When the Supply Chain Begins with the Customer

iSource: And are you primarily using EDI [electronic data interchange] with your customers and suppliers?

George: Yes. EDI has become the vehicle for communication that we use, and we're very comfortable with it — and it works.

iSource: AIPC just opened a major new production facility in Arizona. When the company is opening this type of facility, how is the supply chain function involved in the planning for the new facility and the execution side of incorporating that facility into your overall supply chain?

George: In our company, the supply chain drove the decision to build the plant, and it drove the decision on where the plant would be located. We do that through this modeling technique that we have for the supply chain. When we realize that we have a capacity opportunity upon us, we will use our modeling capability to run a number of "what-if" scenarios that will lead us to the lowest total delivered cost, not just for that one location but also for the supply chain as a whole.

We saw tremendous logistical synergies in building a facility in Arizona. For instance, we do a fairly significant business on the West Coast, and we used to service that business out of Excelsior Springs, Mo. Now we service it out of Tolleson, Arizona, and the freight costs are significantly lower. We also found in our due diligence that Arizona is a front-end destination for a lot of freight coming out of California that was going home empty. So by locating to Arizona, we're immediately a back-haul. Numbers that we researched said there were as many as 10,000 trucks going out of Arizona empty each week. We thought we had a great opportunity to put some pasta on those trucks.

iSource: And you were able to put this information into your planning model to run "what-if" scenarios?

George: Yes. In fact, the model contains real operating data for the entire supply chain. We have a person whose full-time job is to maintain and operate that model, and we probably use the model weekly in making a number of decisions.

iSource: What are kinds of decisions that you're making based on the model?

George: We've used it, obviously, for expansion and capacity balancing. We've used it for acquisition. We use it for long-range planning.

iSource: Another issue that I wanted to discuss is how the supply chain contributes to the competitiveness of the company overall, and whether you've been able to increase the company's competitiveness by improving supply chain efficiencies through the use of new technologies and processes.

George: I don't think there is any doubt about that. From AIPC's point of view, the fact that we have a fully integrated operating platform vis-Æ-vis mill, manufacturing and supply chain speaks to how strategic we believe it is. But I think that the competitive contribution the supply chain makes is twofold. One, we're the low-cost producer — and not just a little bit. We're significantly lower cost in the marketplace, and we're constantly looking for new ways to drive cost out of the business. When you look at the scale of AIPC, and our volumes this year in excess of 900 million pounds produced, a fraction of a penny per pound is a lot of money. So any opportunity to shave a half-cent here, a half-cent there repays us with huge dividends. We call it "funding the growth." And that's really the primary purpose for the supply chain initiatives, to drive costs down, to continue to drive our low-cost position in the marketplace and to release funds that can go to driving commercial growth.

In addition, we have very, very strategic relationships from a supply chain point of view with a number of customers. I spend probably 50 percent of my time supporting the commercial side of the business, meeting with customers, talking about how we can find joint synergies and apply them to our business and grow it. We are on a number of advisory panels with customers, looking for different ways to use our tools to help identify opportunities for them.

iSource: How do you balance the various supply chain initiatives ongoing at your customers with the work you are doing to improve your own supply chain?