The downside was mostly overlooked. Capital tied up in slow-moving inventory was capital not invested in production. Surplus stock accumulated as processes changed or units were modified. Every major operator had essentially become a part-time industrial distributor, a role they hadn't signed up for and weren't particularly well-suited to play.
The Outsourcing Era: The Industrial Distributor (1980s–2000s)
By the late 1980s, Oil companies began asking a compelling question: why are we warehousing nuts, bolts, and flanges when someone else can do this better and cheaper?
"Do what you do best and outsource the rest" — might have been written for this era. The answer to that question was the market basket agreement: a negotiated contract between an end user and one or more distribution partners covering a defined set of products at agreed pricing.
The refinery got predictable costs and reduced inventory exposure. The distributor got a committed book of business that justified investing in local inventory.
This era produced the regional PVF powerhouses that many in the industry still know well. Distributors built warehouses near their customers’ job sites across the United States. They hired technical sales representatives who understood the products and material specifications.
"Do what you do best and outsource the rest" became the motto of the industry in this era. The answer to that question was a negotiated contract between an end user and one or more distribution partners covering a defined set of products at agreed pricing.
The refinery got predictable costs and reduced inventory exposure. The distributor got a committed book of business that justified investing in local inventory.
This era produced the national PVF powerhouses we still know well who hired technical sales representatives who understood the products and material specifications.