Tuesday, July 26, 2005

Steel Partnerships

The summer is truly upon us, although you could be forgiven for not noticing it if you are living under the grey blanket that passes for the sky here in the UK.

Many of the Steel plants of Western Europe and North America are closed for maintenance, and their workforces enjoying their annual leave. As only a small percentage of the population are employed in manufacturing today, the concept of annual closures may be foreign to many, but for those of us in the steel industry, it’s commonplace.

Things could hardly be different to the situation at this time last year, when demand was outstripping supply and steel manufacturers, service centres and traders alike were enjoying unprecedented sales. Prices were rising rapidly and producers who had been losing money for years were finally seeing their businesses running at a profit. Consumers were struggling to find suppliers, and some manufacturers were taking advantage of the situation by increasing prices to the point of profiteering. How quickly things change.

Whilst the steelmakers can hardly shoulder responsibility for wider macro-economic shifts, maybe they can contemplate a little during this time the wisdom of their overall commercial strategies.

During my time in the steel industry, it became common to refer to the relationships between the steel supplier and the steel user as “partnerships”. This is a sensible approach based upon the mutual reliance they have upon each other. Understanding each others’ needs provides a foundation for developing long term mutually beneficial relationships. In practice however the word “partnership” has often been no more than a thin gloss of paint over an old fashioned game of buyer and seller trying to outsmart each other in a bid for the best deal. Partnerships only work when both parties benefit from a relationship, and that involves both giving a little as well as taking.

It’s often necessary for the steel supplier “go the extra mile” for a loyal customer and maybe forgo a short term advantage for the long term good. Equally a steel user, who changes supplier for a few dollars saving, may well find support not forthcoming when he most needs it.

Maybe the forging of some real partnerships between suppliers and consumers in our industry may benefit us all in terms of some stability in our chaotic industry.

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