How Prince Industries Mixes Manufacturing With Off-Shore Sourcing
Mark Miller went to work one day and had his world rocked. His company’s largest customer told him it was moving its sourcing overseas. The reason: The customer could purchase the high-quality, precision machined products it needed for less than Miller’s company, Prince Industries, could sell them.
“This came out of the blue,” Mr. Miller says of the day, about 18 months ago, when his customer informed him of its decision. When he found out the customer was going to source the parts from China, “we knew we couldn’t compete with the price,” he explains.
During the 2 to 3 years before this news, Prince Industries had lost business to the Chinese. It was typically the “20-cent- to 30-cent-per-piece” screw machine parts that went overseas. Never had the Carol Stream, Illinois company been hit broadside on its CNC parts. “I always thought that no one was going to beat us on these parts,” Mr. Miller says.
At first, he wondered whether the company his father had started nearly 45 years ago was seeing its final chapter. But as he thought through the news he had just received, Mr. Miller began to understand that where there is a hurdle, there also is a potential opportunity.Both A Supply And A Source.
Today, Prince Industries has positioned itself in the marketplace not only as a supplier of American-made precision machined products, but also as a source for offshore parts and inventory management. Mr. Miller says that Prince Industries will not abandon its core manufacturing capabilities. Rather, the company has established itself as a supply chain management source for manufacturers needing precision machined products.
Coaxed by his largest customer to act as its sourcing and inventory management arm for Asian-produced parts, Mr. Miller says he began to see that Prince Industries was at a crossroads some 18 months ago. “My first reaction was, ‘I don’t want anything to do with China,’” he comments. But as he and his management team thought about the offer, Mr. Miller elected to move forward with the idea of becoming his customer’s supply chain manager for Chinese-sourced precision machined products.
He accompanied the customer’s procurement team to China, expecting to find “a third-world” operation—for example, poor management, old machinery and used equipment. “I was shocked to see companies as well run as those we have here in the United States, with the latest in technology and good management,” Mr. Miller says.
But Prince’s customer wasn’t done asking for help from Mr. Miller and his staff. The company’s procurement team next wanted Prince Industries to show the Chinese the proper method for making the pieces it needed from Type 303 stainless steel and brass.
“The difficult thing is when a customer asks you to help someone else make their parts. We wrestled with that a lot,” Mr. Miller declares.
In the end, though, he again agreed, seeing it as another potential opportunity for Prince Industries. But that wasn’t the only twist. The customer also asked Prince to maintain the tooling for its parts in the event of a supply chain disruption. Prince Industries again obliged, which turned out to be fortuitous for the customer. Late last year, with West Coast dockworkers on strike, containers sitting at the port and ships waiting in the Pacific, the customer again turned to Prince Industries for its needs. “So we started the machines and began to turn out parts,” Mr. Miller says.Supply Chain Solutions.
With more than a year under its belt sourcing and managing the Chinese inventory for the domestic customer, Prince Industries’ management decided the next step was to take its expertise to the marketplace as a supply chain solution to other precision machined products customers.
“That’s our goal—to start selling this to our other customers. There’s not a month that goes by that we don’t hear of another customer going overseas for parts,” says Mr. Miller, who noted that his company wants to be involved in that sourcing.
The reaction so far from the market has been “mixed,” Mr. Miller cautions. Some companies “didn’t even want to think that their parts can be made in China. They say the volume’s not there and they have no plans to go there. But at least we’ve given them the option.”
Within his company, the switch to selling a supply chain solution versus producing and selling a part has required a re-engineering of employees’ thought processes, too.
“It’s a logistics nightmare because you have to consider not only the parts they need, but the time it takes to get them and the amount of inventory you’ll need,” he explains. Because some of what Prince is stocking and selling now comes from overseas, Mr. Miller says his company also has had to deal with different payment terms that are spelled out in letters of credit.
The biggest challenge he sees his company facing, however, is inventory management. “We have to get a better handle on managing inventory,” he says. But there has been another benefit to sourcing and managing the offshore inventory. Mr. Miller says he has a “bird’s-eye view” of what it takes in terms of pricing to “know what I have to beat” to win an order.
The shift to a solutions-oriented business does not mean the end to manufacturing for Prince Industries. Mr. Miller says that his vision for the company is to continue to produce precision machined products for North American customers, in addition to being a source for parts produced overseas.
Although he added that he doesn’t want Prince Industries to become solely a distributor, Mr. Miller says, “Our customers are really the ones who are going to dictate that to us in the future. We’re trying to source and solve our customers’ problems—because if we don’t solve them, they’ll solve them themselves.”