At a customer's plant, a supervisor was giving a tour to a specialist from Industrial Distribution Group , explaining what this machine did, what that machine did. Pointing to a production puncher, the supervisor said something along the lines of, "It's a great machine, but each year it seems to costs us more to run…."

Turned out that the production puncher used high-speed steel punchers. The IDG rep pondered the situation and, after doing some research, talked the customer into doing a test using a carbide punch, not steel. His research had taught him that there could be an advantage to using the carbide in terms of puncher's durability and productivity.

While the carbide punch was ostensibly more cost-efficient, the client was skeptical that it would do the overall job as well. The test was conducted and showed that the carbide was as effective as the steel while causing less stress to the machine's belts. As a result, the machines ran longer and, naturally, productivity increased as well.

Oh, and the client saved $378,000 annually.

Charlie Lingenfelter, president of IDG's southern division, tells this story followed by a satisfied laugh. Many of IDG's clients are satisfied as well, thanks to the Atlanta-based company's expertise in similar industry matters.

The focal point of IDG's operations is its Flexible Procurement Solutions™ (FPS). It earned IDG this year's Value-Added Partner of the Year Award as presented by ISMA/IDA at its convention this past May.

FPS has evolved into what one might call a best of both worlds arrangement. Talented, well-informed personnel tap into the latest technology to come up with the best support, processing and product sourcing combinations for IDG's MROP clients.

In announcing IDG as its Value-Added Partner of the Year, ISMA/IDA cited the "more than $13 million in cost savings, productivity enhancements, process improvements and other value-added benefits for its customers."

The success of FPS has played a key role in the profitability of IDG as well. In its second quarter financial statement for 2003, revenues from FPS comprised 52.3 percent of the company's total sales, compared to 48.6 percent for the second quarter of 2002. And so far in '03, FPS revenues have increased by $9 million, or by 7.6 percent, over '02.

So where did FPS originate? It had its origins about eight years ago and was inspired, as most good ideas are, by a need in the marketplace.

"It really evolved as opposed to our suddenly turning a switch and it was there," said Jack Kramer, president of IDG's midwest division. "It was something that started as customer-specific, but has gone on to become a success story for us – one that we're translating as quickly as we can to every location we have and every customer we do business with."

Among the keys to the success of Flexible Procurement Services is that it is, well, flexible.

For instance, it can function as a full-service, integrated supply agreement with the client, what IDG describes as "full storeroom management," where IDG will oversee the site, do the buying and take care of most of the procurement function details.

"With our typical full storeroom management, we have people at a client's site seven days a week, 24 hours a day. We'll also have assets on site," Lingenfelter said. "It is like having a branch in a customer's plant, but you only have that one customer." He estimates that IDG has more than 100 sites operating as full storeroom management.

On the other hand, FPS also can contribute comparatively "simple solutions," Kramer explained. "Maybe we'll just barcode their inventory or just provide a vending machine in a building that ties in to the client's systems."

IDG readily admits that the full storeroom approach is not for everybody.

"Full storeroom management may not necessarily be the right solution for a smaller organization that can't substantiate or justify the costs," Kramer explained.

As integrated supply has become more common in manufacturing and industry, suppliers such as IDG find companies more eager to sign on for their services. That, along with the current economic climate, contributes to growing interest in FPS. Thus, when IDG comes calling, they often find themselves preaching to the convertible, if not the already converted.

In addition, many companies have fewer employees these days, which tends to make the ones they have get stretched a bit thin.

"Today, the end customer has fewer staff people, both in supply chain management and process engineering," Lingenfelter said. "The people they have need help and are more susceptible to getting that help, which gives us more opportunities."

"The economy lends itself better to these alternative solutions [FPS] or approaches to cost savings," Kramer observes. "Typically, the only solution they'd look to in the past was built strictly around 'product.' For example, they'd ask, 'How do I get a lower price; or, failing that, a substitute product, at a lower cost?'

"FPS allows us to focus on the total cost of acquisition, and not only the product cost itself," he explained. "The value is not just inherent to the product alone, but the way the customer acquires it. FPS lends itself very well to that."

FPS' documentation process also provides customers with daily, tangible displays of cost savings.

Andy Shearer, CEO of IDG said, that "in the past, there was always a 'perceived value'" that companies went by. "Having that tangible documentation in place makes it easier to educate people as to the value that we bring. It provides us with the opportunity to differentiate ourselves from the competition by focusing our efforts on the most consistent need of our customers: reduce their costs."

Through the years, integrated suppliers have related stories of coming to a company and having to go through a "hand-holding" stage. People get concerned over an "outsider" coming in and a potential loss of control. Has the success of FPS eliminated this?

"No, I think there's still some of that we have to overcome. You'll still find that to be the case occasionally," Lingenfelter said. But FPS' reputation precedes it and, as a result, "some people may fear losing control, but more importantly, people fear losing their jobs."

IDG makes use of more than 18,000 vendors and "no one vendor provides an overwhelming percentage of our business," said Blair Crum, vice-president of IDG's southern division. IDG has some relationships, Crum explained, with what they categorize as "strategic growth suppliers."

IDG has developed partnering agreements with many market-leading suppliers as part of this strategic growth program. These arrangements enable clients to take savings advantage of the most cost-effective product offerings. The expertise of these suppliers also can be tapped.

"They tend to be leaders in a given product or type of commodity with whom we've reached a special arrangement where we support each other in the marketplace," Crum said. "For example, that allows us to go into a FPS site as full partners, and seek out ways for the customer to lower costs and improve their processes."

The ball still remains in the customer's court, however, as to a final decision.

"That in no way means we don't do business with other suppliers who may be competitors," Crum said. "Because in the final analysis with FPS, the customer makes the final choice. But the SGS arrangement allows us to pool our mutual businesses with those suppliers in an accelerated manner."

To remain flexible, IDG makes sure its associates receive pro-active training and re-training for both working in FPS as well as its other functions. It is training that, in essence, results in "knowledgeable associates providing solutions to ensure our customers a competitive advantage," said Carol Marks, who oversees training at IDG and also is the director of purchasing for IDG's southern division.

Training covers necessary product and technological background as well as "people" training. "Understanding and being able to work and communicate with customers is very important," Marks said. "We do this with new associates, of course, but also on an ongoing assessment basis.

"All associates go through some standardized training which will give them the baseline they need to understand such things as company procedures in addition to the general product training," she explained.

One theory that IDG has steered away from is the "Big Win" theory.

"The general impression is that you only go for big wins in a customer location," Lingenfelter said. "Nothing could be further from truth, in my opinion. Those big wins come from looking from the small wins.

"Be on the continual lookout for opportunities to improve the process or reducing costs."

By being on the lookout at a customer's site, Lingenfelter emphasizes the "small win" theory, with examples such as the "$500, the $1,000 'wins.' As a result, sometimes, in finding one of those 'wins,' you might just fall into one that may be, say, a $400,000 'win' or even larger."

He provides a recent example. At one of IDG's integrated supply locations, the customer was using a coded abrasive belt. The belt used about $100,000 annually in abrasives' cost, Lingenfelter estimates.

The client was wondering about changing belt makers amid complaints that they were rapidly going through more coded abrasive belts than they liked. A sort of "They don't make belts like they used to, I guess" attitude was emerging.

The site manager asked for help. IDG went in with the supplier and one of IDG's specialists.

"We decided the product itself [belt] was a tremendous product," Lingenfelter said. "However, a rubber roller, a contact wheel behind it, was causing the abrasive grain to break down faster than it should."

Replacing that contact wheel was the verdict. Result? A $50,000 a year cost savings, as the belts did not break down nearly as often.

Moral of the story? "If you are constantly on the lookout, there's no telling what you can find," Lingenfelter said. "And then, not only are we saving the customer money, we can take the relationship to a whole new level where we work as partners to improve the process and reduce the costs."

At moments like that, "this business is a lot of fun, I can tell you that!"