Most manufacturers that outsource machining work would prefer to deal with just one supplier. Nick Busche has heard this from customers, and he has also seen it in their RFQs. His shop in Albion, Indiana—Busche Enterprise—is set up to machine castings and forgings, but the shop also gets plenty of RFQs for screw machine work and other bar-fed jobs. Returning a "no-quote" on these jobs is dangerous, he says, because the shop might find itself blacklisted from that customer's next job, which may involve forgings or castings.
The obvious solutions didn't appeal to Mr. Busche. Subcontracting would turn him into a middleman—not an attractive position. And enlarging his shop's capabilities through acquisition would be risky, because acquired companies often lose the spark that made them valuable.
So Mr. Busche joined with other shop owners to form an alliance. He created the Busche Machining Consortium.
The organization currently consists of six shops. The group acts like a single supplier for big customers needing high-volume work and/or a range of capabilities. The Consortium itself, a newly formed company, acts as an agent. Members remain free to pursue work on their own, but an RFQ sent to the Consortium is electronically forwarded throughout the group. The lowest quote from among the members is the one that goes to the customer. In cases where more than one shop must work together on a large order, the Consortium coordinates their efforts.
Marketing and buying power are among the alliance's benefits, but one other benefit is key to Mr. Busche's plan. The Consortium intends to offer an exit strategy to the owners of small shops. Within 3 to 5 years—so goes the plan—the member shops will organize into one company, which will be sold to an industrial buyer or to the public through a stock offering. Shop owners who join the Consortium expect to cash out or to stay on as part of something bigger, Mr. Busche says.
Can the Consortium idea work? First it needs more shops. The goal is to reach 25 members having combined annual sales above $300 million.
Another important factor will be continued cooperation among members. Internal friction does occur, because member shops still bid against one another. In these situations, Mr. Busche tries to stress that a shop losing out on a particular job still stands to win in the end. So long as someone in the Consortium is doing the work, the alliance as a whole will benefit.
Contact Nick Busche at (219) 636-7030blog comments powered by Disqus