The pruned metal fabrication supply base

Natural disasters turn people’s thoughts toward risk. Last year, between floods and tornados and other Weather Channel fodder, I visited several fabricators told me about their customers’ concerns about mitigating supply chain risk. For years, large OEMs have pruned their supply chains to the nth degree, giving more business to fabricators who perform well, order after order. Fabricators who don’t perform are pruned.

Then came last year’s floods and tornadoes. This year, some are worried about an economic slowdown, and some sectors have more to worry about than others. As the American Wind Energy Association reports, unless Congress renews a production tax credit for 2013, makers of wind tower components may need to shed 10,000 jobs due to an anticipated slowdown in orders. Vic Abate of General Electric’s renewable energy business told Bloomberg he expects to dramatically reduce the number of parts suppliers. As Bloomberg reported, “The company might have as many as 10 suppliers for certain components now a figure that may dwindle to just three once he is finished pruning.”

Ouch.



Supply-base pruning seems to be an ever-present challenge in this industry.  Consider what Mike Jacobs said at The FABRICATOR’s Leadership Summit in early March. The vice president of strategic sourcing, operations, and engineering services at Rockwell Automation in Milwaukee, carried that supply-base pruning theme throughout his presentation.

“We have performance and on-time delivery expectations,” but engineering and technical assistance is playing a greater role, Jacobs said. Globally, Rockwell has more than 5,000 suppliers. “We are aggressively reducing that number. We think it’s in our best interest to work with a much smaller group of high-performance suppliers.”

Jacobs added that the company ensures those high-performance suppliers not only delivery good products quickly, but they also have plans in place for emergencies.

What would those plans be? Fabricators have told me they’re looking into strategic partnerships with competitors. If a tornado or hurricane brings a shop to a halt, managers may call on other shops dozens or even hundreds of miles away, to ensure products keep flowing.

But what about propriety production methods, like a special fixture? As sources have told me, such sharing may just have to be the price a shop pays to ensure continuity. Revealing a few trade secrets isn't easy, but holding up production at a large OEM may cost the company more in the long run. Bad reputations don’t go away easily.

The ultimate solution might be a single-location fabricator that grows regionally, perhaps with several small satellite plants that have similar fabrication technologies. Such machine-tool redundancy may be costly at first, but it may be a small price to pay, and the extra capacity certainly can’t hurt a shop’s response time. Besides, being pruned by a major customer would be far worse.