Service, availability and risk reduction are a few of the things large stockists bring to the metals supply chain.
Master distributors are, in essence, the distributor’s distributor. However, some companies are exclusively masters, while for some it’s just a small part of their business.
There are different perspectives as to the master distributor’s role in the supply chain. John Hellenhausen, vice president, U.S. Corporate Headquarters, Ta Chen, Long Beach Calif., says, “We serve our role in the supply chain as part of the risk management system. It’s really not only the service centers that we serve, which is the majority weight of that, but it’s also on the producer and mill side. It’s basically to mitigate risk and that’s relative to inventory investment.”
Kent Benson, vice president of sales operations, AA Metals, Inc., Orlando, Fla., says the master distributor really provides one thing – service. When it comes to the supply chain, managing the flow of products, vetting and managing supplier relationships, managing the supply chain door to door means a seamless process to customers. “They put an order in and they don’t have to worry. It allows the customer to operate with less inventory. The master distributor provides just-in-time services, strategically located facilities for order fulfillment and allows them to order smaller orders rather than fulfilling large mill orders.”
“From our vantage point, we kind of look at the master distributor’s role as being bifurcated into two separate responsibilities. The first one is minimizing our customers’ inventory risk and the second is broadening our customers’ product portfolios,” says Justin Rattner, president, Dover Tubular Alloys, Dover, N.J.
In addition, Rattner says: The product extension portion of the master’s role is often overlooked. “We look at ourselves as an extension of our customer’s business. We’re providing them with immediate in-stock items that may be outside of their core competency or primary product portfolios. This provides them with a more complete product offering that they can market to their own customer base.”
There are many responsibilities of a master distributor. Drew Gross, president/partner, Alliance Steel, Gary, Ind. says their key focus is to make sure their customers are lean when they need to be lean and robust in inventory when they need to be. “When they need to have good, strong inventory, we can stay fairly consistent. It provides that smaller service center the opportunity to leverage our ability to buy and process at a higher level.”
Rattner adds from his vantage point, the role of the master distributor is to act almost like an “invisible hand” in the market. “We are designed to be behind the scenes or backstage helping our distributors to support their customers. Our job is to make our customers look great while taking zero of the credit. We get none of the glory that comes along with a great transaction but we do get the trust and the relationship equity that is built through continuous success. We’re here to facilitate our customer’s success and to quietly live in the background without taking credit.”
Master distributors really exist, says Benson, solely to provide value to the supply chain, carrying a wide variety of inventory that’s readily available for shipment. “Master distributors continue to thrive providing a winning combination of both needed inventory and high levels of customer service. The quality relationships that we build with our suppliers to provide a quality product into the market is very important.”
Hellenhausen says the easy answer is inventory and they are a stockist and that is their key role. With that inventory, the idea is to build as much value with that and around it as possible. “Obviously quality comes to the top, to be competitive so that the value gets carried through to our customers and then ultimately their customers.”
At the moment, demand is relatively soft throughout the chain. Gross is hoping for the post-election boom, but he doesn’t see anything major happening until probably Q2 to halfway through next year. “The way I describe the market is we’re in a hangover from a really good party because the last three years or four years have been really robust for the steel industry and manufacturing. You can’t operate at that level without there being some hanging over particularly in a rising interest rate sort of environment.”
Demand for Dover has been strong, but tempered, says Rattner. “The general temperament that I hear is demand is good, not great and the big theme that you always see coming into these election years is there are major projects on the sideline. The typical mantra from the customers is that we can’t pull the trigger until we have visibility over the election outcomes and there’s some truth in that. But it’s also the most convenient excuse in the industry.”
Mike Barnett, president, Grand Steel Product, Wixom, Mich., agrees that demand is decent at best. They’ve seen a muted level of demand over the past three to six months that has sustained at that level. They are hopeful that some changes in the near future will spur a little bit of additional demand.
Furthermore, there are key perks to buyers of working with a master distributor. Jeremiah Shaw, Jr., vice president of sales and administration, Benedict Miller, LLC, Lebanon, N.J., says the benefits they introduce in managing the quality for their customers might actually be the most important aspect of their role in the supply chain. Their relationships with the mills ensure they know exactly what quality levels the industry demands. “For those customers who aren’t well versed in the specifications, it can be an intimidating experience to buy directly from the mill. Until you’ve bought this material for generations, it is impossible to predict what details cannot be assumed. We know the quality, expectations and details like nobody else in the industry for these specific products and thus ensure an experience that allows our customers to act quickly with confidence when they can buy from us.”
One of the major benefits is you can theoretically get information on material quickly because you’re dealing with the source many times or somebody whose job it is to sell that inventory on a consistent basis. “Depending on what master distributor you’re working with, most have more information about this deal than you would typically get and more cooperation than you would typically get from a big steel mill who likes to sell things in big chunks,” Barnett states.
Benson says there are several factors that go into this. Being the importer of record is very beneficial to its customers. “We absorb all the risk, we protect against the liabilities, issues that may arise from regulations, we have protective issues, resolutions, streamline processes. We have the buying power based on volume pricing which we could pass along to the customers. Not only that but we also own our manufacturing facilities so we’re different from a lot of master distributors.”
According to Gross, Alliance knows if it is satisfying customers when it gets the next order. It is a customer-centered business. “All of our tools have been developed around customer service and that has largely been developed with our customers, so we have a high level of communication. We have a customer service group that is constantly communicating with our customers and we’re always evolving and trying to push our customer service level higher.”
“We use a variety of strategies, but in this business we take great pride in doing what we say we will do. And when we can’t, we communicate,” states Shaw. “I must admit the most effective tool is as simple as picking up the phone. We have our team here answering every call from the shop with eyes on the operation. It’s not as common these days to be able to call someone who can run down to the shop and check on your order in real time. It’s that simple.”
“When we think about customer satisfaction, it really comes down to four words and it’s just ‘do the right thing,’ says Rattner. “From our perspective, things will always go wrong; we’re going to make mistakes and our customers are also going to make mistakes. It’s how you address those situations and how you resolve them that lead to better customer satisfaction and better long-term relationships.”
Benson adds his company is big on relationship building. “We don’t have a large customer service department, so our account managers basically manage that account all the way through. With everything we have going on now with texting and emails, we found that it’s very important to get close to the customer, face-to-face, finding out exactly what their needs and expectations are.”
“We conduct customer service surveys regularly and we analyze the data we receive from them immediately so that helps us to address the customers’ concerns. Our goal is to set us as their go-to-suppliers so that when they have product needs, the first go-to is us and our service,” notes Ying Jiang, vice president of personnel and public relations, AA Metals, Inc., Orlando, Fla.
Subsequently, master distributors need to manage their relationships with both manufacturers and customers. Barnett says one thing his company does is have an online social media presence, which is a great way to keep in touch with the customer base, potential customers and anybody else looking. The inside sales team does a fantastic job of managing their manufacturing base or end user base, he says. “We like to think of ourselves as the easy button and sometimes it takes a while to get there but as we grow with different end users and manufacturers and customers, we develop a cadence, know-how and experience that allows us to sustain the relationship, grow the relationship and really it’s a trust factor that’s one of the most important things.”
On the other hand, Rattner states that he thinks of his business relationships like a marriage. If you want to have a long, enduring marriage, it requires one thing: compromise. “There’s going to be times where we need to give and there’s going to be times where we need to take and that has to stay in balance throughout the whole relationship. For us, it’s about never taking too much, never giving too much but creating a relationship where there is long-term reciprocation.”
In a like manner, Gross says Alliance at its core is a relationship company. “There’s a trust that happens between the customer and the vendor that’s a given. The magic happens when we know your needs not because we’re being a good vendor but because we’re being a good steward of the relationship.”
Benson agrees. “Relationships, quality, service, price are the key factors with both customers and suppliers. We’ve got a great team on board that stays close with our vendors. It’s the same with the customers again getting face-to-face with them and understanding what their needs are and what their expectations are moving forward.”
Technological advancements are constantly occurring, including in the distribution space. Rattner says technology is revolutionizing everything. “The word we all like to use is AI because it’s sexy, but the truth is the real power is in automation overall. We spent the better part of the past three years automating every business process we can possibly find. Wherever we see inefficiency, we analyze it, we process map it and we identify how to automate it. Automating technology really helps you get some great outcomes and it’s a great return on investment.”
AA Metals has electronic data interchange capabilities with its customers and vendors. It also added an online portal this year which allows customers to view inventory, purchase products and pull their own documentation.
As a result, Jiang says they have seen a significant increase in customers utilizing the online portal as all paperwork is at their fingertips 24/7. “We don’t have to worry about time differences and response time from sales account managers. The ecommerce portal is very efficient to help us and our customers get what they need exactly at the time they need it,” she said.
Barnett says from the logistics side, Grand uses tracking on trucks so it can be in real time with those assets from an inventory standpoint. “We’ve seen quality-control measures that have been better than we’ve ever seen before and I think there’s a lot of information in the data that we have in our inventory. We use that to assist us in making intelligent purchases of stock or stocking purposes so not buying directly for any particular customer but just having inventory in our warehouses to supply our customer base whether it be a service center or an end user.”
In reference to the next few months and upcoming year, the outlook varies modestly. Hellenhausen says Ta Chen is not expecting much through the rest of 2024. “Service centers will basically minimize inventory levels toward the end of the year to prepare balance sheets for the market, basically ready themselves to begin a big first quarter. The outlook for 2025 is a small bounce back from 2024; not huge by any means but in a positive direction.”
“I don’t think it’s going to be anything substantial but I think the level of uncertainty in the marketplace is rather high right now. I think at this moment we are looking to more of a plus side than a downside in the near future but I think to see anything significant, we’re most likely looking into the first quarter of 2025,” Barnett says.
On a seasonally adjusted basis, Rattner says he expects demand to remain flat through the end of year and doesn’t see any catalysts that are going to shoot it up. “If I forecast out further to next year, there’s election optimism. Everybody’s sitting here thinking 2025 could be a barn burner and that we could all be setting new records. But, at the same time, over the past few years I also feel like we’re always on the edge of an economic explosion so it’s a very challenging time as a business leader to try to predict outcomes because the outcomes are highly polarized.”
With all this in perspective, what does the future look like for master distributors? Gross says there will always be a place in the chain for a master distributor. It’s safe and probably growing.
Benson says the need for masters distributors will continue as companies look to more just-in-time to reduce their inventory costs. It’s important that they have strategically located facilities and high-volume areas to supply in a speed-to-market type of environment. It boils down to one key factor: service. “Those companies like us that provide the service will continue to thrive and we add value to our customers so really providing service and value to our customers is where the bottom line is for master distributors. The buying power of flexible payment terms that a master group distributor provides is a better way for customers to manage their cash flow and that’ll continue.”
“I think there will always be a place for master distributors. I think with the idea that a mill or a producer wants to use their capital in other forms than readied inventory and service centers want to focus on a proper inventory turnover, there’s a space there in the middle and that middle space is served well by master distributors. I think that there’s a healthy place as long as those functions are performed, certainly in respect of both supplier and customer,” concludes Hellenhausen.
Caption:
Removing customer risk is a key element of master distribution.
(Photo courtesy Ta Chen)