Understanding
the Effectiveness
of Supply Chain
By Chris White, Chatham Steel
Corporation.
Chris White
Chris White has been an executive in
the metal service center industry for 35
years holding senior
leadership positions
with several
leading national
organizations. He
attended Lewis
University where
he earned an
undergraduate
degree in Business
and his MBA.
White is currently
the Director of
Energy Products
and Services for
Chatham Steel
Corporation, a subsidiary of Reliance
Steel and Aluminum Company.
Over the years an entire industry has
grown around the discovery of what makes
an effective Supply Chain. Purchasing
Managers are challenged to improve the
quality of product they purchase, improve
lead-times while reducing costs year
in and year out. Chatham Steel, a metal
service center that has been in business
since 1915, has taken many of the same
Supply Chain principles that have been
part of the Service Center Industry
culture for decades and applied them to
the Nuclear Energy Industry. Here are a
few helpful hints for today’s Purchasing
Manager to consider while juggling the
daily activities and objectives that they
are responsible for overseeing.
Supply Chain
Management is based
on two primary principles. The first
principle is that almost every product
that a customer
could
purchase
involves a number
of suppliers before
the product arrives
and is available for
use. The second
principle is that
most
companies
focus on their own
internal
activities
and spend little time
on the activities of
the entire supply
chain. This narrow
focus can result in
unreliable deliveries, increased costs,
and less than accurate or incomplete
information. This is unfortunate, because,
how well a company manages and
understands their entire supply chain can
lead directly to lower cost and improved
service levels, without sacrificing quality
requirements. Simply beginning by
focusing on sourcing and logistics can
make for substantial improvement.
Sourcing
: The value that many
NQA-1 suppliers have traditionally pro-
vided to the nuclear industry revolved
around commercial grade dedication
or upgrade certification of materials to
ASME Section III requirements. Mate-
rials supplied often required long lead-
times and, although expedited service
was available, there was frequently a
significant premium associated for that
service. The traditional material supply
chain for the nuclear industry often re-
veals a 5 step process:
• Producing Mill
• Metal Service Center Source
• NQA-1 Supplier
• Carrier
• NQA-1 Customer
The core reason for long lead-times
and inflated cost can be traced to how
many “middle men” are involved to
get the product in the hands of the end
user. The increased cost comes from
the “extra” number of markups that are
added each time an additional supplier is
involved. The process was not as “Lean”
or efficient due to the additional links in
the supply chain. In addition, it is often
found that information flow may suffer
due to more “links” in the chain, and
the increased communication needed
for all parties to get the most current
information. As a result, planning or
scheduling becomes more of a challenge,
since the material may not be delivered
on time. To be sure that companies are
not overlooking the efficiency in the
supply chain, it is important that a set
of metrics be established to measure the
effectiveness of sourcing.
Logistics
: Many suppliers for NQA-
1 materials utilize outside carriers for
deliveries. Pricing is often quoted FOB
ShippingPoint.Thechallengewithoutside
carriers is 3 fold: Reliability of delivery,
Costs and Quality of product received.
The more efficiently these 3 variables can
be managed, the more effective a supply
chain will be. Is Reliability of delivery
really that important? What happens
when a supplier is late by a few hours?
Perhaps a few hours is not critical if the
end user had built in “late delivery time”
into the build schedule, but what are the
ramifications if a 50 man construction
crew sits idle waiting for a shipment?
Although the second possibility may raise
more eyebrows, the fact is, building in
excess waste into scheduling to account
for “late delivery time” can be just as
costly to a company, as inventory sits
idle. Inventory carrying Costs typically
average 15-40% of total logistics costs for
many industries. This hidden investment
cost is often overlooked and frequently
slow turnover can be attributed to longer
(Continued on page 44)
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NuclearPlantJournal.com Nuclear Plant Journal, September-October 2013
