Taking a hard cut at inventory costs
By Staff -- Industrial Distribution, 1/1/1999
Once a small Midwest abrasives house, Brunswick, Ohio-based Precision Supply Co. is going national with its inventory management program.Precision Supply has grown nearly threefold since 1996 and the company expected revenues to reach about $20 million for 1998. The key to growth, says president Robert Koch, is a strategy focused on lowering hard costs for customers by managing their inventories. He'll leave it to other distributors to lower soft costs such as purchasing and other transactional costs.
"We're first a very technically-oriented company," says Koch. "Our focus is we offer the technical service as part of our program, but we key on managing people's inventories and lowering the costs of their inventories. We came up with a unique way to manage people's inventories and we're taking that to a national market."
During its 25 years, PSC's core business has been abrasives and cutting tools. In the mid-90s Koch and senior managers began studying integration and inventory management with industry experts. Koch, whose father, Al Koch, started the business with a partner in 1976, saw reducing inventory costs as the firm's future.
To differentiate his company from other integrators, Koch hired integration experts and continues to add talented engineers. He would not disclose the number of engineers or proprietary details of the inventory management program. But Koch says Precision Supply wants to acquire other firms to add talent and expand its geographic reach. He expects to complete the buyout of a California firm this month.
To date, the firm's customers are concentrated in Ohio, Indiana and Michigan, with some as far away as Arkansas. Koch says there are about 20 major integration contracts that are fueling growth.
"We see a lot of integration where you may be reducing soft costs but the hard costs may be going up," he says. "We wanted to help people reduce the hard costs and be able to measure it. The only way you can do that is through innovation and control."
As Precision Supply's integration teams win new accounts, the company runs operations like tool cribs and in-plant stores. A manufacturing division of the company, X-Press Tool, provides related services such as custom tool design, heat treating and tool repair, regrinding and sharpening. PSC also handles products from workholding and indexable tools to machine accessories.
Koch defines innovation as constantly looking at better ways to be cost effective for customers. As an incentive to do that, PSC put together a commission program that is tied to production gains delivered to customers.
"We concentrate on hard costs savings. The soft costs are the easy part," he says.
Debbie Clem, vice president of the abrasives division at Continental International, a manufacturer in Fort Wayne, Ind., says Precision's value-added services shows through its commitment to consistent quality and customer service relations.
"We've not had any customer complaints from their end users on returns in six years," she says. "If there's a problem they'll handle it on their end and call us."
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