Cut and dry

Houston-based chemical manufacturer Ashburn Industries won 2002 Value-Added Partner of the Year honorable mention honors for cutting thousands of dollars in costs and improving productivity for customers. 

by Paul Markgraff

Adding value for both distributors and end-users is a two-sided coin. Houston-based chemical manufacturer Ashburn Industries Inc. must satisfy distributors on one side and service the end-user on the other for value-adding programs to function properly. These two sides are never the same.

Distributor salespeople cannot sell chemical products the way they sell other commodities. Coolants involve environmental and safety concerns, storage and delivery problems, and hazardous materials training.

“Distributors want an easy sale; their job is to distribute product,” says Ashburn president Steven Madden. “This is not an easy sale. This is a difficult sale. What we’ve done is make a difficult sale easier.”

End-users don’t often know they can cut costs and boost productivity by changing their coolant and fluid maintenance practices. Ashburn’s job is to demonstrate that cost savings and efficiency increases can happen with the proper products and practices in place.

“Very few users take care of their coolant properly," says Madden. “The normal culture is to ignore their metalworking fluids on a day-to-day basis.”

Working closely with distributors and end-users, Ashburn and its sister company, Fluid Service Technologies (FST), are taking a bold step in metalworking fluid production, maintenance and service. Ashburn’s cradle-to-grave philosophy squeezes costs from the supply chain and helps metalworking companies achieve the next level of efficiency and productivity.

Just ask
While Madden heads Ashburn and FST, his father and grandfather worked in distribution. In fact, his father, John Madden, was president of the Southern Industrial Distribution Association in 1978. This, Madden believes, helps him understand that distributors want to increase their margins and turns and reduce slow moving inventory. Ashburn is consistently in the top 10 lines of its distributors' margin contribution.

Madden uses this understanding to bring value to distributors. Ashburn tries to learn about each distributor’s priorities and objectives. Every year, Ashburn sits down with each distributor and jointly fills out a 22-question survey that rates different aspects of Ashburn’s performance and service levels.

For example, the survey asks the distributor to rate the importance of:
• fast inventory turnover;
• Ashburn’s return policy;
• involvement with the end-user;
• integrated supply process;
• decision-making;
• turnaround time;
• delivery performance; and 
• Return on investment (ROI)

The survey measures and ranks the intangible qualities Ashburn brings to the table. It allows the company to get a sense of the priorities of different distributors, which makes for more successful working relationships. Click here to see an example of the survey.

In return for this sensible approach to helping distributors, Ashburn requires them to ask prospects tough questions, such as whether they are operating at their most efficient and productive levels, or what Ashburn calls its “Optimal Operating Cost.”

By asking tough questions, Ashburn and the distributor get a feel for whether the end-user may be a qualified prospect for the key element of Ashburn’s value-adding services: chemical, fluid maintenance, and total fluid management.

“What we really need out of the distributor is to identify prospects, qualify the leads and generate interest by asking tough questions,” says Madden. “After the lead is qualified and generated, it is Ashburn/Fluid Service Technologies’ time to do its job.”

Three’s company
Ashburn created FST to maintain various programs taking place within different end-users. FST has its own management structure but shares goals similar to its parent company: Create an environment within the end-user’s facility that operates at optimum efficiency with the lowest costs possible.

Once a distributor and Ashburn identify an opportunity, they must complete a four-step process. First, the distributor and Ashburn qualify the prospect, make sure there is a distinct interest, and contact the appropriate parties for an introductory meeting.

Second, the distributor salesperson, the FST representative and the end-user contact perform a survey of the site. It requires specific answers to questions to determine if all three parties can work together and find out if there is interest in continuing the program. Click here to see an example of the audit.

Step three is an in-depth site audit. This comprehensive audit evaluates tangible costs, including coolant consumption, labor and maintenance costs, equipment costs, and waste costs. The audit also measures intangible costs, including machine downtime, health and liability costs, procurement, productivity, and other difficult-to-quantify costs.

For the fourth and final step, Ashburn and its distributor present their findings to the end-user, recommended solutions, a cost analysis and proposal complete with a written cost savings guarantee.

Ashburn prefers to present the proposal to all involved managers from departments such as maintenance; production; environmental, health and safety; engineering; purchasing; and plant management.

“That is a huge value because we are going into a facility, evaluating the existing program and saying, ‘Here is what you are doing right. Here is what you are doing wrong. Here is what it costs you today. And, here is what it will cost you tomorrow,” says Madden.

Ashburn charts the end-user’s tangible costs today, and what the end-user’s tangible costs will look like down the line, if it follows Ashburn’s recommendations.

“We have never gone into a manufacturing facility and not found process improvements,” says Madden. “Our guarantee is that depending on the size of the shop, we can save them a minimum of 15 percent of their total costs while dramatically improving their efficiency and operating environment. That’s a pretty bold statement.”

For example, FST went into a medium-sized manufacturer of light and heavy equipment and laid out costs under their current system. Using Ashburn’s coolant, the manufacturer would save $2,469 per month. And, though labor costs would remain the same, FST would save the customer an additional $1,560 per month attributed to waste. In all, using the Ashburn/FST system, the manufacturer would save $4,029 per month or $48,348 per year. Click here to see an example of the documentation.

Add it up
Madden believes the process of adding value goes to the heart of an issue facing all manufacturers: Jobs are leaving the U.S. for other countries. He says that in order to minimize sending jobs abroad, America must become more productive. Adding value to the distributor’s and end-user’s bottom line is one way to do that, he says.

Madden also believes that distributors and end-users are thirsting for value-added services relating to chemicals. He says maintaining chemicals is detailed, monotonous and requires education and training, which leaves it outside of the core competency for most companies.

This article was prepared exclusively for ValueAddedPartners.org. Copyright 2003.

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