Investing In The Future

Distributors and suppliers can make a difference in stemming the industry slide.

By Richard J. Self

During the American Revolution, Ben Franklin said, “We need to all hang together or we will all hang separately.” The same can be said for the North American welding industry now that we are in the midst of an industrial evolution. While some suppliers are just thinking about the short term, and some distributors are worrying about their local territories, we all need to focus on winning the new industrial war.

It is unfortunate that many U.S. fabricators are in a survival mode. The facts remain that we are in a slow global economy, there is overcapacity in manufacturing, and consolidation is going on amongst our customers' businesses.

Today's successful distributor can no longer look out his or her window and worry only about the accounts in a geographic region. The present global economy means more acquisitions, more subsidiaries and more business consolidation, all of which affect how end-users buy and what jobs they get. All of this trickles down to the local and regional distributor.

We need to quit blaming the economy, overcapacity and consolidation just because they're easy targets. The real issues are industry-specific threats to our customers (which means they are threats to us), requiring us to work together and invest in our collective futures—by ensuring theirs.

Four significant factors face the fabricating industry:

• A knowledge loss in the welding community,
• Increasing sophistication in procurement practices,
• Competing materials in manufacturing processes,
• Foreign labor competition.

Where Are the Welders of the Future?
Welding is a mature industry and is challenged to attract qualified individuals to the field. Trade, manufacturers and educational organizations are working hard to develop the next generation(s) of welders...today...but many of our welding craftsmen have retired. And with these retirements, much of the art of welding, its finesse, its importance and its knowledge have gone with them. The result is fewer skilled welders with a strong understanding and passion for welding fabrication.

Today's Buyer Is More Sophisticated
As end-user companies become more sophisticated, they often enter into buying groups and even provide bonuses for ever-smarter purchasing functions. They are also purchasing more and more on a global basis, sometimes via the Internet. When the purchasers get rewarded for getting the price down, they eliminate any loyalty or value-add that distributors and suppliers previously offered. Too often, distributors and suppliers go right along just to keep the business. In the long term, however, cutting your prices could mean cutting your throat.

It's Not Just Welding ... Now or Then
The influx of competing materials is an age-old problem. From the early 1910s through the 1920s, welding competed with riveting. Today it's concrete, plastics, adhesives, fasteners, and all other types of polymers and composites. There will always be alternatives to metals, and competitive materials will continue getting stronger and more affordable. To keep welding viable, it is imperative that our combined message is reinforced to support and promote the metal fabricating industry, particularly welding, as the optimal joining process. A process, I might add, that will keep using the materials we jointly supply.

Foreign Labor
Mexico, China, South America, the Pacific Rim, Eastern Europe and just about every region in this world are benefiting from the U.S. industrial shift. Cheap and readily available foreign labor continues to be the biggest issue our customers face. Labor, along with overhead, is their highest cost expenditure by far.

So when end-users see their costs escalate, they have few choices: They can go bankrupt, move out of the country, or import fabricated components. In each case, it means less business and less profit for distributors and suppliers. So what's the answer?

Opportunities
A recent AWS study, Welding-Related Expenditures, Investments and Productivity Measurement in the U.S. Manufacturing, Construction and Mining Industries made this observation: “Most firms have not studied, and have only a minimal understanding of, the economics associated with the use of welding-related processes.” The same study also found that “by far, labor represents the largest proportion of total welding expenditures.” That means opportunities exist to provide end-users with distributor-supplier solutions and increases in productivity with the right services.

Customers tell us to focus on productivity. They want distributors and suppliers to work together to find solutions for them, not just focus on the lowest materials and equipment cost measures. Repeat: They want us to focus on their productivity.

Distributors need to partner with suppliers to offer customers new technologies and solutions to solve productivity issues. These solutions are available and can be developed with end-user input and acceptance. The end result, in many cases, provides excellent pre-sold benefits to end-users and makes them stay with their distributors as satisfied customers.

That's why working together—providing service and solutions with new technologies, highly engineered and trained assistance, and on-site problem solving—are key components to beating the “how low will the price go” blues.

Here are some other practical ways suppliers and distributors can work together to solve customer problems:

• Guaranteed Cost Reduction programs — Suppliers offer actual productivity incentive programs which reduce welding costs and save companies significant dollars.
• Advances in power source and waveform control technologies — Distributors and suppliers can provide end-users with significant welding-related cost savings by applying specific software developments to achieve the best arc and most efficient weld to generate more quality products per day.
• Welding samples and on-site application engineer assistance — Distributors and supplier engineers can work hand-in-hand with on-site job analysis and actual hands-on project evaluation at an individual company.
• Overall project evaluation and combined productivity recommendations — Distributors can focus on gas costs, usages and leakage packaged with supplier reports on improved welding processes and engineered systems.

True, end-users have to attack their overhead and labor issues. But they look to their distributors and suppliers to provide support, knowledge and expert assistance. As Ben Franklin said, we can all hang separately and lose the new industrial war. Or, by teaming together, we can win the productivity war and continue to make our industry and country strong.