In my younger, more vulnerable years, I asked my mentor why he chose to stay in the steel service center business for most of his career. His response was jarring. He said, “I chose to stay in the business because it is so fundamentally basic.”
Initially, I was disturbed. I thought to myself, “Isn’t basic boring? Wouldn’t you want to do something because it is exciting or because it could change the world? Why would I want to devote my entire career to something that is basic?”
Nonetheless, he elaborated, and I listened. Since then, I have been continuously captivated with the thrilling ride that we call the metal service center industry.
My mentor said that to know where you are going, you must know where you are and how you got there. It is implicit that if we are in this business, then we must meet the basic requirements to exist in the business. This includes all the standard promises: low price, high quality, in stock and on time.
Don’t forget what we are. We are a steel service center in the competitive space between producing mills and original equipment manufacturers. We came into existence because vertical integration was inefficient in the industry.
Neither mills nor OEMs have the desire to deal with the inventory burdens, the property, plant and equipment investments, and the day-to-day operating requirements necessary to deliver the basics. We are the burden carriers, shouldering the inefficiency of the supply chain, all the while being perceived as a commodity.
However, now that we know who we are, we can figure out who we want to be.
Therefore, we decided we wanted to “de-commoditize.” My mentor mentioned one of Warren Buffet’s quintessential quotes: “Price is what you pay; value is what you get.” For 20 years, we’ve been entirely committed to the notion of value creation in the metals service center space.
Practically, we understood we weren’t swimming in a vast ocean or even in a great lake, but rather, in an exceptionally large pond where we were a VERY SMALL fish. Where do we start? Keep it simple.
This brings to mind another Buffet quote: “It is not necessary to do extraordinary things to get extraordinary results.”
We didn’t do anything crazy. We didn’t go on a buying spree, sell something we couldn’t deliver or even worry about perception. We didn’t try to wheel and deal and profit on market fluctuations.
We decided to focus on the simplest concept of them all. Something that, when you think about it, is at the natural core of what defines a successful service center (or so we thought at the time, and as of late, have received some level of vindication). We chose to focus on being the best we could possibly be at managing a customer’s part, an SKU: from receiving the initial customer RFQ all the way to the customer, ultimately producing a finished product.
Was it revolutionary? No. Was it extraordinary? We thought not. Conceptually, this is basic. However, the farther we got into the details, the deeper we dove into the process and system requirements. After countless hours were spent developing a rudimentary understanding of the hundreds of steps involved to be a true end-to-end service provider, we realized we stumbled on something that could deliver extraordinary results.
We kept treading against the current, relentlessly trying to become a bigger fish. We continuously pursued the idea of being the best at managing an individual part number. What followed was a long road of development, design and learning.
To manage a part, we have to know the part. We need to know all the specifications and have a system and process in place to gather this information. We need to know what the customer does with the part and what it will be in its final form. We need to know all the costs associated with processing and servicing the part and understand the connections between all the variables.
The days of estimating these figures are long gone, the market demands more. The market expects transparency. Today, they may use this transparency for negotiation, but we believe they will ultimately use it to collaborate and drive out inefficiencies. This can only happen if we get back to the basics and truly understand our costs.
How long can the industry afford to estimate costs, hoping they don’t give back too much of their already compressed margins? The smallest change in a part specification can have incredible cost implications that reverberate throughout the supply chain. When looking at a single part, this seems like a reasonably straightforward process. However, across thousands of customer part numbers, all with their own set of requirements, there are millions of variables to consider.
What does all this mean? In summary, Jemison believes that our focus on the fundamental concepts that determine what a successful service center is has helped us create something timeless.
Obviously, times have changed. We have seen every market cycle possible: the booms, the busts and now an interesting era of uncertainty. Technology has advanced at an extraordinary pace, from rudimentary ERP systems and spreadsheet management to complex technologies such as Blockchain, IoT and Machine Learning. Advancements at OEMs and producing mills are leading to better manufactured goods for customers. Competitors, suppliers and customers are in a constant flux due to integration, fragmentation, globalization, and consolidation.
We have no idea what the future holds. What we do know is that what we have discovered is adaptable to anything the industry throws our way. We can say with a high degree of certainty that in the next several years, nothing will be the same.
With that same level of confidence, I can also say that we will be here, focusing on the basics and endlessly pursuing a system that guarantees optimal delivery of every single SKU we manage. Craig Mathiason is president and COO of Jemison Metals, Birmingham, Ala. He has been with North America’s 44th-largest service center company for 20 years.