SUMMER 2019

10 THE DISTRIBUTOR’S

10 THE DISTRIBUTOR’S LINK Laurence Claus Laurence Claus is the President of NNi Training and Consulting, Inc. He has 25 years of experience with a medium sized automotive fastener manufacturer, holding positions including Vice President of Engineering, General Manager, Director of Quality, Director of New Business Development and Applications Engineer. In 2012 he formed NNi offering technical and business training courses as well as technical consulting, expert witness and consultation work. He can be reached at 847-867-7363 or by email: Lclaus@NNiTraining.com. You can learn more about NNi at www.NNiTraining.com. WHY PARTS COST SO MUCH - COST DRIVERS IN THREADED FASTENERS I can’t tell you the number of times that I have been sitting across the desk of a potential buyer and have them incredulously ask me why this fastener costs so much. In their terms, “it’s only a screw” or “it’s only a bolt”. The implication is that the item is a simple, noncritical, commodity object. Most everyone on the outside of this industry would take a similar approach, failing to give any appreciation for the complexity, engineering, or performance requirements needed from even the most basic of threaded fasteners. When I first started out on my own, one of my first engagements was with a distributor that needed some application engineering assistance. This individual had recently executed a multiple year agreement with one of their customers to provide complete Vendor Managed Inventory services of one of their plant’s needs. The agreement called for my client to reduce prices every year. In fact, it was a significant percentage reduction every year over about five years. Their customer, however, had provided a provision that stipulated they could receive “credits” for any bona fide cost savings ideas they could propose. Having no experienced application engineering support on staff, he turned to me for help. I agreed to this project but fretted over it for the several weeks prior to its beginning. In particular, I thought, “what if I don’t find any cost savings ideas?” This was misplaced anxiety, though. After conducting a walking investigative tour of my client’s customer’s facility, I found many opportunities for potential cost savings. In fact, I wouldn’t be surprised if there wasn’t several hundred thousand dollars’ worth of potential savings. TECHNICAL ARTICLE Although I had spent a good deal of my career working directly with customers on new business development projects, this was still an eye opening experience and one that has, ever since, forged a passion to tackle this topic of finding value and cost savings in fastener products. Thus, I will begin a three part series where we look at different aspects of the value engineering equation. The remainder of this article will focus on cost drivers in threaded fasteners. Before anyone can effectively provide value engineering services or tackle a cost savings program, they must first be acquainted and comfortable with what drives the costs of fasteners. Following this segment, the next one will look at “Value Engineering on Existing Parts” and the third and final installment “Value Engineering on New Parts”. Although segments two and three share a lot of things in common, there are some differences in the approach and nuances one takes to address business already won versus that yet to be won. The topic of what drives the cost of a threaded fastener can be a complicated one, as there are many factors that must be combined, understood, and included to answer this question. Many of these boil down to detailed specifics and minutiae. In this article, it is my intent to try to keep this at a high level, but still provide sufficient information to have you asking questions and looking at parts in a new way. It is my hope that after reading this article, if you have ever been caught off guard by a purchasing agent inquiring why your part costs so much, you will be better prepared and equipped to give a good answer. CONTINUED ON PAGE 124