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Parts Maker's Fortunes Soar After It Receives Boeing's 'Gold Supplier' Status

November 01, 2000

Terry Windust knew that, within the aerospace parts industry, winning "gold supplier" status from Boeing Co. was the highest honor he could achieve. But the odds of a small machine shop like his ever meeting the stringent, 100% quality level demanded by Boeing were almost laughable: A year ago, when he applied for certification, only 13 aerospace suppliers in the world had done it. Still, Windust was undaunted. It took five years and an investment of $100,000, but the company finally snagged the gold. T.L. Windust Machine Inc. co-owner Terry Windust was interviewed by freelance writer Karen E. Klein.

Boeing Co. established a preferred-supplier certification process in 1992 and has certified hundreds of suppliers all over the world since then. It grades its parts suppliers based on quality, on-time delivery, cost, business practices and statistical controls. The grading process is intensive: Boeing sent a team of seven individuals to our company for a week to fine-tooth-comb all aspects of our company, from employee relations, to management, to business practices, sub-tier suppliers, and quality and delivery of the product.

Under the system, Boeing awards bronze, silver and gold certifications, though many firms do not meet the basic standards and remain unrated. To be considered high-performing, you have to be rated bronze or above. The first time we went for certification in 1995, we got silver. We were the 100th supplier to get a silver rating.

Over the next five years, we maintained our status as a very high-performing silver supplier, but it took time and investment capital to build our business practices to the point where we were ready to go for the gold.

Under Boeing's matrix, we had to upgrade from our one-year operating plan to a five-year business plan. We had to implement statistical process control systems and upgrade our trend monitoring, our sales and marketing, quantify our maintenance costs and budget and improve our business practices.

We also had to have a continuous improvement plan in place and had to establish long-term relationships with our sub-tier suppliers so we could get the best value for the work they were doing. We signed five-year exclusive contracts with most of our suppliers, including our air-conditioning maintenance people, our computer technology suppliers and our machine-maintenance firm. Putting them on longer-term contracts gave us better rates and reduced the price we pay by 20% to 30% on average, which reduces our cost and means that we can sell parts at lower prices.

How we treat our employees was a big part of the certification. Part of achieving gold status was making sure our salaries were at the top of the industry and setting up 401(k) pension plans companywide. We established an open-door management policy, where a floor sweeper can bring up a problem with the company president. The Boeing evaluators did interviews with all the employees, verifying that the management claims we made were true and that any employee can make suggestions and ask how the business is going. In fact, we post information on how the company's doing financially.

The evaluators wanted specific evidence that we met Boeing's standards. They have identified only 22 gold-rated suppliers in the country over the last eight years. They don't want to hang the gold on a company that's not world-class. The inspections took place between October 1999 and January 2000, and they reviewed our deliveries for a year, making sure we had 100% quality and we were 100% on-time during that time.

We were notified this spring that we would be the first "job shop"--a smaller operator that quotes every job separately rather than being a major subcontractor--in California to get the gold certification. We were very proud.

Since we were rated as a gold supplier, Boeing has committed to doubling our business in the next three years. We used to sell only locally, but now we're getting calls for bids from Boeing locations all over the country. Other customers who have heard about the certification have also started calling more often.

Because it costs us more to achieve gold status and maintain it (we have to stay at 100% quality and timeliness to do that), Boeing gives us a 6% margin over unrated shippers on our bids. So, if an unrated supplier bids $100 for a job and we bid $106, we would still win the contract because of our gold status.

Because we now have all the management systems and the corporate structure in place, we are ready to double our output as the work comes our way. So the certification not only helps us get more clients, it has helped our company on every level.

Recent Learning Curve columns are available at http://www.latimes.com/curve. If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016 or at kklein6349@aol.com. Include your name, address and telephone number.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

AT A GLANCE

* Company: T.L. Windust Machine Inc.

* Owners: Terry and Dorothy Windust, Carter and Kathleen Collins

* Nature of business: Aerospace machine shop

* Location: 7871 Cherry Ave., Fontana 92336

* Founded: 1983

* Employees: 41

* Web site: http://www.tlwindust.com

* E-mail: terry@tlwindust.com

* Annual revenue:

$6 million

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