Executive Briefings

How Does a U.S. Materials Manufacturer Compete? By Bringing the Pain

It's tough for a U.S. materials manufacturer to keep pace with foreign competition - especially when it's burdened with "tools from the stone age."

How Does a U.S. Materials Manufacturer Compete? By Bringing the Pain

That's the perception of a company that ought to know: JW Aluminum, a U.S.-based maker of rolled aluminum products. Like many domestic producers, it's constantly battling overseas sources for key markets. China is a particular rival, made more formidable by a currency that has been stubbornly undervalued, in the eyes of many international traders.

JW Aluminum learned its lessons the hard way. Up until 2006, the company’s manufactured operations were fractured, into what amounted to four separate factories running under one roof, according to brand and marketing manager Nicole Snyder. It has since succeeded in flipping that equation, pursuing a strategy of “one plant, many locations.” In the process, it has centralized its information technology and brought all operations under a single instance of enterprise resource planning.

Today, JW Aluminum operates plants at its headquarters in Mount Holly, S.C. as well as in Williamsport, Pa.; St. Louis, Mo. and Russellville, Ark. Snyder describes the executive philosophy as that of “a small player, but determined to keep those jobs in America.”

Snyder says domestic materials producers are up against lower labor costs and large government subsidies from foreign rivals. China, for example, sank more than $300bn of subsidies into its state-owned enterprises between 1985 and 2005. It continues to prop them up with money for capital improvements, cheaper materials and new technology.

American manufacturers, meanwhile, “are often stuck using 50-year-old equipment and planning upgrade cycles over such a long period that the initial round of improvements is obsolete by the time the cycle finishes,” JW Aluminum says in a new white paper on forging more effective supply chains.

When it comes to balancing supply with demand, materials supply chains lag those of the consumer goods industry. “A lot of it is due to materials manufacturers being complacent and slow to act against competition from overseas,” JW Aluminum says. They haven’t responded to the growing quality of product from sources like China, even as some low-end domestic producers were acquired or forced out of business.

But some of the most serious problems can be found right at home. Large department stores used to be forced to discount substantial inventories of product that didn’t sell during the Christmas season. Consumers came to expect that they could pick up incredible bargains on items such as Christmas ornaments, if they just waited until January. Retailers have largely eliminated that surplus through investments in new forecasting technology. Not so on the materials side, according to JW Aluminum.

So can an American manufacturer of materials, which tend to be highly price-sensitive, compete? Step one, says JW Aluminum, is to identify the main internal pain points “that lurk just underneath price-consciousness.”

Research reveals five major problems that are common to large materials-manufacturing supply chains: long lead times, inaccurate forecasting, lack of “customer intimacy,” poor communication and response times, and competing software standards.

Phrases like “just in time,” “Lean” and “on-demand” are foreign to many materials supply chains. That has to change. Snyder says companies must overcome their price obsession, and stop viewing their products exclusively as commodities. That dreaded word signifies a world where margins are so thin that there’s no room for improvement in quality and customer service.

A new way of thinking about materials is essential. “When asked what the last major innovation in materials sales and production was, many of the company executives we spoke to couldn’t remember anything more recent than the advent of digital spreadsheets or online catalogs,” says JW Aluminum. “The idea of commoditization has largely frozen progress in the industry, leaving it far behind direct-to-consumer products.”

New technology is an obvious step forward, but it must come with the proper approach to implementation. Too often when companies acquire new systems, the effort isn’t deliberately planned, says Snyder. “You’ll be chasing after one shiny object – say an ERP solution – and get that stood up, only to find it doesn’t communicate with existing in-house systems.” Technology is a great idea in theory, but “adoption makes the entire tech piece of the puzzle very difficult in practice.”

The forecast can’t exist in a void. Seasonality is one key factor to consider. Even more important is the ongoing needs of the customer. Maybe it’s possible, for example, to ship a given order early. Or the plant can produce generic aluminum coils and hold them for last-minute customization. “We try to take all these unknowns and changing factors, and balance that with the contractual business we have as part of the mix,” says Snyder.

Tight linkages with the customer will also make for a more reliable long-term forecast. Customer “intimacy” means the willingness to work closely with accounts, solicit any issues they might be having, and discuss the changing requirements of end customers. It’s not uncommon for JW Aluminum’s sales and quality teams to make regular visits to the plants, to ensure that they’re producing according to actual need.

Some factors can’t be eliminated, but they can be partially offset. The strong dollar and weak yuan have put U.S. exporters at a severe disadvantage in world markets. For JW Aluminum, that’s especially the case on the foil side of the business, which employs lighter-gauge product.

Still, says Snyder, “our customers don’t put all their eggs in one basket. I can’t name one customer that is single-source supplied for all of their flat-rolled aluminum.” The proper internal improvements to a materials supply chain can help U.S. producers to compete even when currency rates are unfavorable.

As with any global supply chain, JW Aluminum has more work to do. Its biggest future challenge is “sustainability.” By that, Snyder means the ability to maintain “open, honest and regular communications with the customer – and sustaining those processes when you get them in place.”

Snyder’s dream: That the materials supply chain will one day catch up with the consumer-products sector. “We want to make the experience you have with us as a customer as seamless as it would be with Amazon.com,” she says.

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That's the perception of a company that ought to know: JW Aluminum, a U.S.-based maker of rolled aluminum products. Like many domestic producers, it's constantly battling overseas sources for key markets. China is a particular rival, made more formidable by a currency that has been stubbornly undervalued, in the eyes of many international traders.

JW Aluminum learned its lessons the hard way. Up until 2006, the company’s manufactured operations were fractured, into what amounted to four separate factories running under one roof, according to brand and marketing manager Nicole Snyder. It has since succeeded in flipping that equation, pursuing a strategy of “one plant, many locations.” In the process, it has centralized its information technology and brought all operations under a single instance of enterprise resource planning.

Today, JW Aluminum operates plants at its headquarters in Mount Holly, S.C. as well as in Williamsport, Pa.; St. Louis, Mo. and Russellville, Ark. Snyder describes the executive philosophy as that of “a small player, but determined to keep those jobs in America.”

Snyder says domestic materials producers are up against lower labor costs and large government subsidies from foreign rivals. China, for example, sank more than $300bn of subsidies into its state-owned enterprises between 1985 and 2005. It continues to prop them up with money for capital improvements, cheaper materials and new technology.

American manufacturers, meanwhile, “are often stuck using 50-year-old equipment and planning upgrade cycles over such a long period that the initial round of improvements is obsolete by the time the cycle finishes,” JW Aluminum says in a new white paper on forging more effective supply chains.

When it comes to balancing supply with demand, materials supply chains lag those of the consumer goods industry. “A lot of it is due to materials manufacturers being complacent and slow to act against competition from overseas,” JW Aluminum says. They haven’t responded to the growing quality of product from sources like China, even as some low-end domestic producers were acquired or forced out of business.

But some of the most serious problems can be found right at home. Large department stores used to be forced to discount substantial inventories of product that didn’t sell during the Christmas season. Consumers came to expect that they could pick up incredible bargains on items such as Christmas ornaments, if they just waited until January. Retailers have largely eliminated that surplus through investments in new forecasting technology. Not so on the materials side, according to JW Aluminum.

So can an American manufacturer of materials, which tend to be highly price-sensitive, compete? Step one, says JW Aluminum, is to identify the main internal pain points “that lurk just underneath price-consciousness.”

Research reveals five major problems that are common to large materials-manufacturing supply chains: long lead times, inaccurate forecasting, lack of “customer intimacy,” poor communication and response times, and competing software standards.

Phrases like “just in time,” “Lean” and “on-demand” are foreign to many materials supply chains. That has to change. Snyder says companies must overcome their price obsession, and stop viewing their products exclusively as commodities. That dreaded word signifies a world where margins are so thin that there’s no room for improvement in quality and customer service.

A new way of thinking about materials is essential. “When asked what the last major innovation in materials sales and production was, many of the company executives we spoke to couldn’t remember anything more recent than the advent of digital spreadsheets or online catalogs,” says JW Aluminum. “The idea of commoditization has largely frozen progress in the industry, leaving it far behind direct-to-consumer products.”

New technology is an obvious step forward, but it must come with the proper approach to implementation. Too often when companies acquire new systems, the effort isn’t deliberately planned, says Snyder. “You’ll be chasing after one shiny object – say an ERP solution – and get that stood up, only to find it doesn’t communicate with existing in-house systems.” Technology is a great idea in theory, but “adoption makes the entire tech piece of the puzzle very difficult in practice.”

The forecast can’t exist in a void. Seasonality is one key factor to consider. Even more important is the ongoing needs of the customer. Maybe it’s possible, for example, to ship a given order early. Or the plant can produce generic aluminum coils and hold them for last-minute customization. “We try to take all these unknowns and changing factors, and balance that with the contractual business we have as part of the mix,” says Snyder.

Tight linkages with the customer will also make for a more reliable long-term forecast. Customer “intimacy” means the willingness to work closely with accounts, solicit any issues they might be having, and discuss the changing requirements of end customers. It’s not uncommon for JW Aluminum’s sales and quality teams to make regular visits to the plants, to ensure that they’re producing according to actual need.

Some factors can’t be eliminated, but they can be partially offset. The strong dollar and weak yuan have put U.S. exporters at a severe disadvantage in world markets. For JW Aluminum, that’s especially the case on the foil side of the business, which employs lighter-gauge product.

Still, says Snyder, “our customers don’t put all their eggs in one basket. I can’t name one customer that is single-source supplied for all of their flat-rolled aluminum.” The proper internal improvements to a materials supply chain can help U.S. producers to compete even when currency rates are unfavorable.

As with any global supply chain, JW Aluminum has more work to do. Its biggest future challenge is “sustainability.” By that, Snyder means the ability to maintain “open, honest and regular communications with the customer – and sustaining those processes when you get them in place.”

Snyder’s dream: That the materials supply chain will one day catch up with the consumer-products sector. “We want to make the experience you have with us as a customer as seamless as it would be with Amazon.com,” she says.

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How Does a U.S. Materials Manufacturer Compete? By Bringing the Pain