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Sandvik Materials Technology is a world-leading manufacturer of high technology stainless steels, special alloy materials and advanced value-added products developed according to precise customer needs. David Soyka examines how this company shapes its business.

Some companies “steel for success” by trying to dominate market share. Other companies look for niches to provide specialized products and services that the companies fighting for market share cannot provide due to lack of time, inclination or capabilities. Both have their challenges. But, arguably, the niche marketer has to be more nimble, more customer-focused, more of a value-added provider to find and retain business.

According to Peter Frosini, president of Sandvik Materials Technology (SMT), Region Americas, “It is true we do sell some products that could be considered commodities where customers order X amount of units from us when they need it. But even these products are designed to address the unique needs of certain niches. We’re not a large, bulk producer. The Sandvik philosophy has always been to develop niche products that provide added value. Our growth strategy is to continue to identify new niche markets and work to become the number one or two solution in that niche. We’ve been very successful with this model.”

Sandvik Materials Technology (SMT) is a business area within the Sandvik Group, a global high technology engineering company based in Sandviken, Sweden. Sandvik Materials Technology has about 8,300 employees worldwide; just under 1,000 of these are based in the region that includes North and South America, throughout 14 strategically located production units and distribution centers. Headquartered in Clarks Summit, Pa. outside of Scranton, it is the largest SMT subsidiary outside of Sweden, selling and manufacturing for demanding applications made of stainless steels and special alloys based on nickel, titanium and zirconium. The company specializes in five product areas: tube, strip, wire, heating systems, and process systems. The stainless steel alloys and systems from these product areas are sold to OEMs to incorporate in their own products or processes through a direct sales force, although some sales agents are used in South America.

Tube is the largest product area, in which SMT is a recognized world leader. It includes seamless and welded tubes, fittings and flanges, as well as complementary sheet and plate. According to Phil Belejchak, vice president and general manager of product area tube, “Key markets are oil and gas, power generation, aerospace and machining and general industry applications where corrosion resistance, mechanical properties and reliability of operation are critical.” The tube product area also markets complementary sheet and plate.

The strip product area encompasses applications ranging from razor blades, medical instruments, springs, domestic and industrial knives to strip for catalytic converters, compressor flapper valves and photochemical machining. Wire products include precision wire, profiles, spring wire and welding products, usually developed specially for particular applications in the automotive, oil and gas, electronics and medical industries.Kanthal is a Sandvik proprietary technology that provides metal and ceramic resistance materials in the form of wire, strip, elements and systems for electrical heating in household appliances, industrial furnaces and processing equipment. Process Systems supplies steel belts, press plates and associated equipment, such as machinery parts or complete systems. It is particularly involved in the sorting, chemical, wood based panels and food industries.

Value-Add
Frosini emphasizes that most products are developed in close cooperation with customers to meet specific needs. “Sometimes they’ll have already engineered what they want and come in with a set of requirements they need us to fulfill,” he explains. “Sometimes they’ll ask us for our thoughts in how to engineer what they need.”

“It’s also not unusual for the customer to come in with a request and for us to recommend something else,” Belejchak adds. “For example, we recently did a highly engineered product where the customer specified a stainless alloy with a high level of nickel content. But because of the high price of nickel, we recommended another alloy that was lower in price because of the lower nickel content, and actually offered a higher level of corrosion resistance. We have a staff of metallurgists and part of their job is to see if we can come up with something better in performance and/or price than what the customer initially requested.”

Indeed, metal prices are swinging upwards of late, and the market remains highly volatile. According to Reuters, “Prices (of nickel) have risen more than 70 percent since the beginning of the year on soaring demand and dwindling stocks.”

While acknowledging the problem, Frosini says it is a fact of doing business everyone has to deal with. “We’re experiencing double-digit growth and I don’t think anyone knows when we’re going to see the top of the cycle, much less a decline. There are basically three things our customers are looking for: cost, service and turnaround. We think we’re better at all three than anyone we compete against.”

While no one can do anything about the price of the materials products are made out of, you can work to reduce the costs of making the products. “The first leg of what we call the SMT business system is lean manufacturing,” Frosini says. “We are constantly looking to achieve continuous improvement at all 14 of our manufacturing and distribution facilities.” (The other “legs” of continuous improvement are sales, purchasing, people development, and product development. Frosini remarks, “What Total Quality Management was to the 90s, our SMT business system is to this and the next generation. It is a journey!”)

Consequently, Frosini notes that, “large inventory does not exist in the Sandvik vocabulary.” In part, that’s also because the majority of products are specialized applications. As Belejchak notes, “Sure, there are some things that a customer can order off the shelf, and we have to have some of that available. But, for the most part, we’re not providing standardized product, but rather an engineered product. And while lead times depend on what we can get from the mills – and lately that’s tended to get longer – we have the resources to supply quick turnaround. What makes us the competitive leader is our expertise to work with customers in providing the best-suited and most-economical solution engineered to a given application, and to provide the quickest turnaround in the industry.”

Another contributing factor to Sandvik’s success is innovation based on a commitment to research and development. Each year about 4 percent of revenues are reinvested in new product development. Two recent examples are Bioliner and DecorexT.

“Bioline uses very high quality stainless steel in tube, wire and strip forms that can easily integrate into tooling that has stringent sanitation requirements for medical and dental applications. It is ideally suited to the manufacture of torque wrenches, drill bits, catheter tubing and interdental brushes. It is corrosion resistant, good for repeated sterilization, has good edge retention properties for blades and cutting tools, an excellent surface finish and the potential for lighter devices to be produced,” Belejchak says. “Decorex is a strip application that improves adherence of color and other coatings for applications with high demands on surface appearance and technical functionality in the design of such components as digital cameras, mp3 players and other digital media products.”

Because it addresses multiple market segments, SMT is somewhat immune to the business cycles that occur individually within a segment. “Right now I’d say that the industrial sectors are continuing to grow the fastest, especially oil and gas,” says Frosini. “And while the consumer side is not as robust, especially around automotive applications, we are still operating at high levels in those markets.”

This means that, overall, Sandvik Materials Technology is very well positioned in providing whatever specialized stainless steel, alloys and systems their customers require.

Volume:
9
Issue:
5
Year:
2006


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