Interview with Mike McGuire by Lisa Kleinhandler
The latest buzz around the fastener industry is about letting OEM fastener buyers into the fastener shows. There are pros and cons, pluses and minuses, there are some who favor it and some that absolutely do not want it to happen at all. So I went deep to the source, the guy who started it all, Mike McGuire the founder of the National Industrial Fastener Show and the one who set the policy that stood for the whole time he owned and was involved in the fastener show for 35 years. Distributors ONLY, NO OEMs!
Mike answered my phone call and I asked the wrong question right off the bat. I asked what were his feelings about this coming fall. He stated very enthusiastically that his Ohio State Buckeyes will beat Florida State for the National Championship! After a few laughs and getting to a better understanding of why I was calling we got to the subject…OEMs.
Mike stated, “He is bias, very bias, in favor of fastener distributors, but understands both sides of the equation.” He continued and commented, “He was third generation in the wholesale/distribution business, loved it and believed that distribution of just about anything was a wonderful business.” We talked a while longer about his family fastener business and the history of the fastener business, the NFDA, the Hall of Fame and many of the characters that have made the fastener business what it is today.
Mike broke the ice about OEMs. “Every time OEMs come up, people immediately think about the automobile industry and then aerospace fasteners, the two largest segments of the fastener business. However, they are actually talking about two very unique parts of the OEM fastener business. They never bring up in the discussion the quality requirements for both industries, the required delivery scheduling, the engineering required, the P-PAP tests and all the other numerous specifications and qualifications a supplier must have to become a certified, qualified supplier. For example, a short list for aserospace QSLM, ISO 9001, ASTM and AIAG at a minimum for automotive and that is just the start. Interesting is the fact that automotive uses the metric thread series, while the aerospace industry uses the inch thread series. I do not believe there is a standard commodity fastener on any American made car or airplane today, they are all what I would call “Specials.” If you throw in the Military Aircraft and weapon systems, you even have more requirements and paperwork.
Mike made a strong point here that the fastener show is not about these two industries; but really about the nearly 300,000 other manufacturing establishments in the United States. Mike said one of his favorite sayings is that “Everything made has fasteners in it, or the machine that made it, has fasteners on it, with only one exception…Mother Nature making weather. There is plenty of business for distributors and fastener manufacturers in today’s world! Read that sentence again.” A very interesting statistic is that the vast majority of manufacturers in the United States are really quite small companies. U.S. Census Bureau figures show about 225,000 of these manufacturers, employee 20 or less people. Only approximately 3,800 manufacturers hire over 500 people. Mike laughed again a little bit and said, “I would rather have 10, $10,000.00 accounts a year than 1, $100.000.00 account. Less hassle, better relationships and better margins. Yes, I have had accounts over several hundred thousands of dollars a year, but the real money was made on the smaller accounts; which fits very well into fastener distributor business model and what services and benefits they can offer to the their customers.” Mike continued, “Services and benefits which a fastener manufacturer cannot provide easily or profitably to smaller OEMs and in fact they are probably very glad they don’t have to provide them.” Mike said he gets a little hot when somebody says, “That the fastener manufacturers will take all the orders away from distributors by selling direct; has no idea in Hell what he is talking about. This person does not know or understand the job the fastener distributor performs in the supply chain!”
Distributors today have to differentiate themselves from not only the fastener manufacturer but his direct competition other distributors. This actually is pretty easy to do. It can be your location, your hours of operation (i.e. open Saturdays maybe), billing procedures, minimum order size, your emergency delivery service, your testing ability, your inventory level in certain items, your VMI programs, your engineering assistance and advice and the list goes on and on and on.
The Reshoring phenomenon is happening in America! Rising and expensive labor costs overseas, higher and increasing shipping costs, steel increases and slower deliveries are making manufacturing in the United States very practical again. Amazon has had a positive effect as customers can now get fast delivery and avoid high freight costs on “Made in America” products. Interesting fact, that taken alone, manufacturing in the United States would be the ninth-largest economy in the world.
Another point Mike made, when a distributor acquires another distributor it doesn’t mean that operation went out of business. It was probably acquired for geographic growth and market share in a neighboring state or city and will provide additional products, inventory and services than before. The real change is the name on the building. Yes a smaller number (list) of distributors by name, but not by establishments. Same with domestic fastener manufacturers being acquired by other fastener manufacturers, smaller list of names, but most likely the same number of establishments.
One thing that really puzzles Mike and that is the high expectation that a lot of OEM fastener buyers will come to the show if opened to the OEMs. In reality, the fastener buyer is often an entry level buyer position or as many people call it “Junior Buyer”. Mike says “A great job, a fun job and a great way to learn the fastener business and the purchasing obligation a buyer has to his company.” “BUT, fasteners only represent approximately 2% of the cost of the components in any one product, however it cost four-times as much to install these fasteners in an assembly. Drilling or punching holes in the material, taping the hole, cleaning the work surface, adding lubricate if necessary, tooling required and then the cost of hand labor assemble or even a robot. More time and money should be spent on the installation, instead of the cost of the fastener. So OEM management does not send a fastener buyer who is only responsible for 2% of the cost of components in their product they manufacture to a fastener trade show. Sure there are some exceptions, but I bet that number is a lot smaller than one thinks!”
I asked Mike what he thought about the affect the millennials are having on the fastener industry. Mike stated, “He didn’t believe it was the millennials who were changing the fastener industry, but technology is what is responsible for change. Yes, a lot of millennials are doing some of the work today, but so are people from a slightly older generation, who are also contributing a lot of experience. Innovation is the only way to create new wealth today.”
“Today, you can purchase a wide selection of packaged fasteners from several sources and some bulk imported fasteners, but what needs to happen is for the distributor to be connected to the inventory on his customer’s production line. Know the inventory level, know how many fasteners are being used daily and know when to replenish the inventory so a production line is never shut-down for lack of fasteners. Mike calls this “Service!” and this is what being a fastener distributor is all about. In the same vein, the fastener manufacturer and/or supplier should know the inventory levels of their products on the distributor’s shelf and have re-order points to maintain the correct levels of inventory. There is a lot for room for more advanced innovation and technology in the fastener industry and maybe this is where millennials will have a greater affect.”
Mike was very detailed in the following point, that there are three things that all fasteners are associated with and that is Price (P), Delivery (D) and Quality (Q). You can never get the absolute best of all three at any one time from one supplier, but you can get two. Think about it and put it in your business model. PDQ is what separates the fastener distributor from the fastener manufacturer. The fastener manufacturer normally only manufacturers a certain product line, for example small screws, flat washers, locknuts, hex head cap screws and/or some different types of bolts. If the OEM wanted to buy direct, they would have numerous suppliers, numerous shipments to receive and inspect, numerous invoices to process and numerous other concerns, all adding up to additional costs. The fastener distributor can offer all the fasteners they need from one source, one or fewer shipments, less handling, one or a few invoices all saving time and money, costing less. Maybe the fastener piece price would be a little bit higher, but the delivery would be most likely on time and the quality would be the same or maybe even better. Mike said, “don’t get me wrong, I respect the position of the fastener manufacturer in the market place and in certain situations they may be the best way to go for the OEM, but working with a fastener distributor in tandem will provide the OEM, the end user the best combination of PDQ over the long run.”
We continued to talk about a wide variety of subjects from the vending machine trend, “Specials” production, consortiums, barcoding, buying groups, fastener training and skilled tradesmen, but I had one last question about the Fastener Show and I wanted Mike’s thoughts. I asked, “How will the attendance be this year in the new facility?” Mike thought it would be healthy, in fact actually larger than last year for several reasons, no hotly contested Presidential election on the horizon, business is better this year than last year (good example, residential construction continues to grow slow and steady and every new house, apartment or condo needs furniture and appliances which means a lot of fasteners), there are additional new exhibitors to visit, the new convention hall is exciting, distributors and suppliers both place the fastener show in their annual budgets and want only one major fastener show every year to attend. Mike continued, what he would like to see more of, is additional distributor buyers and distributor salesman (inside & outside) come to the show. There is always a great benefit when you can put a face to the voice over the phone.
Yes, this is an additional expense for the companies, but the return will pay dividends for years to come. Nowhere can one see so much fastener “stuff” in two days. If the companies have young people and women in their business, bring them to be introduced to their peer groups Young Fastener Professionals and Women in the Fastener Industry. They will become more enthusiast about the fastener industry and their jobs…I guarantee it!
Bottom line, it is easy to see why Mike is very positive after more than 50 years in the fastener industry and believes all parties, distributors, importers, master distributors and fastener manufacturers can work together to continue to grow the industry and grow it profitably.
Fastener News Desk thanks Mike McGuire for his contributions and insights. During these times of transitioning business models, technology and workforce, it is crucial that the exchange of knowledge, information and ideas are shared amongst our community.
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