There must be some misunderstanding: The contract molder-OEM relationship

The event that I am going to describe is completely true. Obviously, I will not provide names of any of the parties involved. I should also mention that approval was given by the client to tell this story. I am looking for input and thoughts from the readers of PlasticsToday on the situation described below. I will write a follow-up article summarizing the feedback I receive. I am curious—and I think others will be, as well—to learn how people in the industry would have handled the following situation.

 Business negotiaton

As consultants to companies in many industries with various levels of plastic background and knowledge, we are commonly asked to provide names of companies that we believe are well-suited for molding a specific product or material. To begin, I need to briefly describe the client. I believe this is important, since it will provide context to the enormity of the situation.

  • The company (client) has $500 million to $1 billion in sales.
  • It is a traditional metal company that “does very little in plastics.”
  • Current plastic part purchasing is at $15 million to $20 million per year.
  • Strong internal engineering groups have some plastics knowledge.
  • The company is pursuing many opportunities to change its metal parts to plastic.

For the reasons/benefits we all know, the client is looking to do major and numerous metal-to-plastic conversions. Because this company has an extremely strong name in its industry, is very forward-thinking and recognizes that it lacks internal knowledge and experience, the client wants to move cautiously as it converts its first significant metal product to plastic. This conversion will be a showcase for the engineering groups within this company, as well as established clients. The product chosen is a low-volume, relatively simple design that will experience some environmental challenges in the field, but nothing that the proper material will not be able to handle. 

Without getting too specific, a fiber-reinforced thermoset material was chosen with our help for this application. The client selected a molder. The molder determined the process to manufacture the part and the shop where the mold would be made. The first parts off the press showed cracking at critical areas. After we ran a series of molding trials along with mold-filling simulation to gain insight into the process, it became obvious that the molder did not have the horsepower to make the part. The client accepted the situation, made the molder “whole” and decided to move forward with a different molder. The client asked us to recommend a molder who would be up to the task to produce this part. 

As mentioned, the first part chosen is purposely low volume. Though cost was monitored, more important to the client is creating a long-term relationship with a company that can mold this particular class of materials. If you recall, the client currently uses $15 million to $20 million in plastic parts, and is extremely devoted to two injection molders with which it currently works. The client has a strong, ingrained philosophy that cost is not everything, but relationships are. I can see your eyes rolling as you read this, but I have experienced it with this company a number of times. The philosophy is truly practiced, and it works. With this in mind, we recommended a very capable and well-respected molder. This company utilizes various molding techniques and molds several different classes of materials. With approval from our client and an NDA in place, the molder was contacted and specifics of the program were provided. More importantly, the magnitude of the opportunity was detailed along with the quality of the client. In this first meeting, there was a genuine interest by the molder, but I could sense some hesitation. I brushed off this hesitation, which I attributed to the molder not knowing the client nor the opportunity that was being presented. In fact, I expected some reluctance and doubt, but felt this would be eased once I put a conference call together between the molder and client. 

A conference call is arranged with the client, molder and ourselves to make introductions, describe the current program and discuss potential future opportunities. The molder’s vice president of business development described the company and its competency in specific areas of plastic molding. Again, interest is shown in working with the client, but a whisper of “prove to me that we should be your molder” is clearly in the air. The client, who is the director of new product development, is a true professional and has much experience working with vendors. He quickly picks up on the molder’s demeanor. Sensing this, he describes the background of the company, its philosophy of working with vendors, and the initial program to get to know the molder and desire to make this a long-term relationship. He assures the molder that it could be part of numerous conversions being put into the pipeline—thermoplastic or thermoset. The molder appears to have a genuine interest in working with the client, but makes it clear that the initial program is not its goal—it is the means to get a foot in the door to work with the client. This goal is both understood and appreciated by the client. The phone call concludes with the molder stating that a meeting would be held with the other executives to determine the level of interest. 

One day later, to our great surprise, the molder responded that given other opportunities it is currently working to secure, based on the small project that was presented, it would not be able to work with the client. However, if the client could find $1 million in immediate transfer business—i.e., transfering work from a current molder—with a commitment to have $3 million to $5 million of molding work in three years, it would consider working with the client. 

With dignity, humility and straightforwardness, the client responded: 

“We will not transfer or take away any current business from our existing suppliers to establish a new relationship. We tend to be very loyal to our supply line and we value their partnership with us. Rest assured that if you ever became one of our business partners, we would treat your firm exactly the same way.”

I realize business can be ruthless and cut-throat, but how are solid, trustworthy business relationships made and kept? I have certainly been part of programs where the OEM transfers molding from one place to another, typically for financial reasons. It seems that this situation creates a capricious environment. Some questions for the reader:

  • Is the plastic molding industry so busy that demands like this can be made before the molder will work with a potential prospect?
  • Was the molder correct in demanding that the client pull programs from current molders for it to bid and run, prior to taking on this relatively smaller project?
  • Is it not common to begin a business relationship in the molding industry with a smaller project, or is it more common to establish this relationship with a larger program?
  • What is your experience in establishing that initial molder-client relationship?
  • What is your experience with losing a program to another molder?

I look forward to hearing your input, stories and even criticism of my naiveté. If you are an OEM, I would be interested to hear your insight, as well. Please respond to [email protected]. I will not publish your name or affiliation, unless you explicitly state that it is admissible to do so. And, if you feel so inclined, feel free to share your thoughts in the comments box below.

By the way, the part of interest, is currently being molded successfully at rates higher than those originally established. The part is performing excellent in the field, making it a successful metal-to-plastic conversion. We have assisted the client in converting several high-profile, complex parts from metal to plastics. The client, who is the true leader in its field in terms of sales and technology, is winning large contracts, in no small part, because of its forward-thinking embrace of the advantages of plastics.

Image: Baranq/Adobe Stock

About the author

Paul J. Gramann, PhD, PE, is President of The Madison Group, which has been providing consulting services, technical expertise and innovative technology to the plastics industry since 1993. The company is headquartered in Madison, WI.

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