New Mexico industries looking for suppliers

While manufacturers in New Mexico want to do as much business with local suppliers as possible, having the ability to buy locally apparently is much easier said than done.

You may need some belts, some gases and chemicals, or maybe some computer services.

Surely those goods and services are plentiful and available in New Mexico. So what's the problem?

A Business Journal mini-survey suggests that there are many opportunities in the supply industry.

Whether it's Philips Semiconductors in Albuquerque, Intel, General Mills or some other industry in the state, New Mexico industries lack suppliers.

Philips Semiconductors, for instance, buys about $75 million worth of goods and services, but thus far only a small portion of that is purchased through local vendors.

It's not that high tech and other industries are trying to send money out of state, but local vendors are scarce; and vendors often fail to understand quality requirements.

Philips Semiconductor's manufacturing site in Albuquerque is the company's largest, employing about 1,100. Philips, incidentally does about $3.5 billion in its corporate-wide semiconductor business each year.

Executives throughout New Mexico's industries contend there must be education and channeling of local vendors.

Firms are forced to maintain a larger inventory than they'd like because of having to order out of state and because of a lack of vendors who can do "in-time delivery."

Larry Fallin, former plant manager at Philips Semiconductors in Albuquerque, said some time ago that it indeed can be a knotty problem.

The predicament seems more than one of untimely delivery; many industries have strict purchasing requirements which small vendors may have trouble meeting.

The International Standards Organization (ISO 9000) and Ford Total Quality Excellence (FORD TQE) are two of the certification programs many industries are a part of these days, to help guarantee quality -- and customer satisfaction. While the ISO 9000 is more common in Europe, the FORD TQE program is the American version and Philips is a part of both. Most of the certification programs have similar goals and requirements.

All of Philips' vendors will have to be ISO 9000 qualified to do business with the company.

Thus, any supplier, whether it's supplying gas or O-rings to the private high tech firms, will be held to the highest quality standards if it wants to do business.

The same standards apply to non-high tech industries.

Doug Andrus, plant maintenance engineer at General Mills in Albuquerque, says he believes as private industry in the state grows, so will the availability of quality suppliers.

"When we first moved to town, I was a little frustrated at first because Albuquerque is not really a manufacturing town. It's like an island," says Andrus, who moved to Albuquerque from the General Mills operations in California.

Andrus says he had to work at dealing more with local businesses when he first got to the Duke City.

"What we have done on critical spare parts, we sat down and met with their people and we've made some agreements that our storeroom will stock a certain amount and they will stock a certain amount," says Andrus. "It's difficult to find some of these spare parts but there just hasn't been the need for in-state suppliers."

As far as quality concerns go, Andrus says vendors have been more than willing to work with General Mills and try to be efficient and timely in deliveries.

"We have to keep a relatively large inventory because we can't afford any down time," he says, "but we worked with some local electrical firm to reduce some of that inventory."

Another issue may be New Mexico's dependence on the federal labs, a dependence that with recent developments in defense cutbacks will have to change if New Mexico is to remain competitive.

The manufacturing support industry is driven by what happens at Sandia, Los Alamos or Phillips laboratories.

The contract mentality, however, may make it more difficult for businesses to make the transfer to supplying private firms.

Executives are also noticing the difficulties in industry conversion, which may also play a part in the overall economic picture in the state. Some extraction and farming industries are dwindling and trying to convert to other specialties, and retraining workers for other livelihoods is no easy undertaking.

One thing that will definitely change the business climate in New Mexico is the push for tech transfer, say those in private industry and in defense- and energy-related functions.

With the defense sector providing one in six jobs for New Mexicans, the response to cutbacks by state leaders is to search out ways to transfer technology to the private sector.

That alone will eventually force suppliers to conform to quality demands in the private sector.

Tech transfer is driving the change for quality. The state of New Mexico -- with three national labs -- has some opportunities to extract those technologies into its infrastructure.

It would be advantageous if New Mexico businesses can figure out how to access and tap that technology transfer faster than somebody from Massachusetts.

State business and government leaders claim they are working on just that.

The Governor's Technical Excellence Committee (GTEC) issued a report last year calling for stronger bridges to the private sector, and the federal government is urging the labs to transfer their technologies to the private sector.

Herbert Fernandez, director of New Mexico Tech's Energetic Materials Research and Testing Center, has been working with the governor's committee.

"I've been involved with the governor's technical excellence committee for more than a year now," he says. "They've brought all the federal labs and the universities together to put their thoughts together with one object in mind: What can we do to bring more business to New Mexico and more jobs?

"I guess the general conclusion was that we have to work more together as a group to attract more business to New Mexico," says Fernandez. "We need to go out and market ourselves as a state. The national labs and the private companies all have to work together to make it happen."

Fernandez says the federal labs have improved their rate of local purchasing with the help of local councils and associations, like the Small Business Suppliers Association, the Rio Grande Minority Purchasing Council and economic development programs.

With about 88 corporate members, the Rio Grande Minority Purchasing Council has education programs and meetings where business owners can network and learn new and better ways to supply goods and services to large corporations.

"We have about 300 minority and women-owned businesses to match-make to get these small companies some work," says David Roybal, marketing director for the Rio Grande Minority Purchasing Council. "These companies we support must be compatible with these large corporations."

Roybal says General Mills is active in the council. The council publishes a directory of member businesses and services they supply.

But more work needs to be done, especially in bridging the gap between the public and private sector.

If the state's leadership reaches out for these opportunities, New Mexico can become a center for high technology manufacturing and services to the Southwest, according to the technical excellence committee's report to the governor. The committee contends the high tech vision is right for New Mexico although the national laboratories' payrolls and purchases have not significantly engaged industries and businesses in economic development. The laboratories, however, have had substantial economic impact on the state through payrolls and purchases.

The committee contends tax incentives, more capital investment, more long-range planning and a review of the regulatory environment, among other things, are needed to exploit growth opportunities.

There are needs for gases and chemicals; needs for general office supplies and computer supplies; a lot of PC needs.

A lot of PC purchasing, for example, comes from California, except for some minor items. Local companies are missing out on a quarter million dollars' worth of business.

Part of it is because a lot of companies don't know some of the suppliers are available locally because they're not knocking on doors saying they're ready and willing to supply. Companies, however, are making a concerted effort all of the time to search out local suppliers, either.

Besides saving dollars in transportation costs, there are several reasons a local manufacturer would want to buy locally.

"If you're a vendor and you're over on San Mateo, a company official can drive to your office and you have to pay attention. And the odds are the local vendor will respond favorably.

But if a company has to call on a vendor in Boston or if problems occur at the manufacturing plant after a vendor's closing hours, a company may have to wait a day or longer and that costs money with downtime.

There are a lot of advantages from a local prospective in dealing with local vendors; you have a degree of control over them.

Philips is trying to increase its dealings with local vendors, and the changes and improvement in quality services will probably come naturally to the suppliers, both existing and potential.

Relying on local vendors allows a local company to be more competitive, including providing risk management in different ways as opposed to being conservative and carrying x-million in inventory.

Those x-million dollars can be invested elsewhere by the company.

Gov. Bruce King and other state leaders are trying to accelerate the process.

Although there are some good distributors in the state, suppliers have to become more customer oriented to boost their business.

That means more than just sales representatives being more attentive, but managers for the supplier firms as well.

Customers know there is a cycle where a complaint can be resolved through whatever level. They know a company executive will get involved if he or she has to be involved; that the product manager will get involved if necessary.

But maintaining a quality program is not cheap, especially for smaller businesses. It involves hiring expertise. There's excess paperwork for what might be called a low return and aiming for a specific market can be risky.

"My feeling is there are some limitations in this state as far as suppliers, but there are a lot of good small business suppliers," says Greg Devejian, head of the finance division of the U.S. Small Business Administration in Albuquerque. "There are a number of small businesses that don't have the resources to put a mil-spec program in place," he says. "By pure economics, they can't afford to have that quality control, but I don't think there's any real trend here."

Changes will probably come slowly for a lot of companies, but Philips, for instance, has begun working with a local gas vendor.

A lot of executives concede there are some excellent distribution businesses in the state of New Mexico and they probably have expertise to provide services they've never thought about.

They have to say 'I want to grow my business. Is this semiconductor or high tech industry an area that I now want to target my market for?'

There are some deterrents, but those real growth-oriented, risk-taking businesses are looking to ways to penetrate new markets.

Those markets are here.

E. David Grenham is a Belen newsman and freelance writer.

COPYRIGHT 1994 The New Mexico Business Journal
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