Manufacturer builds his plant near his primary customer and connects the two with a pneumatic conveying system
Ralph B. Andy doesn't like anything to come between his company and its customers -- even physical distance. So the company, Polycom Huntsman Inc., built its newest plant just 1,500 feet from General Motors Corp.'s Harrison Radiator Division in Lockport, N.Y., and then connected the two factories by a pneumatic conveying system. Now, when the GM plant starts to run low on the plastic compounds that Polycom supplies, a computer-controlled system automatically begins shipping material from Polycom's silos to Harrison's. "It's probably the best just-in-time system you've ever seen," says Robert Falgiano, a Harrison purchasing manager.
It's certainly a better system than Harrison bargained for. Back in the early 1980s, Harrison began asking favored suppliers to consider moving closer to Lockport as part of GM's effort to install just-in-time (JIT) programs throughout the company. Nobody expected any supplier to take the request quite as literally as Washington, Pa.-based Polycom Huntsman did. But once Polycom decided an adjacent site was suitable, the decision to link the two buildings physically -- rather than using railcars -- made sense to both companies. "Otherwise, we'd just be reducing freight costs," says Andy. "We wanted to eliminate them."
But is 1,500 feet too close for comfort? After all, it cost Polycom $4 million to build the plant (its fourth), and 80% of its Lockport output is sold to GM. What if GM suddenly cuts back? To guard against that possibility, Andy persuaded GM to sign a long-term contract with certain purchase guarantees, instead of its typical one-year pacts. He could do that in part because of the conveyor system, which -- by eliminating ordinary shipping costs -- allowed the two companies to set a contract price advantageous to both. But perhaps more important was the relationship the supplier has established with GM over the past decade: Polycom (a three-time Inc. 500 company) is a self-certified supplier, which means that Harrison relies on the smaller company's internal quality control. "We went to a long-term, stable relationship," says Harrison's Falgiano.
Which is not to say that GM is all heart. With its JIT system, Harrison is often in the enviable position of shipping product before receiving an invoice for its raw materials. And you wondered why large manufacturers like just-in-time. . . .