A bright idea and a brand-new business strategy will boost business at Wrayco Industries – just in time.
When Gary Gibb's only customer suggested last year that he diversify and supply fuel and hydraulic tanks to other prospects, he anticipated slow orders and dwindling deals down the line. "I'd been advised for years that 100 percent was not healthy, but our situation was working well," Gibb says of his "captive shop." The Stow-based steel fabricator has produced complex weldments for one construction company since 1980. "We avoided a lot of business costs by having that business model in place."
But times change, manufacturers cut back, and suppliers like Wrayco must decide: dedication, or diversity and product development?
"Things are tough out there, and you have to have something to offer," Gibb says. "The manufacturing process is more refined, defined, and measurable. It's changing – it really is."
Gibb calls Wrayco "that small company that no one hears about." Its commitment to a single manufacturer made it "the best-kept secret in the Midwest," he says. Few prospective customers realized Wrayco's capabilities.
Today, Gibb is bending new customers' ears and entertaining product introductions for new U.S. markets.
"We do value-added, high-skilled manufacturing jobs, and those jobs are still here," he says of the trend toward overseas production. "But you have to prepare and invest in your company. The orders don't just come and you can't just sit back and wait for the old work that is gone or going."
This attitude defines successful suppliers today. As manufacturers thin out orders and ship work to international sites, companies like Wrayco confront an identity crisis of sorts. Which products will tempt new customers? Can the same machinery produce different items? What strengths can suppliers tap? Mostly, suppliers with loyalty to just one manufacturer discover that dedication is detrimental to the bottom line – and diversity rules.
Chain Changes
Supply chain shifts don't surprise most market players. Consolidation, overseas manufacturing, pricing pressure, and a push for improved, high-tech processes punctuate the competitive industry, says Stephen Gage, president of Cleveland-based CAMP Inc., a professional services organization that supports manufacturing and technology-based companies.
"The automobile supply world has been one of the chanciest for some time," he says. "The vast majority of suppliers have been jostled in one way or another."
Manufacturers that once purchased parts from 20,000 to 30,000 suppliers whittled down their playlists to 3,000, for example. "Ten years ago, the theme was to simplify the supplier structure," Gage says. "This forced suppliers to heavily commit to one company." Gibb knows this gig well.
But loyalty isn't standard in today's competitive manufacturing landscape. "If a [supplier] does 90 to 95 percent of its business with one manufacturer, when that company jerks the chain and says, ‘I want you to lower your price,' or ‘I know you have had an increase in material prices, but we won't pay more,' they are stuck," says Jim Cermak, product development marketing manager for CAMP. "You're not in a good position to demand."
Suppliers must assess their strengths and consider ways to branch out before customers cut off orders, Cermak says. "A lot of [suppliers] are family-owned companies that have been around for 40 to 50 years, and they might be running the same equipment as they did when they started," he says. "Unfortunately, a lot of these companies might be gasping for air. But diversification, new product development, and new market development are keys to survival."
For example, a supplier that produces a stamped automotive part might find another customer who can benefit from the same product. In Gibb's case, simply marketing products to other manufacturers was the first step. "There is a limit on how much you should do for a customer," Gibb says. "We are diversifying into other businesses with unique re-quirements that we can fulfill. Hy-draulic tanks can be yellow, green, or blue, but they are the same [steel] gauge and construction."
Wrayco still does 99 percent of its business with its original construction manufacturer, but Gibb says deals on the table could alter this portion and split it evenly with new customers. By developing an internal sales force and enlisting an outside representative to call on prospects, Gibb, rather than his No. 1 customer, will call the shots, he says.
Sizing Up Supply
Crisis often sparks creativity. After Sept. 11, Bruce Ramsey noticed a soft economy and slow orders. "We knew that a large customer was going to send work over to China, so we projected what that would do to our business," says Ramsey, owner of Elyria-based Mel-Ba Manufacturing Inc. The prognosis for the manufacturer of precision machined parts wasn't positive: Rev-enues rerouted to China would halt Mel-Ba's traditional 20 percent annual growth rate.
"When you are doing well and the economy is doing well, a lot of sins get covered up," Ramsey says. "But those sins become very obvious when your revenue stream starts to decrease."
Ramsey refers to productivity, efficiency, technology, and training. Habit sometimes harbors complacency.
But Ramsey didn't wait for his bottom line to dive before throwing out lifelines to new markets. Slow orders served as a call to action – "a blessing," he calls it, sparking a reevaluation of Mel-Ba's manufacturing capabilities. He considered ways to fine-tune the 12-person factory and ramp up productivity. The goal was to tap into new customers so he wasn't counting on just one company to grease his wheels.
Ramsey's key was selective sales and targeted markets. Since January, Mel-Ba has added 15 new customers to its database, and though sales volume is 15 percent less than in 2000, profit margins are higher, he says. What changed at Mel-Ba? Not the equipment or the employees. "Where the product goes is different and it has a different market pricing structure," he says.
Suppliers need to be picky when approaching prospective customers, Ramsey says. More isn't merrier if diversity dampens efficiency and drives up production costs.
"Don't go out and quote for the sake of quoting," Ramsey says. "Be
selective so your customers' needs are met by your manufacturing strengths."
Training Wheels
Navigating product development and polishing production practices requires resources suppliers might not find on their assembly lines. Training is a critical mechanism to solidify companies' futures.
"Product dictates process, and process dictates the level of work force you need to produce what you make," sums up Sandra Everett, technical training manager for the Nord Advanced Technolo-gies Center at Lorain County Com-munity College.
"The only way we will keep advanced manufacturing processes in this country is to have a very trained work force," she says. "Companies can buy sophisticated equipment and automate their processes, but if the workers can't operate and maintain the equipment, it's to no avail."
The center works with small and mid-sized manufacturers, training employees to utilize advanced manufacturing processes so companies can increase their competitive edge in a market where overseas competition poses a threat, Everett says.
"We have lost a tremendous number of manufacturing jobs to low-wage countries in the last three years," she says. "But while we lost manufacturing jobs to offshore companies, we have kept higher-level manufacturing and advanced processes in this country."
Gibb taps into the University of Akron's training programs, taking advantage
of state-sponsored grants that pare down educational costs by 50 percent. Further,
in-house training from its key customer provides necessary technology updates.
"Training is the key to everything," he says.