It's been just six months since Saginaw Products Corp. instituted a cutting tool management program, but the company is already targeting a 10 to 15 percent cost reduction by the end of the year.

The intangible results are already evident at the Saginaw, Mich.-based manufacturer of trolleys, running gear, jacks, screws and barrels. For example, the company's machinists are no longer able to stash unused tools in their boxes.

Implemented and managed by Shively Bros., Inc., of Flint, Mich., the program includes full management of the company's tooling program. This includes establishing minimum and maximum inventory levels, restocking tools and preventing machinists from using a partial package of tools and socking the rest away for later use.

"We've had a consistent problem with machinists who order a tool for a specific program, but use just two or three out of a package of 10," says Robert Dillenbeck, purchasing manager for Saginaw Products. "They would stash the rest in their box and we would assume they were used up, but they weren't."

A supplier for Saginaw Products for several years, Shively Bros., was chosen to handle the task for its experience, technical ability and willingness to become a part of the Saginaw Products team.

"We wanted a company that could fill our tooling management needs, which include overseeing two plants and handling weekly inventories," says Dillenbeck. "Using multiple suppliers just wasn't cost effective for us, so we chose them to supply everything we needed."

The tooling management program goes beyond just refilling bins and counting inventory, and includes monthly meetings between distributor and customer where they both review any problems, issues or questions that come up at either plant. Because one person is in charge of inventory at both plants, Shively Bros. knows every item's location and can suggest inventory transfers rather than new purchases when applicable.

Along with the tool management program, Dillenbeck says Shively Bros. also handles the firm's stocking program and maintains inventory at its own facility for the manufacturer. "That saves us expediting charges," he explains, "while helping improve our overall efficiency and productivity by standardizing our tooling to similar machining processes and materials."

Founded in 1947, Shively Bros. was an early entrant into the commodity management market and today serves customers like Saginaw Products throughout the state of Michigan. The company was started by Thomas Shively Sr., and his brother Jack Shively during the post-war era in which pent up customer demand was driving the economy.

"That demand created a real need for capable manufacturer's representatives and local distribution companies," says Scott Shively, Thomas' grandson and current president. "We started as a key line distributor, specializing in machining related products, fluid power and lubrication products."

During the 1970s, Scott Shively's father, Thomas Shively, Jr.; uncle, Edsel Shively; and aunt, Fran Johnson owned and operated the business and streamlined its product focus into cutting tools and abrasives. In the late-1980s, the third generation took over when Shively, Bob Kerlin, current CEO, and two other partners bought the firm together through an employee stock ownership program.

Along with that new ownership came a formal participative management/quality process program based on the Demming quality philosophy. The innovative efforts caught on quickly with customers and by 1986 Shively Bros. had netted the first-ever cutting tool commodity management program for a large automotive company. Two years later, it introduced the first automated tool-dispensing unit in a large automotive facility.

According to Pat Parker, sales engineering manager for Worcester, Mass.-based Saint Gobain Abrasives, Shively Bros.'s early commodity management program was a key both for the distributor and for his firm, which was a preferred supplier for the account.

"That account served as a stepping stone for Shively Bros. to propel itself into commodity management," says Parker. "By the early '90s, automotive manufacturers and other major corporations began seeking out innovative ways to do business that went past just dealing with their local distributor. They wanted someone to manage a whole commodity for them."

Many of those customers found the solution in Shively Bros., a 52-year-old company that over the years has become known as "the" place to go for abrasives and cutting tool commodity management. By concentrating on metalworking products, the 84-employee company posted $47.6 million in sales for 2001 and expects about the same this year.

Ask Brad Mead what he enjoys most about doing business with Shively Bros., and his answer comes easily: they're a highly technical distributor with very qualified personnel. Mead is mid-central zone manager for Sandvik in Fairlawn, N.J.

"They support our products and initiatives extremely well," says Mead. "Plus, their marketplace position as a pioneer in commodity management and automated tool dispensing affords us the opportunity to bring our productivity enhancement to the end user in a professional manner."

Mead points out a recent opportunity when Shively Bros. asked Sandvik to review an automotive subcontractor's processes and highlight areas in need of improvement. "They told us that the customer was struggling to be competitive in the marketplace, and asked that we take a look at it," Mead says.

Through the combined efforts of both companies, that end user implemented new technology and wound up saving about $195,000 annually, according to Mead. That, he adds, is just one example of how Shively Bros. stands out in the marketplace. "They focus on their end user relationships and win-win propositions," he adds. "They also train their customers, which is very unique these days when end users lack training facilities of their own."

Along with helping solve customer problems and offering training programs, Mead says Shively Bros. also assembles competitive tooling packages that guarantee the right choice for its customers, who want to buy the right machine tool, but aren't always sure about what tools to put use.

"Shively Bros.'s technical expertise and wide variety of products allow the company to ensure that the process is the most efficient in the marketplace," says Mead. "It also helps the customers gain maximum efficiencies from their machine purchases, therefore helping them pay off the purchase in a timely fashion."

From its two 20,000-sq-ft facilities, Shively Bros. concentrates on metalworking applications with automotive, machine shop and tool and die customers. Rounding out its current management team are Marty Kenney, vice president, and Dan Graves, secretary/treasurer.

According to Shively, the company draws its strength from a team approach to doing business that not only cultivates open communication, but also empowers individual employees to make decisions that will positively impact the customer relationship.

"Without our people and their dedication to our valued customers," says Shively, "we would never have the success that we have today."

Shively Bros.'s quality process — based on documented internal processes — has also played a significant role in the company's success over the years, according to Shively, and has served as a "footprint" for efficient, consistent growth. Complementing the quality process is an intensive "CIP" or continuous improvement process, which enables the distributor to document, track and improve on the value-added products and services that it provides its customers.

And it's all done in the name of reducing customer costs. "We strive to reach total cost per component reduction in the manufacturing process – a goal that ties into all of our internal processes," says Shively. "We accomplish it through cycle time reduction, increased tool life and scrap reduction."

Going forward, Shively sees the distributor creating even more efficiencies for customers as it also expands its team and grows its own sales. He expects the firm to remain independent, despite rampant industry consolidation, thanks in part to the way it helps customers concentrate on their core manufacturing competencies.

"As customers strive for this, they'll outsource more procurement, inventory management and engineering-related activities to companies like ours," says Shively. "We hope to expand our business as a result of our emphasis on cutting tool and abrasive commodity management, total cost savings programs and our flexibility to adjust to whatever our customers' current and future needs may be."