Internal Audit: Structural Risks in Custom Steel Sales Processes

To the Special Profile Leaders,

In the special steel industry, we define ourselves by precision. We measure tolerances in microns and track energy consumption to the cent. We invest heavily in the maintenance of our machines and the quality of our metallurgy. We assume that if the factory floor is disciplined, the business is secure.

However, an audit of the commercial processes within the sector reveals a different reality. While production lines often run at peak efficiency, the sales offices are frequently operating in a state of disorder. This results in lost contracts, eroded margins, and unnecessary risks to physical equipment.

Below are the five primary structural failures currently impacting the profitability of European mills.

1. Internal Pricing Discrepancies and Margin Erosion

The most significant threat to a mill’s credibility is a lack of internal pricing synchronisation.

The Reality: In a documented instance at a prominent mill, a department received an inquiry for a laser-welded profile and quoted €12.50/kg based on a "gut feeling." They did not verify if other departments within the same corporate group were in contact with this client. The customer, however, already held a quote for €9.00/kg from a sister company in the same group.

The Failure: When the customer revealed the lower group price, the first department panicked. To secure the order and save face, they immediately lowered their price to €8.00/kg.

The Consequence: In less than 48 hours, the customer watched the price collapse by 35%. This signals to the market that the mill’s pricing logic is arbitrary. It trains distributors to never trust the first offer and encourages them to play different departments against each other to destroy margins.

2. Technical Mis qualification and the Rejection of Specialist Work

A mill’s reputation depends on its ability to execute what others find too difficult. Yet, the sales desk often acts as an uninformed filter, rejecting high-margin work the mill is fully capable of winning.

The Reality: In a high-stakes inquiry from a global leader in the Nuclear sector, a client requested a complex hexagonal profile. The salesperson reviewed the drawing and rejected the lead in minutes. The client was told: "This is a simple bending job; we are a laser-welding mill, so we cannot assist you."

The Failure: The salesperson was incorrect. The shape was a complex, closed laser-welded profile exactly what the mill was built to produce. A physical sample of that exact profile was sitting on a desk in the office next door. Because sales staff often lack deep technical intelligence, they reject drawings they do not immediately understand. Every day, multi-million-euro specialty deals are discarded because the sales desk does not know the true capabilities of the factory.

3. Operational Risk: The Gap Between Sales and Production

There is a dangerous friction between sales targets and production reality that can lead to catastrophic equipment failure.

The Reality: Sales personnel, seeking to meet tonnage quotas, frequently accept orders for shapes that are physically impossible to manufacture such as 12mm wall thicknesses on small-diameter profiles. Often, engineering staff are not consulted before these promises are made.

The Failure: At these dimensions, the heat from the laser warps the steel into useless scrap. More importantly, attempting to weld such material can destroy the guides and lenses on a machine worth millions of Euros. When the sales office is disconnected from the physics of the factory, they do not bring in revenue; they bring in repair bills. They make promises that the machines literally cannot keep.

4. Lead Management and Professional Reliability

In the DACH region, reliability is the absolute standard. If the steel is precise but the communication is disorganised, the mill is viewed as an amateur operation.

The Reality: Inquiries from global engineering conglomerates firms frequently sit for over 70 days without a response. In one case, after months of silence, a meeting was finally scheduled with six of the client's lead engineers. The sales manager failed to attend because they "were not in the office yet."

The Consequence: Wasting the time of a Tier-1 engineering department signals that a mill is disorganised. Major industrial clients do not provide second chances to partners who cannot manage a schedule, regardless of their metallurgical quality.

5. The Mismanagement of Senior Technical Expertise

The most expensive assets in any mill are the senior managers with decades of experience. These are the experts who understand how to solve the most difficult technical challenges.

The Reality: In many mills, these experts spend three to four hours every day writing long emails to junior staff, explaining basic math, scrap recovery, and material compatibility.

The Waste: This is the equivalent of using a master engineer as a school teacher. Because the technical intelligence of the mill is trapped in the heads of a few individuals rather than in a professional system, the company is in a state of constant risk. If those experts retire, the sales office goes blind. There is no institutional memory only individuals who are forced to answer the same basic questions every day.

Executive Oversight Questions

To determine if a mill is suffering from these structural issues, leadership should audit three specific areas:

1. The Price Correction Audit: Review every instance where a price was lowered by more than 15% after the initial quote was sent.

2. The Rejection Log: Review every technical drawing that was turned down this month and verify if the factory has built similar shapes in the past.

3. Technical Resource Allocation: Track how many hours senior technical staff spend answering basic internal inquiries rather than developing new markets.

   
   

The choice is clear: Continue running an office based on guesswork and disorganised communication, or build a commercial process that is as disciplined and reliable as the steel you produce.