Value-Added Partners

Carbide Tool Services and Sterling Supply Company demonstrate channel partnership by developing a tool repair program to help Toyota lower costs.

The Toyota Production System is perhaps the world’s most famous manufacturing concept. It spawned methods such as just-in-time inventory, cellular manufacturing and lean manufacturing that revolutionized the way companies around the world build their products.

A centerpiece of the Toyota Production System is the concept of continuous improvement, or kaizen. Toyota encourages every team member to participate in kaizen events and empowers them with the ability to improve their work environment. Similarly, in order to be a Toyota supplier, manufacturers and distributors must also embrace the concept of continuous improvement. Even small suppliers have a role to play when it comes to suggesting new processes that can help Toyota lower costs or become more efficient.

Carbide Tool Services (CTS) of Anoka, Minn., and Sterling Supply Company of Huntington, W. Va., partnered to develop an innovative cutting tool repair program for Toyota Motor Manufacturing West Virginia, which manufactures engines and automatic transmissions for Toyota automobiles. The program saved Toyota more than $70,000 in new tooling costs in 2004 and projected savings of $200,000 for 2005. The effort demonstrates how small companies (each company has annual sales of $10 million or less) can be valued suppliers to multi-national corporations.

In recognition of their efforts, CTS and Sterling earned the inaugural American Eagle Value-Added Partner Award from the Industrial Supply Association at ISCON 2005. The award was created to recognize the efforts of a manufacturer and distributor working together to add value to their end-user customers. In order to win the award, applicants were required to demonstrate exceptional documented cost savings or productivity improvements based on a single event or an annual program conducted with a channel partner.

Repair instead of replace
The Toyota facility in Buffalo, W. Va., employs more than 900 people, occupies 1.2 million square feet on 30 acres and produced more than 450,000 engines and nearly 390,000 automatic transmissions in 2004. Because the company consumes more than $1 million in cutting tools annually, plant management was eager to learn more about a program to repair tools when possible instead of purchasing new.

Some metalworking tools used in the plant are custom-made and shipped from Asia or other parts of the globe. Replacing them is costly and requires additional time because of shipping considerations.

Under the program developed by Sterling Supply and CTS, once a week, a Sterling employee picks up damaged tooling from 10 collection bins located throughout Toyota’s facility and ships them to Carbide Tool for evaluation and repair. CTS repairs the items and ships them back to West Virginia so Sterling onsite personnel can scan the tools and return them to the customer’s tool crib or production line. Sterling bills transactions electronically, eliminating time-consuming paperwork. CTS developed Cost Savings Reports to track and report savings to Toyota quarterly.

“It’s worked very well for Toyota because they don’t have the personnel to do this,” says John Zitter, president of Sterling Supply. “They’re very lean and they rely on us to pick up tools on the production line, send them out of the plant, process all of the paperwork and then return them to the shelf at the plant.”

Emphasis on quality
CTS president Julie Reiling says customers typically realize savings of 25 to 70 percent by repairing tools instead of replacing them. The company specializes in indexable and rotating tool repair programs. An ISO 9001:2000 certified company, CTS offers a wide variety of repair, regrind and special manufacturing services on any OEM brand of end mills, face mills, drills and lathe tools, and for rotating tools such as tap adapters, tap holders and tap chucks.

“Our main objective as a company is to provide our distributors and their end-user customers with unique cost savings programs specific to their individual accounts. We achieve that objective by utilizing our documented Cost Savings Reporting tool,” says Reiling.

Sterling presents the Cost Savings Reporting tool to Toyota on a quarterly and annual basis. It summarizes the actual repair costs, Toyota’s part numbers and purchase order numbers and each tool’s estimated replacement cost.

“By providing ongoing documented cost savings such as this program to our customer base, we continue to position Sterling as a valued supplier to our customers. This program allows us to show savings year after year,” says Reiling.

Sterling ships tools to CTS in lots of 10 to 30 tools. Each tool is tagged to identify the tool number, release number and which Toyota engineer or line requested the repair. The tags enable Sterling to return each tool to the proper location after repairs are completed. When CTS receives the tools, it matches them to its library of master inserts and drawings provided by Toyota.

“We developed a program where we store their prints electronically and we hold a library of their master inserts, which makes things much more efficient,” says Reiling.

CTS repairs the tools to Toyota’s specifications and documents the required inspection results. The normal turnaround time for completing repairs is four weeks, but CTS can ship same-day in an emergency.

“Toyota knows they can count on us to take care of the things we say we’re going to take care of. When they give us a piece of business like this, they know it’s going to get done,” says Zitter.

Reiling says the tool repair program grows larger each year, as Toyota realizes the cost savings potential the partnership between the three companies provides.

“Building a relationship with a distributor and manufacturer that could provide top-quality repaired tooling was a huge issue,” says Reiling.  “All three parties are committed to staying focused on continuous improvement.”

Zitter says repairing tools that his company doesn’t normally stock generated new business for Sterling Supply and offers a competitive advantage that catalog houses don’t typically provide.

“This is something distributors need to look at. If they’re not doing a repair program, this is a fabulous tool to be able to go to a customer and say, ‘Don’t buy a new cutter, let us fix it for you at half the cost.’ This is something the customer could not get from another distribution channel,” says Zitter.

Reiling adds that the repair program is an example of true channel partnership.

“Our two companies share a vision when it comes to delivering products and services to the customer. We’re on the same page. That is very important. Our commitment to provide top-quality service makes it an example of true cooperation between channel partners,” says Reiling.

This article was prepared exclusively for ValueAddedPartners.org, Copyright 2005.

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