Flexible inventory program secures steel pipe supply chain for refrigerant system manufacturer

We’re sure you’re sick of hearing about it.

If one more person complains about supply chain problems, your head will explode, right? It’s a waste of server space at this point to write an article about what’s wrong.

Instead, we want to talk about ways to set it right. Our partnership with a refrigerant system manufacturer provides a textbook example.

heat exchanger and pipe

Supporting steady growth

Our customer’s sprawling facility in the Midwest belies its modest beginning in its founder’s home garage.

Several years and an acquisition later, the firm bills itself as a “total system specialist” manufacturing components for oil management, heat exchange, liquid management and other refrigeration applications.

Owing to this breadth of scope, they need a constant supply of carbon steel pipe and other components. And until 2016, they had sourced the material from a variety of suppliers across the U.S.

But that began to change with a cold call by Shane Russell, who today is our executive vice president of sales.

“I was just trying to find new business and got the ear of one of the buyers there,” Shane said. “It started with a lot of spot buys.”

Every few weeks, the customer would furnish Shane with a list of pipe and components they needed. Shane and the team at American Piping quickly earned their ongoing business through quick responses to RFQs, competitive pricing and the team’s project management execution that kept orders organized and supplies arriving on schedule. Business continued this way for a year, long enough for Shane to notice important trends.

“After a year of supplying them day-to-day material, we started looking at stock release options together for the product sizes they used on a consistent basis,” he said.

With a stock release program, American Piping Products would buy and store a large amount of product the end user knows they will need. We would then gradually release material to the end user according to their ongoing demand. The benefits of such a program are clear:

• The unit price of products purchased in bulk is often lower than market pricing
• The end user can pass this savings to customers, winning more business
• Material cost is stable and predictable for a longer period of time
• The distributor shoulders more of the supply chain and cash flow risk
• End users avoid devoting excessive space to bulk storage

Stock releases of both welded and seamless carbon steel pipe work well for our customer because they use it to manufacture a high volume of repetitive products. When their shop is busy, their buyers can trust that American Piping Products will keep their welders welding.

Creative problem solving and skillful project management services make it happen.

Stock release pays off big in 2021

From the onset of the COVID-19 pandemic and onward, the customer’s buyers did keep buying. But the supply chain disruption everyone is talking about reared its ugly head.

Anyone who buys commodity carbon steel regularly knows how acute its impacts have been. Quoted prices used to be good for weeks at a time. Today, they go stale in a matter of hours — if the inventory is even available at all.

“Pricing stability is probably one of the biggest concerns that customers have, especially those who manufacture a consistent product. They want to quote their customer a price and know they don’t have to go back and re-quote every week,” Shane said.

And while the customer has not escaped supply chain volatility entirely, the stock release program in place has blocked much of the ill effects.

“They know they’re going to have a more consistent price,” Shane continued. “It also means they won’t have to worry about where the material is coming from. It’s on the ground, ready to ship when they need it. They don’t have to go out into the market and try to find it.”

Explore stock release with American Piping Products

Are you tired of pricing instability and a lack of available inventory? Are you an existing customer interested in stock release? Are you considering switching to American Piping Products because your current suppliers do not offer stock release programs?

In an environment of questions, this might be the answer. Contact us now to start the conversation.