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A molder’s guide to the proper care and training of customers

Bill Tobin

April 26, 2016

10 Min Read
A molder’s guide to the proper care and training of customers

Recently Clare Goldsberry related a story of a company that reduced its cycle times for an automotive client. Its profits improved until the buyer pounded on the desk and demanded a price reduction, essentially taking away the profit from the molder's hard-earned efforts. A buyer once told me, "I like to keep my suppliers almost on the verge of going out of business. It motivates them." When I asked him what he would do if his company were to cut his wages and bonuses the same way, the discussion promptly ended.

Buyers go to seminars to learn how to beat up their suppliers and improve their own bonuses. Somehow they gleefully think that when their supplier goes out of business, there will be a dozen others who'll gladly sign up for this abuse.

You feel like they have you on a leash. So what's a molder to do? Actually, it's pretty simple.

Image courtesy Stuart Miles/freedigitalphotos.net.

First, look at the quote and purchase order: What are you selling to your customer? Ninety-nine percent of the time you're selling parts for $/1000 pieces composed of material, labor, yield and your expertise. The material cost is publicly available and will affect the price as it changes. Everything else is private, based on your initial price. When you brush away all the fluff, the buyer orders parts in some quantity and defined quality level; the molder ships per the specifications; and the buyer pays. If any portion of this contract is violated, unless stated otherwise in writing, the entire contract is void.

Contract law has an interesting concept: It assumes all negotiations are complete before work begins. The articulation of the contract is the last piece of paper that is exchanged between buyer and seller before work begins. All previous versions are void. Both buyer and seller, because they are the professional agents for their companies, are required to read their mail and take exception (read: object and re-negotiate in writing) until all objections have been resolved. If it isn't in writing, it never happened. Since both parties are professionals, a contract can have any amount or kind of other conditions so long as it doesn't violate any laws.

So how does automotive get away with making what would normally be abusive demands? I call it the “asking isn't stealing” approach. Let's look at this: Automotive is insistent on "transparency" but it’s actually one-way transparency. OEMs demand rebates, “givebacks” and price reductions when they think you are making too much profit, but the reverse isn't true. They demand you purchase new equipment but won't guarantee the loan or the business to fill it. They demand you accept "tasks," such as improving quality, cycle times and so forth, regardless of the expense and will gladly take the profits generated but won't fund the expense of getting there. Most molders are closely held corporations but they demand to see everything about your company and micro-manage it.

Take a deep breath and ask yourself the question: Why should I agree to this kind of abuse? Answer: They demand it and, for whatever reason, you submit to it.

How do others get around it? Here's an example. Toys are an ultra-high-volume, seasonal business. There is manic activity to build and qualify tools and then fill the distribution network 90 to 120 days before Christmas. This means the toy molders are at 100% capacity for five months and then essentially dead the rest of the year. Long ago the toy industry solved this problem: OEMs went to their Tier 1 suppliers and bought a majority position of their stock. Now the toy people sit on their suppliers’ boards of directors and require capacity and tooling during the time it's needed. They can mandate all the things automotive demands. But it's all accounting dollars, not real money. The only real requirement is that the molder backfill the loss of the toy business during the off season. Problem solved without all the desk pounding.

So, how can you manage your customers?

First of all, you need to understand the concept of "NO!" Quite like how your pets and kids understand it.

Remember the old phrase, "Business is based on price, quality and delivery, but you can only have two of the three?" You got the job because the buyer thinks you can do all three. The rest is the behavior of a schoolyard bully daring you to say, “NO!” (Bad dog!)

Here's what NO! means:

NO! means you write your policy manual stating, "Here's how we do business with our customers," and not accepting the "I'd welcome the abuse you will heap on us" approach. Think of it like a pre-nup agreement. Getting married is easy, but a divorce can get ugly if you don't have the exit policy spelled out beforehand.

Send your policy manual referenced to your quote. If necessary, specifically and continually state you will not agree to all the stuff microfilmed onto the back of the customer's PO. Send it and reference it with each response to your customer's objections. The buyer is required to read and understand each document. If he doesn’t, it's at his peril, not yours. (Who's wearing the leash?)

NO! means you won't put up with threats (meaning you fire them). One of my clients had an exit clause in the contract that stated, before the job could be pulled, the customer had to pay for all in-house finished inventory, work in process and raw material ordered for future business. All outstanding invoices as well as storage fees from the time production was halted to the time the customer paid for everything and took possession also had to be paid in full. While an exit clause is standard practice in our industry, it is meaningless in a court of law unless both buyer and seller have specifically agreed to it as part of the PO. (Note: If you don't have a written exit policy and try to hold the mold hostage before your customer pays for everything, a judge will quickly find you guilty of “business interruption,” costing you a minimum of three times your customer's lost business.)

Sure enough, the buyer tried to pull the “if you won't agree to XYZ, we'll move the job elsewhere” trick/threat. The molder said (and followed up in writing), "I'm stopping production as of today. Everything will be moved as is to the back of the parking lot until accounts are fully settled and the payment clears the bank. And, by the way, we think we're going to have bad sleet storms tonight." That stopped the buyer dead in his tracks. Quickly followed by a series of humble-pie type phone calls and blah-blah. (Who's holding the leash?)

NO! means you have the right to build a mold to satisfy the customer's capacity. I had a client who was paid to build an eight-cavity hot runner 2 x 4 combo tool—four drops filling two cavities each plus spare cavities. He paid for the mold modification for a 3 x 4 combo tool out of his own pocket, installing the spare inserts. With four extra producing cavities, his costs dropped, productivity went up and his profits soared. At some point in time, his customer pulled the tooling. My guy happily shipped off the mold and spare cavities. But he had removed the extra cavities from the mold base and filled the pockets with weld, leaving the next sucker to figure out how he had shortened the cycle. (Teaching a puppy new tricks.)

NO! means it is your company, not your customer's. After a job was pulled, my client was told he had to go over to the new molder and show him how to run it. His answer was he'd be glad to do it, once he had an open PO for $10,000 per man, per day, for as long as it took.

NO! means keeping your expertise private (which is really all you have to sell). One molder I know simply wouldn't let customers into the production area. His excuse was “insurance reasons.” You could visit the company all you wanted but you'd die of old age in the front lobby or his office before seeing how they ran your tooling (so his customers could secretly measure the cycle time, spy on process sheets, etc.). He wasn't being rude, but customer visits to the production floor disrupted his business, so he made it difficult. But you could see your mold out in the parking lot, if it wasn't running. If you wanted them to interrupt production and look at the mold, that would cost you a flat $1,000 extra to look at it on a mold cart in the parking lot. Opening the mold up/flipping it over had a flat $200/man-hour charge, also.

NO! means if your customer wants complete one-way transparency, he or she is more than welcome to make you an offer to buy controlling interest in your company like the toy industry does. (You have to work for your doggie treats.)

NO! means you will do business professionally. After all the bidding and specifications, it is laughably common for the buyer to say: "I'd really like to award you the job, but I've got another quote here that's $2/1000 cheaper. My hands are tied. I have to award the job to the other guy, unless you can at least meet his prices." Question: Why is the buyer talking to you? If the other guy was cheaper, why didn't he just give him the contract? Fact: The buyer is bluffing. There is no other guy. Lesson learned: The buyer is trying the first of many subtle threats/ploys to get you to lower the cost, even though you are already the low bidder. Since you're on the phone, tell the buyer to tell his boss your price just went up by $5/1000 because you overlooked something and he brought the price back down to your original price because of superior negotiating skills. (Good dog! Go fetch!)

When requiring your customers to act in a professional manner as you do, will you lose some business? Maybe.

Think of it this way: What would you do with smart but arrogant, know-it-all, abusive, constantly complaining employees? Usually you put up with them for a while, and when they don't change, you fire them.

What will happen if you stop getting RFQs from the Big Three? Because they cannot afford an overnight massacre of their supplier base, you'll have the time to backfill the loss of arrogant, know-it-all, abusive, complaining contributors that will ultimately lead to a future bankruptcy and do business with customers who believe in the "we order-you ship-we pay" philosophy of doing business. (Good dog!)

Who's in control? As much as your customers shout the mantra of supplier management, it’s actually as futile as trying to manage herding cats! You are in control, not them. If they award the business elsewhere, let your competition go out of business! Just keep making periodic friendly calls to your ex-customers and buy the occasional lunch. You'll still be there, and when they come back “allowing you a second chance,” inform them politely you are allowing them the luxury of doing business with you on a professional basis based on price, quality and delivery performance; not the other way around.

Put the leash on that ill-behaved dog and teach him proper behavior. Or, as the southerners say: "If that dog won't hunt, let him find another home."

It's your choice.

Bill Tobin is a consultant and owner of WJT Associates. He has authored several books and articles and teaches courses on plastics processing. Books, additional articles and the current public training seminar schedule are available at www.wjtassociates.com, or contact the author directly at [email protected].

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