July/August 1991
Free advice and quality products at a good price are only a toll-free call away via the National Association Supply Cooperative.
By Jeff Borsecnik
Jeff Borsecnik is assistant editor of Scrap Processing and Recycling.
Last year, the National Association Supply Cooperative (NASCO-OP) ( New Philadelphia, Ohio ) sold 773,000 feet--more than 146 miles--of wire rope to the scrap processing and recycling industry. "We've got wire rope people crawling in the windows trying to sell us wire rope," says Jack Matchett, NASCO-OP manager. "We command a lot of respect from the industry, so I am constantly telling them, 'Fine, you want to sell us wire rope, give me the right price.'" And the co-op gets the right price.
NASCO-OP is a not-for-profit buying cooperative made up of about 900 companies, more than 95 percent of which are members of the Institute of Scrap Recycling industries (ISRI) ( Washington , D.C. ). Its customers are its members--and its owners--who have paid a $300 fee to buy into the co-op's clout as a volume buyer and to gain access to free advice, current prices, and easy, centralized purchasing. Its product line ranges from accessories and peripheral equipment like magnet crane cable, twin hose, and steel strapping to heavy equipment such as shears, magnets, generators, grapples, and related replacement parts. It also sells common tools, including torches, drills, and saws, as well as safety equipment. In essence, NASCO-OP is a nonstocking distributor for about 120 vendors.
The co-op concentrates the buying power of its members, creating a single voice vendors have to listen to. "If a [co-op] customer has a real complaint," says Jack Goldin, Goldin Industries Inc. (Gulfport , Miss.), a co-op member and director, "the vendor has to look at it real hard." Vendors won't risk offending the whole membership, he says.
NASCO-OP only sells items widely used in the scrap processing and recycling industry that can be distributed nationally at a competitive price. The co-op is careful not to "spread itself too thin," says Matchett. For example, he says, the group used to sell vehicles but found that such varied and infrequently purchased items were more of a strain on the co-op than a benefit to members.
NASCO-OP is volume oriented, concentrating on products that many members need, especially items they need frequently. In 1990, in addition to selling large quantities of wire rope, the co-op sold more than 63 miles of magnet crane cable, 27,000 torch tips, and significant amounts of other products.
Industry Cooperates
NASCO-OP was incorporated in New York state in 1959 by about 50 scrap processors in the Northeast. The co-op proved popular and grew to about 600 members within a few years. But, during the late 1960s, the organization suffered several rapid changes in management, a drop in sales, and increased costs, according to Matchett.
In the early 1970s, another group of scrap processors began an effort to keep the co-op afloat. One of the first steps was moving the co-op out of its high-rent office in New York City to cut costs. ("We had no real reason to be there," says Matchett. "We could operate in a rowboat as long as we had a telephone.")
Another significant step took place in late 1975, when the co-op's board interviewed Matchett, who was purchasing manager for the construction equipment division of Warner & Swasey Co. (New Philadelphia , Ohio). He had worked for the firm for 20 years, gathering experience in finance, systems, production control, purchasing, and materials management. He also arranged the sale of Warner & Swasey's scrap.
Matchett says he was "awestruck" when he first met the co-op directors: "I had never met a group of people like that in my life. They were very entrepreneurial individuals. They owned their own companies but were willing to give their time and effort to keep this thing going, and that impressed me. It made me think that, if I've got guys of this caliber behind it, it must be viable, so we talked ... and they made me an offer I couldn't refuse."
In the spring of 1976, the co-op moved its office to Matchett's hometown, New Philadelphia , and took up business in the space it occupies today--1,350 square feet on the second floor of a bank budding. Matchett had spent the winter weeks prior to the move in New York , learning the ropes of running the co-op, and returning to New Philadelphiaon weekends to interview NASCO-OP job applicants. He hired several assistants, including JoAn Wagner, the assistant manager, and they went to work.
"No one knew a whole lot about what was going on," Matchett says, "but we worked our buns off." He credits the co-op's members for being patient while the staff learned about the scrap business.
Sales in the first year in New Philadelphia totaled $1.5 million and the co-op had 435 members. Since then, membership has grown to 895 and the co-op sold $6.6 million in products in 1989, its peak sales year.
A Good Customer
The co-op is the largest buyer and distributor of some industry-related products. In addition to the volume of potential business the group's membership represents to suppliers, vendors are offered other advantages when working with NASCO-OP.
For one thing, they know they will be paid promptly when selling to the co-op, says Matchett, who takes advantage of any price breaks available for quick payment, such as 10 days/2 percent, to keep the co-op's costs as low as possible.
The co-op also can mean opportunities to vendors that previously ignored the industry. The scrap processing and recycling industry has a relatively low profile and many operations are only small purchasers, says Matchett. Some distributors simply didn't want to get their tires dirty, he says. Also, he points out, there has been a perception among vendors that the scrap processing industry is "a hard sell and, sometimes, a hard collect."
Brian Houston of Galbreath Inc. (Winamac , Ind.), a long-time supplier of self-dumping hoppers to the co-op, appreciates that the co-op's staff is "very knowledgeable." He says that the co-op appears to be run "as professionally, if not more so, than any other business I've ever seen. It takes care of its customers with very few problems."
Suggestions for additions to the co-op's product lines come from its officers, directors, and members. If an idea is considered worthwhile by the board, Matchett says, "We evaluate whether we think it would be a viable product for us and, if so, we try to get it on-stream."
Matchett identifies suppliers that have the most to offer, those that can supply "the gamut" of a product type. "The co-op has weeded out unreliable suppliers with products that don't holdup," says Goldin. "It seems the managers research a product pretty well before they offer it."
Following calls from members and discussion at board meetings about the problems of radioactive scrap, the co-op has added radiation detectors to its line. Matchett researched available products and called scrap processors around the country to evaluate the need for the equipment. The co-op chose to represent Bicron Corp. (Newbury ,Ohio) and directed that company to further examine the type and cost of detectors needed at scrap operations.
Discounts and Dividends
Matchett and Wagner negotiate prices with suppliers based on what other buyers pay, how the item is marketed, and the advantages the co-op offers the supplier.
"Many things, especially in high-volume areas, cost dramatically less through the co-op," says David S. Blue of Louisville Scrap Material Co. Inc. (Louisville , Ky.), a long-time co-op member. "We buy everything from the co-op when it's cost effective"--when it can beat the price of local distributors despite the added cost of freight.
A processor buying wire rope from a local distributor probably pays 30 to 40 percent more than the co-op with its volume break, says Matchett, and similar numbers apply to other items.
"One of the least talked about and, I think, best buys from the co-op," reports David Gahagen, Gahagen Iron & Metal Co. (Commerce City, Colo.) and first vice president of NASCO-OP, "are scale tickets, work forms, computer printout forms, and truck reports." Matchett says local distributors sometimes charge as much as 100 percent more than the co-op for such items.
On high-end items such as magnets and shears, members may save only 5 or 6 percent by buying through the co-op, says Matchett, but even a low percentage on such items can equal significant dollar savings. "Along with that," he adds, "we pay a dividend."
At the end of every fiscal year but one since 1977, NASCO-OP has returned profits to its members in the form of a dividend based on the amount each member spent on co-op purchases during the year.
Annual dividends have ranged from 1 to 3 1/2 percent of a member's purchases. For fiscal year 1990, the dividend was 3 percent on total co-op sales of nearly $6 million. More than 600 firms that spent more than a minimum amount--$150--and were not delinquent in payments received checks ranging from $5 to $5,825. Since 1977, the co-op has paid out more than $1.1 million in dividends.
At its fall board meeting, the co-op's directors review projected sales for the fiscal year, which ends Nov. 30, and determine the dividend. Co-op prices include an average markup of less dm 8 percent, says Matchett, which covers expenses plus a buffer. The dividends come from the difference between the co-op's income and its expenses, minus a small fund retained for working capital.
The co-op's board is elected by the members; each member company has a single vote. Directors serve three-year terms, and a third of the board is chosen each year at the first of its quarterly meetings, which is held at ReMA's annual convention. The board selects the officers.
The board sets the membership fee and approves new members. It also reviews new product selections and the annual budget, which is submitted by Matchett. NASCO-OP President Lee Hummelstein, Hummelstein Iron & Metal Inc. (Jonesboro , Ark.), says the board members act as advisers, review accounts past due, give credit references, and provide "help wherever we can." The co-op tries to enlist members from all over the country to serve as directors, says Hummelstein.
Co-op Connections
NASCO-OP does its business by telephone. In addition to two local lines, the co-op has four incoming toll-free lines, three outgoing toll-free lines, and a toll-free facsimile line. (All the 800 numbers are for member use, notes Matchett; vendors must pay for their calls to the co-op.) NASCO-OP's staff of six handles 1,500 to 1,700 incoming calls each month and makes 1,200 to 1,500 outgoing calls.
Orders placed are fed into the co-op's IBM System 36 computer and purchase orders are generated daily. About 80 percent of the orders are confirming POs, says Matchett; the original orders were called in as soon as they were placed. "Nobody wants anything in two weeks," he notes.
Free phone access is a key benefit of the co-op, according to members. The co-op encourages members to call and compare prices between the co-op and local suppliers. "NASCO-OP makes purchasing a lot easier," says Michael Bank, Winston-Morrow Co. (Detroit) and co-op second vice president. "It's an excellent price shopper.”
The co-op also encourages callers to report better prices found elsewhere, says Matchett. “We want to know if our price is not competitive because then I go back to the supplier and ask why."
"The co-op is always looking for new items, asking for local sources, to determine if a product can be made available economically at the national level,” says Gahagen.
New members receive a 345-page catalog that gives a picture of what's available through the co-op. It is not exhaustive, nor frequently updated; it is meant to let customers know the range of products the cooperative sells. The book is indexed by product and by supplier and provides a purchasing starting point. "We tell the members to just use it as a reference book, " says Matchett. "We say, 'If you don't find what you're looking for, call us. It's a toll-free number and it only takes a couple of minutes.'"
Co-op callers tap into a "wealth of knowledge" about products unlikely to be available from a single source anywhere else, says Gahagen.
"We are in constant contact with what's going on in the industry and with what people are using and why," Matchett says. He is often asked for advice on products and is usually ready with an answer based on the experiences of hundreds of co-op members. And, he warns his suppliers, he will be utterly objective in comparing competing products.
Wagner is also an expert on many of the products the co-op handles, says Matchett, and takes primary purchasing responsibility for several co-op fines, including safety and cutting equipment, torches and tips, twin hose, air compressors, and hand tools. Matchett concentrates on "big-ticket" items.
Getting Noticed
NASCO-OP membership is approximately half that of ISRI, estimates Matchett, and his goal "is to get them all in the co-op." Some companies don't join, he says, because they figure they can purchase as well as the co-op does on their own, especially the big operations that have their own buying clout. "Where we really are beneficial is to the smaller plants because they don't have clout and they are subject to the prices of local distributors," says Matchett. But he says the big guys benefit, too, because "they can call and see if their local price is any good."
The co-op suffers from being "out of sight, out of mind," says Matchett, and doesn't drop in on its customers like other distributors. It does send out occasional mailings, Matchett speaks at ReMA chapter meetings, and co-op staff call members that haven't made recent purchases--all to remind customers/members that the co-op exists. "We want them to sit that great big red catalog on their desk," says Matchett, "and when they want something, give us a call." •
Free advice and quality products at a good price are only a toll-free call away via the National Association Supply Cooperative.