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A Real “Win-Win” Case Study

December 12th, 2011

A REAL “WIN-WIN” HELPS TALAN CUSTOMER IMPROVE ROA

Talk about “Win-Win,” smiles Talan Products CEO Steve Peplin. “This is textbook.”

For years, Talan had counted a major international fastener company in the building products arena as a small customer with great potential.  Talan manufactured stampings and aluminum extrusions for the company, which also had its own in-house stamping operation, making 100 different parts.

Steve felt the in-house operation wasn’t nearly as efficient as it could be. So he had an idea. A big idea.

Only a few months later, Talan actually owned all the stamping equipment and tooling and had relocated it to the Talan manufacturing facility. Annual inventory turns went from 2 per year to 20, saving the customer 11% annually.

How was this possible?

“It’s actually pretty simple,” said Steve. They know fasteners. We know stamping. We analyzed the situation and realized we could do it better if we took over the whole thing and introduced best practices. We made an aggressive proposal. Their new president had a banking background and understood deployment of capital as well as anyone. He saw the opportunity and jumped at it.

“Now, we even work together on R&D. Prototype development time has dropped from months to a few days…and we have even been awarded a patent together.”

The contract between the two companies is long-term. It is Talan’s responsibility to offset inflation increases with annual efficiency improvements. There is a material cost adjustment clause, but Talan’s buying process of materials in this space is more sophisticated than the customers’ previous system, leading to further real savings. Also, product quality is better – with all parts made in the U.S.

“Talan is a trusted supplier, and a very important supplier,” says the fastener company president. “I’m a corporate investment banker by trade and I recognized the advantage of significantly lowering investment in inventory. Our agreement allowed Talan to do what they do so well, and allowed us to focus on fasteners.  Importantly, Steve made the whole process, which could have been complicated, very simple.”

Peplin says there are a lot of ways to structure this kind of agreement, from outright purchase to lease to lease/purchase.  “Lots of companies could benefit from this kind of thinking. The first step is a feasibility study which I head up personally. There is no cost, and if I can’t offer the customer significant savings, I won’t make a proposal. But it is surprising how often we can uncover an opportunity for real savings. Of course, the recommendation doesn’t always include us taking the whole process over….but if so, we are large enough – and aggressive enough – to work together with the customer make it happen.”

 

 


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