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1.
1. WHAT IS UMMA? UMMA
(United Marine Manufacturers Association, Inc.) is an association of independent
boat builders who, while operating autonomously, have joined together
to enhance their collective ability to address important industry issues,
which effect their survival and continued prosperity. UMSA
(United Marine Suppliers Association) is the supplier counterpart to UMMA.
In order to be an approved UMMA supplier, a company must belong to UMSA
and conform to its Membership rules and guidelines. In so doing, UMSA
strives to build a cooperative business partnership between the UMMA boat
builders and the UMRA marine retailers. Just as UMMA is an advocate organization
for the boat builders, UMSA is an advocate for the suppliers in order
to enhance their collective ability to address the industry issues, which
effect their survival and continued prosperity. 3. WHY ARE THESE ORGANIZATIONS NEEDED? The marine industry has changed dramatically since the consolidation of boat building by power providers began in 1986. Since that time, conglomerates with direct or indirect ties to marine power production have secured control of more than fifty percent of the total domestic recreational boat building market. This has resulted in a challenging position for the remaining independent builders and, increasingly, a challenge for their suppliers. It would be similar to Chrysler having to buy engines and transmissions from Ford and Chevy. As this consolidation and the resulting "have" and "have not" disparity continues through acquisition and attrition, both the individual and collective industry strength of the remaining independent builders is diminished. The indirect result for the suppliers is that, as more market share is vested in fewer companies, the leverage of those companies increases and they place ever-greater demands upon the suppliers. At the same time, they retain fewer and fewer options to take their business elsewhere. The philosophy of UMMA and UMSA is that slowing and/or reversing this trend is vital to the continued viability of the independent boat builder and their independent supplier partners. As the conglomerates have increased their influence over the industry, both suppliers and dealers have suffered. Since the industry has not grown since its peak in 1988, consolidation has come in the form of ever-increasing control by the power providers and, more recently, Genmar. The widening disparity has occurred at all levels. Recreational boat builders have been forced to purchase much of their power from direct competitors, while often having to purchase hardware or materials at significantly higher prices than paid by the conglomerates. At the formerly independent dealer level, the value of an outboard motor franchise has been greatly diminished by the influx of packaged boats and programs, which favor the brands of the mega-company built boats. Such disparities even apply to the suppliers, which are forced to compete with power-company owned accessories (i.e. Quicksilver, Swivel-Eze, Motor-Guide, Igloo) at the same time they find themselves with a decreasing base of potential customers. At the retail level, the historic chain of commerce between hardware suppliers, distributors, and dealers has been dramatically altered by the introduction of mass merchants, which demand ever-lower prices. Companies ranging from West Marine to Wal-Mart now supplant much of the traditional marine retailers' accessory business. In many cases this results, not only in lower margins to the supplier, but a lower level of service to the end-user. More recently, consolidation among the dealers themselves has taken the direct form of dealer conglomerates like Travis, MarineMax, Olympic, and Bass Pro. Likewise, de facto consolidation is being imposed in the form of programs, which offer incentives to dealers to purchase multiple lines from a single conglomerate boat builder and/or supplier. These examples are matters of fact. The alternatives are fairly clear-cut. Either the consolidation can continue, attrition taking its toll on independent builders, distributors, suppliers, and dealers alike, or, the parties can band together to create viable alternatives which can survive, irrespective of actions taken by the "big boys." The "United" companies are taking an active role in advancing this second option by bringing independent dealers, builders, and suppliers together in working toward the shared goal of continued prosperity. Founding in 1995, UMMA has grown to become the largest organization of boat builders in the marine industry. More than 90Member companies build more than 70,000 boats per year and work in growing partnership with more than 130 supplier Members of UMSA. By pooling their collective efforts and resources within a unique, semi-cooperative structure, UMMA Members have improved their operational efficiency, while making great strides toward leveling the playing field in relation to the largest companies in the industry. In so doing, they have steadily increased their commitments to the UMSA suppliers. At the same time, through UMSA, the suppliers have secured a direct voice in working with the UMMA builders through the UMMA quarterly newsletter, which provides a vehicle to communicate with UMMA Members on a consistent and exclusive basis. An even more important focal point in building the relationship between the Members of UMSA and UMMA, is the annual UMMA/UMSA "Partnership Conference" each October. This event is a model for cooperative effort between the builders and suppliers and is attended by all Members of UMMA and UMSA. More
recently, the interests of both builders and suppliers are beginning to
be reinforced and extended to the end consumer through the creation of
a vehicle for including the dealers of the UMMA Members in a joint role
of mutual support. United Marine Retailers Association (UMRA) represents
the final corner of a true "Triangle of Mutual Dependency." 4. HOW DID THE "UNITED" PROCESS BEGIN? UMMA was founded in 1995, as a group of four major aluminum boat builders. Along with the group's founder, Kent Wooldridge, these companies shared in the belief that if the independent builder is to compete on a level marketing playing field, they must strive to improve their competitive positions by improving their operational efficiencies, leveling the purchasing playing field, and removing the barriers which traditionally have impeded cooperation between their dealers and suppliers. In addressing these goals, it was agreed that, as an organization, collective benefits could be achieved which would exceed the capabilities of any individual member. Instead
of taking an adversarial approach with suppliers, from the beginning,
UMMA asked their vendors to join them in partnership. As this relationship
matured, UMSA was created in 1998 to encourage the broader involvement
of the suppliers in working toward mutual goals and to work with each
other to further their specific needs. 5. CAN'T LONG ESTABLISHED, INNOVATIVE, AND NICHE COMPANIES SURVIVE? It will be challenging for many of the smaller suppliers. Just as few could have foreseen the degree of industry change since 1986, there is little reason to believe that this pace will slacken. In addition to the boat-building operations of Yamaha and Brunswick, the newly expanded Genmar, with apparently favorable ties to the power companies, will further flex their muscles. Other major independents such as Tracker have long-standing ties with power companies which place smaller companies at a competitive disadvantage, while adding to the collective industry control by the power companies. As the size and strength of these companies increases, they will likely apply more and more pressure on the suppliers to compensate them for their market-share. There is, however, some reason for optimism regarding the continued viability of the independent builders and their ability to sustain a successful relationship with the suppliers. Since its split from the former OMC, Volvo has reorganized and made great strides as an independent supplier of both inboard and I/O power. More recently, Bombardier, having acquired the assets of the former OMC outboard group, has displayed a potentially formidable presence as a partner and non-competitor to the independent builder. The emergence of OEM programs from Suzuki and Honda may add to this counter-balance, but the battle will be a long and difficult one with many skirmishes. Nevertheless, each of the major conglomerates is committed to future growth. Such growth can only come from one of two places, expansion of the total industry, or the capture of market share from independent builders. Based upon the most realistic industry projections, only the latter is reasonably foreseeable in the current market. As these mega-companies focus their purchasing on fewer and fewer suppliers, the position of the supplier "have-nots" will become increasingly tenuous, while the profit margins of the supplier "haves," will continue to be squeezed. Perhaps,
even more of a challenge will be the emerging relationships between Brunswick,
Genmar, and Tracker and major retailers in which they have a monetary
or preferential relationship. If access to the buying public becomes restricted
for the independent builder, production competitiveness may be somewhat
irrelevant. In order to combat this, UMMA has launched its own retail
initiative in the form of United Marine Retailers Association (UMRA),
which will work with dealers to enhance their competitiveness, while building
business ties between them and the UMMA builders and UMSA suppliers. 6. THE POWER COMPANIES HAVE SLOWED THEIR EXPANSION; SURELY THEY'VE LEARNED THEIR LESSONS? OMC didn't learn. Nevertheless, the aftermath will almost certainly result in more powerful alternatives. Brunswick and Yamaha are enormous companies, each arguably larger than all of the non-engine sales of all of the independent builders combined. It has taken a long time for them to learn how to fully flex their muscles. However, they have gotten better, and they will probably do whatever is necessary to protect their existing market shares and, in order to grow; they have the option free to subsidize their boat building enterprises from the profits they make by selling high priced power to the dealers and independent builders. Recently,
acquisitions, alliances, and policy and program changes seem to indicate
that the battle may be heating up. While OMC endured a lot of problems
of their own making, the final result has been their bargain acquisition
by even larger more aggressive companies. The giants may change faces,
but they will not likely be the real fatalities. 7. CAN'T INDEPENDENT BUILDERS AND SUPPLIERS SIMPLY CONTINUE AS THEY HAVE IN THE PAST? In an oligarchy, the companies, which are in a position to control the supply, can and almost certainly will exercise that control. Dealers must have access to power to survive. For builders, power represents between thirty and sixty percent of outboard or I/O boat products. Since the "big three," control approximately eighty percent of outboard sales and a huge majority of the I/O sales, the power companies probably make more off the independently built boats than the independent builders themselves. Ultimately, it could become a relatively simple matter to manipulate engine and/or package programs so that the dealers favor boats built by the power companies, or their favored affiliates. Unless
this trend can be stopped, many of the independent builders may be unable
to survive and the suppliers will have no choice but to compete for the
ever-lower profit margins of the mega-companies. However, if the number
of builders is reduced and if the mega-companies consolidate their business
with fewer suppliers, something has to give. Simple math dictates that
there will be too many suppliers and too few customers. In order for the
suppliers to remain viable, it is essential for them to help keep the
independent builders in the game. 8. WHAT ARE UMMA AND UMSA DOING FOR ITS MEMBERS? The independent boat builder is an endangered species. While there is no magic, UMMA encourages a philosophy of independence, innovation, mutual cooperation, and business professionalism. For far too long, independent builders have suffered because they had no alternative but to do business the way they always have. Unfortunately, they are now playing a game in which the rules have changed. UMMA seeks to empower the independent builder so that he can better survive in a highly competitive and changing industry. While cooperative purchasing is an important component, we believe that the greater benefits derive from the sharing between the Members of collective knowledge, experience, and pooled market share, which allows alternative programs to be developed. In addition to purchasing of goods and services, UMMA is working in conjunction with UMSA, UMRA, and others to address pressing issues such as enhanced business training, product liability, casualty, health and workers' compensation insurance, independently-controlled power, marketing, advertising, government relations, and innovative builder and dealer financing. Perhaps
most important is that UMMA is seeking to transcend the traditional friction
between builders, dealers, and suppliers. By creating three different
organizations (UMMA for builders, UMSA for suppliers, and UMRA for retailers),
each has its own advisory board, but they share the common objective of
building the bonds of business partnership between the three corners of
the "Triangle of Mutual Dependency." By building these bonds,
all three corners reinforce each other's efforts and strengthen their
collective ability to succeed. 9. CAN AN INDEPENDENT BUILDER EXIST WITHOUT THE MAJOR POWER COMPANIES? For many years, life without these companies has been nearly unimaginable. While we are not insisting or even recommending that Members do without these companies, we are suggesting that money spent with them may work against the long-term interest of the independent builder. When this premise is combined with the fact that real profitability of these products has diminished for both the builder and the dealer, there has been a desperate need for profitable alternatives. Recently, this has changed with Bombardier's acquisition of the former OMC outboard companies. Now, the UMMA organization enjoys a special marketing partnership with Bombardier, which is committed to helping our Members grow and prosper. To the extent of this success, the positions of the UMSA suppliers are similarly strengthened. In
Addition, the Japanese giants, Honda and Suzuki, market some of the industry's
finest outboard products. Likewise, Volvo produces some of the finest
I/O products in the industry. All have made significant advancements in
terms of product and market presence in recent years. In total, the combination
of these products can now allow a builder to decrease its dependency upon
power purchased from companies with whom it competes for boat sales. 10. WHY SHOULD ALL OF THIS MATTER TO A SUPPLIER? Immediately,
consolidation results in a diminishing number of customers. Perhaps more
importantly, the independent builders and their dealers provide the glue
that allows marine suppliers to exist and do business in the manner we
them today. If the independents were to fall by the wayside, there would
be too few customers to support the existing suppliers. Those remaining
suppliers would, like in the automotive industry, increasingly find themselves
dictated to by the remaining "mega builders." As such, the roles
would deteriorate to the point that suppliers would be forced to build
what was specified, when it was specified, paid for when dictated, and
profit margins would be squeezed. 11. HOW DOES UMMA WORK WITH ITS SUPPLIERS? UMMA
negotiates Master Purchase Agreements with approved suppliers on behalf
of its collective Member companies. These suppliers, in turn, belong to
the sister organization, United Marine Suppliers Association (UMSA), which
works to increase business between the two organizations. While UMMA does
not actually perform the purchasing function, it does track purchases
on behalf of its Members and suppliers and support compliance with vender
credit policies. In exchange for its efforts toward consolidating the
Members' collective business and improving the efficiency in dealing with
its Members, UMMA receives a small commission. After payment of its operating
costs, the balance is redistributed among its Membership according to
a formula, which recognizes the greater contributions of the larger Members. 12. WHAT DOES UMMA EXPECT FROM ITS UMSA SUPPLIERS? There
are a variety of factors. While competitive pricing, service, product
quality, and financial wherewithal are essential, decisions are not made
exclusively on these issues. Since UMMA is interested in concentrating
its Members' business with its approved suppliers, it seeks, in most cases,
to develop a limited number of supplier relationships in each product
and key service category. It is important that these approved suppliers
work closely with UMMA and its Members to help consolidate the group's
collective business and to improve their purchasing efficiency. In the
course of such relationships it is implicit that UMMA will seek to develop
a working knowledge of each supplier's business so that a cooperative
effort can be utilized to improve operational efficiency for both the
supplier and the group members. Where appropriate, willingness to provide
adequate technical support and training is essential. At the same time,
suppliers are encouraged to develop proprietary components, processes,
and trade names, which can offer the potential of opportunities to distinguish
the products of Member builders within the marketplace. 13.
THIS IS A PARTNERSHIP, NOT A ONE-SIDED RELATIONSHIP! As
evidence that our mission is a two-way street, each year UMMA sponsors
our hugely successful "Partnership" conference, which brings
all of our Members and supplier partners together. Not only do the suppliers
come to a better understanding of the needs and mission of the builders,
but also the builders are exposed to new products and processes, while
gaining an opportunity to interface between the decision makers from the
suppliers. 14. DOES A UMMA MEMBER HAVE TO PURCHASE UMSA PRODUCTS AND PROGRAMS? Not
necessarily. However, one of the key considerations in evaluating a company
for Membership is the commitment by the builder principals to support
the collective UMMA efforts. This "top down" approach when coupled
with enhanced purchasing power and a profit re-distribution formula which
penalizes non-participation can, in conjunction with supplier support,
overcome most arbitrary preference decisions at the purchasing level. 15. HOW DOES UMMA AFFECT A MEMBER'S PURCHASING DEPARTMENT? It
is a natural concern to the purchasing manager, but UMMA is nothing more
than a tool. Our relationships with Member purchasing professionals are
one of our most important resources since they, as a network, provide
a national set of eyes and ears in the field. UMMA's role is simply to
accumulate data from all sources and negotiate and continually refine
Master Purchase Agreements with suppliers, on behalf of the Membership.
This is a continuing process and reduces the burdensome amount of time
spent by purchasing departments to source items and allows them to focus
on improved material handling and inventory control. Since as a group
we can often secure more favorable terms, processing times, and return
policies, the timesaving can be utilized by the builder to review alternative
UMSA programs and to improve inventory turns. We
are now a mature organization and are less aggressively looking for new
Members. However, we continue to be interested in good boat builders who
will complement our efforts and are willing to support our initiatives.
While there are no clear standards for company size in terms of production
units or dollar volume, UMMA is structured with seven tiers of Membership,
making it is possible to include companies from a few million dollars
in sales to nearly one-hundred million. Perhaps the more important issues
are a builder's reputation for quality, innovation, and integrity. Credit
worthiness and willingness to work as part of a group are essential. Belief
that the changing industry requires companies to objectively evaluate
and support alternative directions is also important. Simply, if a profitable
company, regardless of size, wants to help lead the industry instead of
follow, it stands a good chance of being considered for Membership. 17. HOW CAN A SUPPLIER JOIN UMSA? We
are always willing to talk and to listen. In the vast majority of cases,
we have no more than two suppliers of a given product. Because we believe
in and cultivate long-term relationships, we seldom replace established
suppliers. However, if a new supplier can make a strong case for the superiority
of his product or program, we will be objective. Practically speaking,
we are more likely to consider a program in an area in which we do not
offer an alternative, or have only a single supplier. But there are exceptions,
particularly where the products of a new supplier are only in conflict
with a portion of the products offered by an existing UMSA supplier. 18. HOW ARE UMMA AND UMSA MANAGED? Since it is critical that UMMA has access to confidential information regarding all of its Members, the actual operation of the organizations has been established as autonomous from its Membership. UMMA is a for-profit company, and all confidential information is received through the president and operational contracting party, Kent Wooldridge. In his representational capacity as UMMA's attorney, he treats all such information as privileged. UMSA
is a separate legal entity, but it functions as an adjunct to UMMA, which
solicits and consolidates information and orders from UMMA builders for
the benefit of the UMSA suppliers. In so doing, it utilizes a shared staff,
which functions as a liaison between the builders and suppliers to increase
sales, streamline joint operations, and resolve problems. 19. WHAT DOES UMMA EXPECT FROM AN APPROVED SUPPLIER? As
part of the application process, suppliers must agree to comply with certain
rules and guidelines. Specific details of programs are confidential and
must be negotiated between the supplier and UMMA prior to approval. 20. WHAT BENEFITS CAN A SUPPLIER EXPECT FROM WORKING WITH UMMA? As previously stated, the marine market is changing very rapidly. UMMA believes that to stand still in a consolidating market, is dying. This applies equally to both builders and suppliers. We know that we cannot prevent some inevitable business casualties between both groups. However, we do believe that as builders, who traditionally acted in completely independent fashion, recognize the benefits of collective action, they will become increasingly willing to support the actions of the group that represents their interests. While UMMA cannot secure the conversion of all of its members to a single supplier overnight, it can certainly influence a portion of its Members and can, over time, steadily increase that participation. Under
any circumstances, since UMMA will limit the number of suppliers with
which it executes programs, it represents a clear advantage to be an approved
supplier. At the same time, since UMMA has the power to suspend all of
the purchasing programs of any Member, it can and will exercise a great
deal of influence with regard to compliance with suppliers' credit policies.
But as the industry's consolidation continues, perhaps the more important
aspects of involvement derive from the changing environment itself. In
addition to the prestige that a relationship with UMMA provides to a supplier,
this relationship offers valuable opportunities for planning through direct
interchange with Member principals at UMMA functions. As an outgrowth,
it is not only hoped that mutual business planning can be enhanced and
operational efficiencies increased, but such relationships may open the
door to additional proprietary joint venture opportunities, cooperatively
shared between the UMMA Membership, its supplier partners, and in some
cases, even the Member's dealers. 21. HOW MUCH DOES IT COST TO JOIN UMSA?
Currently, there is not a direct Membership charge for UMSA suppliers. 22. ARE UMMA AND UMSA WORKING? Absolutely! Since its inception in 1995, UMMA has grown to more than ninety boat builder companies, producing approximately 70,000 boats per year. In addition to being the largest single block of boat units produced, other than Brunswick, UMMA represents the largest block of boat building material and hardware usage in the marine industry. UMSA has similarly grown to include more than one-hundred-and-thirty suppliers of most of the goods and service products utilized by the UMMA Members. Participation
by UMMA Members in UMSA supplier programs has increased steadily and a
significant portion of the Membership will only consider new suppliers
who are approved by UMMA. More recently, we have begun seeking means by
which UMMA builders and suppliers can work together and share programs
in areas of common interest such as insurance, workers' compensation,
freight, etc. We have remained consistent in our commitment that what
is good for the suppliers must be good for the builders and vice versa.
This bond is fundamental to the slogan which we have maintained from the
beginning - "Sharing in the Partnership of Success." 23. UMMA DOES NOT HAVE ALL OF THE ANSWERS The
industry is changing very quickly and the collective knowledge and wisdom
of our Membership and its supplier partners is clearly our most valuable
resource. We need and seek the input of our Members, their dealers, and
our suppliers in order to help address the challenges, which lie ahead. For further information, contact: United
Marine Manufacturers Association. Inc |
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