Art of sourcing steel

Manufacturing industry has seen manifold growth over the past decades; It might lack a bit of glamour and exuberance attached with the IT & service industries. Nevertheless, it is the backbone of any economy.

Steel Industry –  One of the major drivers of an economy along with other major manufacturing industries viz., cement, power, electricity, mining. Steel due to its versatility and vast usage, is a quintessential product  and forms one of the important raw material for many manufacturing companies. This makes sourcing of steel a critical and crucial role in an organisation.

Due to its  vast usage in many different applications, and innumerable grades and the kind of volatility steel market has been witnessing in the last few years, Steel sourcing can really give hard times for the purchaser, to surf for the list of producers and then zero in on the right supplier(s).  Most of the times, they get entangled by the technical stuff.

As a Steel marketer since the inception of my career, I have always been keenly watching, learning from my peers, competitors, colleagues, as how they handle different steel buyers, their approach to different situations, their persuasive skills, their timing to decide as when to lie low and hold their horses and when to stick on to their guns.

As equally, I have also watched many of the steel industry admired “purchasing managers”, as at times, I switch chairs across the table to be a steel buyer as well.

Steel Industry has matured and evolved in time. The very word “Allocation” from the steel mills is dreadful . In the past, many steel buyers would have to plead the steel mills to increase their allocation, lest their production would halt!

Thanks to the expansion and globalization of steel Industry, today the situation is other way round and we all are witnessing a “glut”, making the job of the buyer easier than in the past.

Given this stance, a steel buyer cannot be complacent as today, there would be many suppliers knocking the doors of buyers wanting to partner with them to service their steel needs.

When “Selling Steel” is an art, “Buying Steel” is definitely an art too, given the complexity in buying steel. It’s just not merely jotting the prices of series of suppliers in an XL sheet and selecting the lowest supplier by price, which even a school kid would do!

This prompted me to write about “Art of Sourcing Steel”.

Some of the vital roles of a steel buyer are,

  1. Finding the producers of the type of steel required
  2. Understanding/comparing the capabilities, strengths and weaknesses
  3. Analyzing the financial stability of the company and their long-term goals
  4. Selecting the right supplier(s) from the lot.
  5. Developing and maintaining mutually successful business relationship
  6. Rating and reviewing the performance of supplier from time to time
  7. Having a close-eye on new potential suppliers.

In any long-term oriented organization, some of these processes would be followed.

Of all this, I personally believe “Relationship” drives business more than anything else.  This can hold good for any product. Irrespective of price competitiveness and quality if product, if there is no mutual trust and mutual respect between the organisations and between people involved in business, any business relationship cannot last long.

Relationships at times many not yield benefits on a short-term, but it is one of the effective tools for a long-term benefit for a steel business. This would reduce development costs both sides ( cost of developing a source for buyer and a customer for seller).

For example, A steel supplier’s  behavior can be gauged as how they behave when there is excess demand/ short supply. Similarly, a steel buyer can be judged as how they align themselves when there is abundance in steel market coupled with modest demand.

If a steel buyer or seller does not tend to behave differently by not trying to make quick buck in these circumstances and stick on to their commitment, then we have a successful long term beneficial relationship.

Unfortunately, due to market compulsions, there are companies, that are opportunistic at times, and use the services of suppliers by sucking the supplier till their last blood, especially, when the supplier is in dire need of business. But this is so true vice-versa as well.  This can yield short term immediate benefit. But, this will  definitely not yield long-lasting results.

Associating with a new supplier for every new requirement, would not only increase the cost of sourcing ( as this has the element of risk involved), it also deprives the organisation of the opportunity to build-on a relationship with an existing source by imposing trust on them.

Today, suppliers are a company’s partners and are considered as equal to any other stake holders. It is those companies who quickly realize this, will stand to reap the benefits on a long-term.

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