Volume 10 | Issue 3 | Year 2007

Outsourcing For Profits, Industry Today

Michele Murano has a passion for tools. As a young man, this Italian immigrant from the Brazilian state of São Paulo, began his professional life by working for large toolmakers. He subsequently went on to become a partner in several other tool manufacturing companies. However, what he really dreamed of was to start a business of his own without any partners – using his private capital to create a company in which he could elaborate his own corporate philosophy and still pursue his lifelong love of tools.

This dream became a reality in 1989, when Murano founded Joalmi Indústria e Comércio in Guarulhos, a satellite city of São Paulo, strategically located next to São Paulo’s international airport and on a major highway leading to Santos, Brazil’s largest maritime port. Within Joalmi’s 129,000-square-foot facility, Murano, the company’s president, set to work putting into practice his philosophy of manufacturing tools with perfection. To achieve this goal, he determined that Joalmi would have to operate like a “First World” enterprise, most significantly, by fighting to always remain on the cutting edge of technology in its segment. Explains the company’s CFO, Marcelo Murano, “We started off making tools by cutting and bending ferrous and non-ferrous metals. But we always sought to stay ahead, continually searching for new solutions using the most up-to-date technology available for stamping and welding. At the same time, we focused on making items that were much more complex than those available on the market.”

Indeed, adherence to this strategy made Joalmi a pioneer in its sector in Brazil. By specializing in highly complex products that only small niches of the industry were capable of producing, the company distinguished itself. When clients came calling, it was because word of its high-tech stamping and welding capabilities spread around the marketplace. For instance, one of the biggest challenges currently faced by the sector concerns deep drawing of steel. Explains Marcelo Murano, “Stretched steel usually loses value or breaks. But our technology doesn’t allow this to happen. Our deep drawing technology permits us to make pieces that offer resilience, quality and safety, while cutting down on losses. Everyone in the world is after the automation of such technology, which can really increase production levels. Our deep drawing expertise was what brought GM to us as a client. Our technology allowed them to reduce their losses and thus diminish their costs.”

Expert Outsourcers
Indeed, although today the company has developed a more aggressive marketing and sales strategy, during its first decade, it was strictly through word of mouth that Joalmi gained a reputation as an excellent, not to mention reliable, outsourcer. One by one, major assemblers for the automotive, electronic, electric, and home appliance industries – multinational groups including Behr, Delphi, Knorr, Magnetti Marelli – signed contracts with Joalmi. And before long, the company was experiencing growth rates of between 30 and 35 percent a year, levels that it has maintained throughout the last decade and that has earned it a place among Brazil’s top five suppliers in the stamped item sector.

Choosing to position itself in the market as an expert outsourcer provided the company with a firm identity as well as a constant source of leverage. According to Marcelo Murano, “Our spurts of growth accompanied those of our major clients. As they expanded, their facilities often couldn’t absorb their increased production needs – but ours could. We absorbed entire units, taking on total responsibility for certain niches.”

Murano cites the example of GM, who contracted Joalmi to stamp its metal parts. “We bought their equipment and we use their tools and workers. Everything comes to our plant, which gives them more space to assemble instead of having to stamp. We take care of everything and they have no headaches and no losses. Meanwhile, we benefit from acquiring GM’s technology and equipment to make items for them. We are a provider of solutions for stamped metallic units, but ultimately, what we’re doing is selling outsourcing. And Joalmi itself is a product of outsourcing.”

According to Murano, this makes for an interesting situation since not only is Joalmi on the same level as most of its clients, but it also competes with many of them. He cites the example of the American company Tower, for whom Joalmi makes stamped items. “They make them too. However, when their production capacity is filled, they turn to us to make the parts and then they assemble them.” Benteler is another client, that like Joalmi, makes stamped parts – and both manufacturers supply GM. Says Murano, “This situation doesn’t create conflict. In fact, it benefits all parties.”

Looking Outward
Nonetheless, Joalmi is beginning to set its sights on becoming an increasingly important tier one supplier. And as part of its plans, it is also preparing to launch itself globally. Marcelo Murano describes the company’s current client base as “a tripod base”: of total production, 30 percent supplies the Brazilian market, 30 percent supplies national assemblers, and 30 percent is exported to assemblers and aftermarketers overseas. “Today, we automatically export 30 percent,” points out Murano. “Our clients export 30 percent of our units, so indirectly we do too.”

However, to maintain a more healthy corporate “balance,” Joalmi is working hard to start exporting directly. Its efforts have led to an increased presence at industry events and trade fairs around the world, searching not only for new clients, but also, and perhaps more importantly, to strengthen ties with pre-existing ones. Explains Marcelo Murano: “We often look for our own clients, representatives from the main offices of Brazilian affiliates such as Behr, ArvinMeritor, Denso, etc., in order to solidify relations with the corporate heads of the groups with whom we work in Brazil. For example, the (Cleveland-based) Eaton Corporation has over 230 companies around the world. We work with three of them here in Brazil. However, if we meet with American representatives in Frankfurt or Shanghai this can lead to us signing contracts with some of their other companies.”

Joalmi has been aggressively pursuing this strategy since 2004. So far the fruits that it has borne have been more in the national market – with external contacts leading to contracts with multinational groups’ Brazilian affiliates. Meanwhile, the company is also seeking international partners that can help offset problems caused by the present currency crisis, in which a sinking American dollar and rising Brazilian real have driven up export prices. Marcelo Murano views such partnerships as perhaps the only way of overcoming this difficult situation: “We are hoping to find some European partners to get around the currency exchange obstacle. If we succeed, then certain parts that we have difficulty exporting to the U.S. or other countries in the Americas, we’ll be able to sell to Europe.”

In the meantime, the company is preparing itself for projected growth by investing heavily in its Guarulhos infrastructure. Already, its facilities boast the latest in hydraulic and eccentric presses automated with pneumatic and mechanical uncoilers, straighteners and feeders with a production capacity that ranges from eight to 1,200 tons; an important differentiating factor in a segment where most competitors’ presses can only handle 400 or 500 tons. Other equipment includes a full welding line with spot, oxyacetylene, electric, MIG, TIG, and robot welding as well as a complete engineering station featuring tools internally designed and manufactured with AutoCAD and CATIA V5.
In order to fulfil its obligations as an outsourcer, Joalmi’s team works in three shifts and with 50 percent of the plant always inactive. As such, it is always prepared to take on last-minute jobs that its clients/competitors can’t perform themselves. However, with demand steadily increasing, at the end of next year the company will inaugurate a second 183,000-square-foot plant on a 269,000-square-foot site, also located in Guarulhos. True to tradition, among the new plant’s technological novelties is a painting line, which Joalmi expects to bolster efficiency and further bring down production costs. Says Marcelo Murano, “This will keep us flexible. And ultimately, it is our flexibility, our ability to pick up the slack at a moment’s notice, that makes us the successful outsourcer that we are.”

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