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Lessons Learned: When a buying group or industry association makes sense for a manufacturer

Posted on October 15, 2007
Filed Under Articles, Marketing |

By Ben Bradley & Pete Wiltjer

An industry-specific association, buying group or consortium can provide many immediate and long-term benefits, ranging from industry education and networking opportunities to focused advocacy among state and federal government agencies.

The manufacturing market in the Midwest, among the most diverse in the U.S., enjoys a comparably diverse collection of associations and buying groups that can serve its special needs. And according to a new report from the National Association of Manufacturers, the time has never been better for manufacturers to band together in order to uncover new competitive advantages.

Despite a strong national economy and nearly a year of continued growth in the manufacturing sector, the NAM report on The Cost of Doing Business in the U.S.’, published September 1, finds that sharp increases in structural, non-production costs (up 42 percent since 2003) are having a negative impact on manufacturers.

According to the IRS, there were more than 86,000 trade and professional associations operating in the U.S. in 2005. With this in mind, we spoke with some Chicago-area industry association leaders and experienced members to get their perspective on the potential benefits, aside from the obvious networking opportunities, of participating in an association or buying group.

“When we started Prime Advantage 10 years ago, we wanted both manufacturers and suppliers to gain an overall advantage on purchasing, supply chain strategies and supplier decisions. Today, our manufacturing industry members are also able to gain an assessment of the supply market and assistance in the development of a sourcing strategy,” said Louise O’Sullivan, president and founder of Chicago-based Prime Advantage, a manufacturing buying group.

O’Sullivan was president of the foodservice equipment manufacturer Groen when she first recognized the benefits of pooling buying power and industry knowledge for like-minded manufacturers. Groen is part of Unified Brands, an individual operating company and subsidiary of the global manufacturing conglomerate Dover Corporation. It was not taking full advantage of the parent company’s collective buying might or ability to swap important information about industry trends.

Unlike O’Sullivan, Michael Johnston of the Chicago Manufacturing Center (www.chicagomanufacturingcenter.com) first experienced the benefits of association membership while leading Hedstrom, a manufacturer of play and sports balls.

“We were members of the Toy Industry Association on a national basis,” said Johnston, who was president of Hedstrom Corporation from 2001-2004. “We would exhibit at the TIA’s two major shows every year, and while attending those shows, we would also set meetings with senior decision makers from all our customers, where we could present the breadth of our line and talk about strategic issues that were difficult to schedule outside of the show timeframes.”

Johnston said the TIA also provided members the ability to monitor the payment trends of major customers and obtain credit reports for smaller customers or customers new to its product categories. Johnston also participated on the board of directors and the strategic planning task force for the association.

“This work helped shape how the industry responded to changing demographics and buying patterns as well as other industry wide issues,” he said. “Overall, we believe that we extracted more value from our participation in the areas mentioned than the cost of membership.”

Sandra Westlund-Deenihan, president of Schaumburg, Il-based Quality Float Works, first sought guidance from an industry association in 2004 when her company joined the Washington, D.C.-based National Association of Manufacturers.

Now, Westlund-Deenihan actively participates in several industry associations, including serving as a board member for the National Association of Manufacturers, a board member for the Tooling & Manufacturing Association, and serving on the Education, Employment, Training and Planning Committee of the U.S. Chamber of Commerce.

“Even though we are a small business, we’re sitting there alongside large manufacturers,” Westlund-Deenihan said. “The large companies look to us for information because we export like the bigger ones do. And we have learned a lot about important issues affecting the manufacturing community through our involvement in these boards and associations. It has helped us have a voice among the industry’s top decision-makers and gain exposure.”

The weak dollar makes this an opportune time for manufacturers to consider exporting to new markets. The latest trade data, which showed the U.S. trade deficit at record low levels, shows that foreign markets are becoming increasingly receptive to U.S. products. Westlund-Deenihan said her company got invaluable assistance from the U.S. Chamber of Commerce in getting an export program running.

Steve Romanelli, president of Carol Stream-based Gerlin, a manufacturer of pipe fittings and flanges, experienced the buying group Prime Advantage first as a supplier to his current company. While working for Precision Stamping Products of Schiller Park, IL, his company enjoyed the opportunity to meet regularly with manufacturers like Gerlin and discuss sourcing needs. Soon after, he left the supply side to join Gerlin.

“The cost savings Gerlin enjoys today through the buying power of the group is just tremendous,” said Romanelli. “And while we absolutely gain value from the strong networking with other members and suppliers, I would say that the coordinated meetings (at Prime Advantage’s bi-annual meetings) go well beyond the typical definition of business networking. We feel that the ability to sit down with suppliers that are audited and qualified a couple times every year is an irreplaceable opportunity for our company.”

Today’s global economy has created a hyper-competitive environment for U.S. manufacturers. Industry associations and buying groups have had to change with the times as well, according to Bruce Braker, president of Park Ridge, IL-based Tooling & Manufacturing Association.

Thirty years ago, Braker said TMA members spent most of their time entertaining customers while enjoying huge order backlogs and a steady stream of business just through phone orders.

“The U.S. was the world’s primary manufacturer,” he said. “Competition and necessary productivity improvements, both for the members and the association have been accompanied by an ever-increasing requirement to do everything immediately.”
Braker said new members of the TMA, or any industry group, will only truly benefit from their membership through active participation in the group.

“Many new members to an association don’t appreciate the value of getting involved with activities that enable them to meet their peers,” he said. “That may include serving on a committee or attending a seminar or business/social activity; become part of the community to really benefit.”

Johnston said a due diligence analysis of membership benefits should be a requirement for any company considering an investment in a buying group or industry association, and should include time spent getting to know the group’s staff and active members. “If you can’t make a case for spending the money, either the organization doesn’t offer things you need or you don’t know how to take advantage of them,” he said.

Jason Speer, a vice president with Quality Float Works, believes that any company considering membership in an industry association may be able to quickly determine which group or association is right for its employees through a cursory examination of an association’s member materials.

“Email alerts from the NFIB, TMA and US Chamber are good resources for us, and these email communications offer a good way to get involved and stay involved,” Speer said.

“Make sure that the make-up of the members meets your expectations for a peer group,” adds O’Sullivan. “Ask yourself hard questions about what you hope your company will gain from its participation in the group. Many Prime Advantage members have forged strong relationships with suppliers that have continued on for years.”

About the authors: Ben Bradley and Pete Wiltjer run the Bradley Wiltjer Marketing Group, an Aurora, IL-based business-to-business marketing and PR agency.

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