October 2009 / Volume 61 / Issue 10|
Customers need pruning too
By keith Jennings
The need to reduce unnecessary overhead has been a common theme at machine shops this year, and if you haven’t evaluated or adopted cost-cutting in your shop, you should. But there’s another cost-cutting technique that’s often overlooked and also worthy of serious evaluation or adoption—developing a “leaner” customer base, one that’s targeted on your shop’s core competencies. Identifying, penetrating and getting jobs from customers that match your shop’s operating niche should be a goal. This way, you’re working on jobs, parts or projects that best suit your shop’s capabilities—not those that are unfamiliar and, likely, more costly for your shop to produce.
In a recession, many shops quote or run just about any job to keep their machines running. This usually includes low-profit jobs that burden employees with tasks that have little or no financial return. Or, more simply put, these jobs are a waste of time. It’s true that you normally can’t get a job without first quoting it, but knowing when to decline a new job or cut your losses with a mismatched customer will save time and give your staff more time to focus on quotes, customers and higher-profit jobs that match your strengths and experience.
I’ll be the first to admit that our shop has occasionally taken on work outside our market and answered some unusual RFQs. Some of those jobs have worked out. Tackling a new type of project outside your normal scope of work may introduce you to a whole new market. Some experimentation is good and can reap rewards. However, an effective manager should be able to recognize the red flags indicating jobs that are likely to waste valuable time and resources.
For example, our shop recently accepted a job from a high-profile government contractor to perform a secondary operation on a small quantity of parts. The contractor had no setup or test piece, wanted a 1-day turnaround and included four pages of incredibly detailed instructions and specifications. These documents were overly thorough and something most people wouldn’t read or notice. Unfortunately, we didn’t either. One of the specifications, buried deep in the document, specified how we couldn’t alter the surface finish in any form without written permission and an ISO paperwork trail. In this case, an operator didn’t read this requirement and incorrectly altered a part.
When the contractor received and inspected the completed parts, it rejected one piece because of unauthorized surface alterations. They were justified in doing so and we were prepared to take corrective action, but the “noncompliance” meeting they demanded at 8 a.m. the following day reminded me that sometimes it’s best to decline a job. This meeting consisted of a conference call with five of their quality assurance (QA) and procurement employees that was essentially a formal “it wasn’t my fault” meeting. Adherence to the customer’s QA corrective action procedure became more costly than the value of the entire job. The part deviancy was minimal, but their bureaucratic system dictated an expensive solution.
After rectifying the situation, we realized this particular type of work wasn’t good for us and we’d be better off saying “no thanks,” even with the high price. Knowing how to identify these situations and stop them before they divert you from more productive activities is important. Sometimes, it’s OK to tell a prospect or customer, “No thanks, this isn’t a good fit for our shop.” Ironically, you can be more profitable if this is understood and implemented. Your time is valuable. Know your strengths, know your market and, sometimes, just say no. CTE
About the Author: Keith Jennings is president of Crow Corp., Tomball, Texas, a family-owned company focusing on machining, laser cutting, metal fabrication and metal stamping. He can be e-mailed at email@example.com.
CUTTING TOOL ENGINEERING Magazine is protected under U.S. and international copyright laws.Before reproducing anything from this Web site, call the Copyright Clearance Center Inc. at (978) 750-8400.|