Making inroads with integrated supply

Distributors capture more of the supply chain

By -- Industrial Distribution, 6/1/2000

Industry consolidation, shrinking margins and globalization are transforming the fastener distribution market into a playing field for only the most nimble of competitors and integrated supply is the game of choice for customers.

Joe McIlhon, the most recent past president of the National Fastener Distributors Assn., says more and more distributors are using integrated supply strategies to move products to manufacturers.

McIlhon, who is also vice president of the Cedar Falls division of IIP/Bossard, says many distributors offer on-site programs that supply fasteners to the production line on an hourly basis. Headquartered in Zug, Switzerland, the Bossard Group has subsidiaries in Europe, Asia and the U.S.

"Customers are requiring the distributor to do more than book and bill," McIlhon says. "The days of receiving the order-then 30 days later throwing it on a pallet and shipping it-are gone."

James Ruetz, president and general manager of All Fasteners, Inc. and the current NFDA president, says his company is forming alliances with other types of distributors to offer customers a wider breadth of products. The Racine, Wis.-based company is linked with companies such as All Tool Sales, Inc. and Nelson Electric Supply Co., Inc., both of which are also headquartered in Racine. By working through an alliance, the customer's employees are able to focus on true value-added activities.

"If a customer can have a person who was receiving product do testing on [those] products and reduce the number of defective products leaving the building, that's added value," Ruetz says.

Bar-coded, point-of-use inventory management is nothing new, Ruetz explains, but customers now want distributors to manage more of the process. Barry Porteous, president of Porteous Fastener Co. in Carson, Calif., says his master distributorship offers a stock and release program. Customers give Porteous projected usage and the company delivers items at certain time intervals.

"We're carrying the inventory for them to help them with inventory management and cash flow," Porteous says.

Richard Schwind, president of Lenexa, Kans.-based ACS/SIMCO says electronic capabilities have pushed fastener distribution beyond just-in-time delivery systems to single sourcing or true integrated supply. In the early 1990s, JIT was a selling point for distributors but is now a minimum requirement of doing business that doesn't provide any leverage. The bar is rising, and Schwind believes customers will soon expect the industry to offer e-business solutions.

"Instead of the distributor holding the inventory, he or she becomes a supply chain manager and may not even own or touch it," Schwind says.

The industry shift began more than a decade ago, Schwind explains, when expired patents invited increased competition and transformed fastener products from proprietary products into commodities. ACS/SIMCO thrives through in-plant programs that provide the products to customers at the point of use.

"Trying to stay ahead of your competitor becomes more and more difficult," Schwind says.

Robbie Gilchrist, a regional vice president with Questron Technology, Inc. of Boca Raton, Fla., says large OEMs are using fewer vendors but small to mid-sized companies are still seeking out regional distributors. And the trend toward national contracting seems especially prevalent among Fortune 250 companies, he adds.

"Those are the ones looking to put their eggs primarily in one basket," Gilchrist says.

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