminum, copper and stainless
  6. Broad range of product types ” flat rolled and long products, bars and extrusions
  7. Multi-million dollar category
  8. Can’t/don’t want to go global with the category

Does this appear counter intuitive? Aren’t we always told multiple line items, fast turnarounds, sheet, plate, coil etc, kanbans are all major hurdles in identifying and achieving solid long term savings? It’s not, especially today. Our recent experience proves suppliers are hungry for business, responsive to opportunities for new business and more than willing to work with consumers to achieve costs savings ” even in highly complicated environments.

The issue is one only of expertise and manpower, both of which can be brought in on the basis of a guaranteed ROI.

If your firm wants to beat the market in 120 days or less, give us a call.

–Lisa Reisman and Stuart Burns

Comments (4)

  1. SUEJ says:

    The products I source are primarily made from steel & cast iron, and whilst I have eagerly read numerous reports on how steel prices have come down, it has been very hard work in convincing my Asian suppliers. I seem to spend a lot of my time trawling the internet in order to present the ‘facts’ to my suppliers. Are producers really passing on these price cuts to manufacturer’s?

  2. Stuart Burns says:

    This is a fascinating point you make. How do you track your Chinese suppliers raw material costs and ensure you get cost downs passed through? The Chinese and US domestic steel markets move independent to each other driven by different demand drivers and raw material costs – for example where steel costs are still continuing to come down in the USA they bottomed in China last December and have even risen very slightly in January. With access to MetalMiner IndX you will be able to track these costs in China for free and in time encourage your suppliers to tie contracts to the IndX to ensure they only pass on fair and reasonable cost changes.

  3. German Dominguez says:

    Something similar to what SUEJ is experiencing happens in Mexico, too. But I beleive the gap is not on the producer’s side entirely, but on the service centers and manufacturers. Service Centers in Mexico, like in China, seems to operate in a different world. I have found that steel prices in Mexico are anywhere from 15% up to 25% higher than in the U.S. (evethough some of them import steel from the U.S.) Blame it on a weak peso? I am not entirely sure this is the case.

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