Jergens Industrial Supply has always taken pride in the ability of its sales force to apply their technical skills to help customers solve machining problems.

“We tell the customer, ‘Give us your toughest problem and let’s see if we can solve that problem.’ By solving that problem, we gain credibility and an entryway to that customer,” says operations manager Duane Frager.

The family-owned industrial distributor of metal cutting, workholding, abrasives and tool and die products for manufacturers in northern Ohio took that same approach when it began to offer inventory management programs to customers about four years ago. Instead of focusing on machining problems, Jergens applies its expertise in solving inventory management problems.

Today, about 10 percent of the company’s $13 million in annual sales are from commodity management business, but Frager expects that amount to grow substantially in the next few years. In recognition of its commodity management program expertise, Jergens Industrial Supply received the 2007 American Eagle Value-Added Distributor Award from the Industrial Supply Association.

In order to receive the award, a company must demonstrate an ability to generate exceptional documented cost savings or productivity improvements for customers. ISA recognized Jergen’s program to manage perishable tooling using AutoCrib point-of-use dispensing systems.

“When we got into this business, we didn’t want to offer a me-too program. So we researched customers that were currently doing some type of vending machine program to find out what they liked and didn’t like and came up with our own program,” Frager says. As a result, sales manager Mark Pierson has a 100 percent close rate on his presentation of this program to Jergens customers.

Following are two examples of commodity management solutions designed by Jergens to help customers solve their toughest inventory management problems.

Improving inventory visibility
Long-time customer Industrial Nut Corp., Sandusky, Ohio, is a manufacturer of precision nuts and special machined parts for customers in the trucking, construction and agricultural industries. Industrial Nut approached Jergens in 2005 for help solving two related problems.

The first problem was tied to its growing inventory of cutting tools. The company maintained a centralized tool crib staffed by one full-time attendant. Since that employee couldn’t cover both work shifts, machine operators often checked out extra supplies, which they stored near their workstations so they wouldn’t run out of critical tooling. The excess inventory scattered throughout the shop artificially raised the company’s total perishable tooling spend.

“People had their own private stash of supplies. The crib attendant didn’t realize what was on the floor,” says Frager.

The second problem was that a veteran procurement specialist was soon to retire, taking with him years of knowledge and experience. Industrial Nut needed to devise a new procurement process.

JIS worked with Industrial Nut Corp. to install AutoCrib’s RoboCrib 1000 tool dispensing system. The carousel style dispenser provides access to more than 1,000 items through one of 15 automated doors in less than 10 seconds. By placing the RoboCrib unit closer to machining stations, JIS shortened the time required to check out supplies. Industrial Nut estimated that it used to take employees 10 minutes to make a round trip visit to the tool crib. Now, it takes them two minutes.

Perhaps more impressive was the amount of money saved by eliminating the excess inventory held in mini-tool cribs at employee workstations. Industrial Nut increased production in 2006 to keep up with historic sales, but reduced its spending on perishable tooling by 21 percent.

The company also reassigned the former tool crib attendant to a manufacturing job; slashed the number of purchase orders required from 240 a year to 12 monthly P.O.s; and lowered inventory carrying costs by 24 percent because Industrial Nut isn’t invoiced for items until they’ve been dispensed from the vending machine. (Click here to read a report summarizing the impact that Jergens Industrial Supply made at Industrial Nut Corp.)

Tracking tooling costs
Cleveland Track, a manufacturer of railway track and components, wanted to accurately assign costs to specific jobs, departments and employees. With no system in place to track tool usage, management had difficulty reviewing employee performance.

Lack of inventory visibility is a major problem at many manufacturing facilities. Managers often know how many perishable tools the facility consumes but don’t know where it’s being used. “They don’t know who is using what on third shift. Or they don’t know that Joe is using twice as many drills as Pete. They just see a total number being used. Maybe Joe is using twice as many because Joe needs some training,” says Frager.

In addition, Cleveland Track suspected that it had excess inventory on the plant floor. Often, when tooling manufacturers introduce new products or improved technology, machine operators order the new tools before using up all of their existing supplies.

After installing AutoCrib automated vending machines on the shop floor, Jergens instituted an “amnesty day,” to encourage employees to return inventory from their workstations for loading into the RoboCrib unit. Jergens discovered that Cleveland Track had more than $400,000 in available inventory scattered throughout the shop.

“Cleveland Track had a lot of excess inventory,” says commodity management supervisor Janet Stenger, who heads up a six-person staff of commodity management specialists. “The AutoCrib software allows us to use up the old product first before switching over to the new product.”

The software also makes it easy to assign product substitutions when appropriate. For example, if an employee wants to check out a new end mill that is temporarily out of stock, the system will know when it’s appropriate to substitute a reground tool until the original item is replenished.

Since implementing the commodity management program, Jergens helped Cleveland Track reduce its spending on perishable cutting tools by 33 percent. (Click here to read a report summarizing how Jergens Industrial Supply helped Cleveland Track reduce its tooling costs.)

Solutions for hire
Frager and Stenger hope that winning the 2007 American Eagle Value-Added Distributor Award from the Industrial Supply Association will help Jergens achieve more success with customers and prospects.

“One of the benefits of doing business with us is that it enables customers to continue their relationship with our technical salespeople, but also use our commodity management team as an additional point of contact,” says Stenger.

This article was prepared exclusively for ValueAddedPartners.org. Copyright 2007.

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