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A.O. Smith Electrical Products earns supplier award from leading dairy farm equipment manufacturer

February 27, 2002 - Milwaukee, Wis.—A. O. Smith Electrical Products Company recently earned Preferred Supplier Status from DeLaval Inc. of Kansas City, Mo., the world's leading manufacturer of milking machines and related equipment for dairy farms.

The award was presented for A. O. Smith's efforts to improve on-time deliveries through reduced lead times, strategic inventory programs, and enhanced forecasting systems.

A. O. Smith was one of 22 suppliers to receive Preferred Supplier Status during 2001, according to J. Mark Juett, North American Director of Sourcing for DeLaval. "Since we began concentrating on logistics with our suppliers, our on time deliveries to our customers have increased to 96 percent. We see this as supplier development and part of supply chain management."

DeLaval and A. O. Smith have spent a considerable amount of effort over the last two years learning each other's businesses and procedures with the goal of making it easier to do business, DeLaval Purchasing Agent Doug Slayton, notes.

One method DeLaval uses to keep track of deliveries is a weekly "open order" report, he explained. The report, which is sent automatically to A. O. Smith, tracks each motor order, the due date, lead time, forecasted requirements, and DeLaval's existing motor inventory.

A. O. Smith customer service analyzes the report each week and contacts Slayton just if there are problems or questions regarding the status of an order. Otherwise, each motor order is delivered within the lead time specified.

As DeLaval's preeminent supplier of electric motors, A. O. Smith is responsible for on-time delivery of 30 motor models, ranging in size from one-half horsepower, 56-frame fractional horsepower motors up to 30-horsepower integral horsepower motors.

"We have been supplying DeLaval with Century ® motors for 40 years," according to Steve Boutilier, general sales manager-integral horsepower motors for A. O. Smith Electrical Products Company. "The open order system enables us to keep better track of each order's status and aids in our communication with the customer."

"We worked together to arrive at lead times that make sense for both parties, and the open order system helps us live within those lead times," Boutilier added. A. O. Smith ships motors to DeLaval from plants in McMinnville, Tenn., Juarez, Mexico, and Budapest, Hungary.

In addition to logistics, DeLaval works with its suppliers to improve quality through the use of a quality scoring system, Juett explained. Standards include traditional measures, such as building the motor to the customer's specifications, but also include correct shipment quantities, packaging, and product identification. Maintaining a total quality approach such as this helps to improve efficiency and reduce costs, Juett said.

"We also look at the people we do business with to see if they are receptive to a program such as this and eager to perform," Juett said. "Do they see value in this? We have found that A. O. Smith is very eager to work with us, to take the information we give them and put it to good use."

At the same time, the company has progressively improved motor quality through the use of its Continuous Improvement process. Employee Continuous Improvement teams focus on motor defects, identifying the root cause of problems and implementing corrective actions to eliminate the defect.

A.O. Smith Electrical Products Company, based in Tipp City, Ohio, is A.O. Smith Corporation's largest operating unit, with 2001 sales of $ $803 million. It manufactures a comprehensive line of hermetic and subfractional, fractional, and integral horsepower AC and DC electric motors used in a wide array of consumer, commercial, and industrial products.