If you’re not partnering with your suppliers, you don’t know what you’re missing.
True partnerships produce exceptional results. Today’s price-cutting pressures have made the need to work together more important than ever. Here’s an amazing story of how a true partnership turned a pricing disparity into a win-win situation.
One of my clients, a manufacturer of automatic electronic assembly equipment, does most of their tooling in-house. But about once a year, when they got overloaded, they would send us about 500-1,000 rough-machined and heat-treated parts for finish grinding. Although they weren’t happy with what we charged, the fact was we never did well on the job because it was so infrequent and we had to relearn it each time.
Then one day they encountered a huge rush order, and needed us to finish 3,000 heat-treated blanks. Based on prior experience, I raised the price to cover my costs. My quote—for finish grinding only—turned out to be almost 2X more per piece than they said it cost them to manufacture the entire part in-house!
Instead of challenging the quote, my customer did something unexpected. He invited me to their shop to brainstorm with their foreman on ways to reduce costs. First, we reviewed the blueprint to determine the cost-drivers. It turned out that my shop was holding tighter tolerances than necessary for the part’s performance, and we marked up the print accordingly. Then, the foreman took me inside their shop, and showed me exactly how they manufactured these parts in-house. This gave me some insights that enabled me to develop a new, innovative method of production that greatly streamlined our manufacturing process.
The result of my “field trip?” I was able to reduce my price more than 30%, and this was with supplying complete parts, including raw material, rough machining, heat treat, and finished grinding! And we made more profit at the lower price with this new method than we did just finish grinding their supplied blanks!
If someone had asked me if I thought something like this was even possible, I would have said no, until I experienced it for myself. It taught me a hugely valuable lesson: “Nothing is impossible if we are willing to put our heads together and work together as partners.” Through collaboration and sharing, my customer received a sizeable reduction in cost (not for just this particular job, but for future orders as well), while my company benefited from an increase in profit.
There were some key ingredients that gave this partnership its power:
Initiative and open-mindedness. My customer prompted the partnership, inviting me to work with his shop foreman in an effort to reduce cost. I took him up on his offer, although I was somewhat skeptical that it would lead to the development of a dramatically improved manufacturing process.
Teamwork. Since we had worked together in the past, both the customer and I respected each other’s capabilities. And our mutual trust resulted in a win-win outcome. Utilizing the information the foreman openly shared made it possible for me to create a radically different approach to making the parts which significantly reduced costs.
The moral to my story? Create bridges instead of barriers. It can allow you to experience the many rewarding opportunities that true partnering enables.