Choosing a partnerChoosing a partner
May 1, 1997
When was the last time you heard someone say this: "The best agreements are just a handshake." Wish it were that simple? Maybe it can be. Harry Pelle thinks so. He's the vice president of DJ Inc., a molder based in Louisville, KY. That quote is his, and a significant amount of his business is based on that premise.
He's actually talking about partnering, something DJ does a lot of with its customers and suppliers. (Pelle's latest partner is the company that acquired his this spring - Nypro.) The concept is simple. Rather than cajole, berate, and browbeat your suppliers for the lowest possible price, you choose a supplier you trust and agree that it will be the exclusive supplier of that particular equipment. With that commitment, in return the supplier becomes a part of your business and agrees to train your employees, maintain the equipment, and provide technical service and advice when you need it. As a result, you buy more than equipment. You buy a relationship in which your supplier has a vested interest in how well you do (see sidebar, p. 12).
DJ, which employs 1000 people in three plants, discovered partnering in 1991 when a customer, according to Pelle, "pushed us into it." It may be the best push DJ ever had. DJ maintained that partnership for a few years; then, during a period of tremendous growth, Pelle says DJ realized how well partnering could work with suppliers. "We were growing so fast that we didn't have time to look for equipment," he says. "We don't have the luxury or time to go out and get prices and quotes."
Pelle admits that at first some suppliers were skeptical. "They have a hard time realizing the savings in the system until it starts to work," he says. Today DJ has developed a core group of suppliers who understand and believe in the system. "My suppliers have to feel like they're in the molding business with me," Pelle says. "We keep in contact with a small group of suppliers and try to let them know where we're going."
It's Pelle's belief that too many molders waste time trying to pinch pennies out of their suppliers. He prefers instead to cut off the supplier's salesmanship and work on getting better service and support. "We're a pretty good-sized corporation. We could pound price out of just about anyone. But it's not just about price. It's about total quality."
Pelle calculates that in a normal molder-supplier relationship, about 40 percent of equipment functionality sits idle because molders are not trained to use it properly. He contends that many suppliers make the sale and leave, not to be seen again until they want to make another sale. "It's about using the 40 percent of the machinery that doesn't get used," he says. "We want to take the whole bidding process out of the way. If a partnership works, then you get past the sales hurdle and develop a relationship."
As a result, Pelle says his suppliers respond faster; they feel like they have a stake in his business, and his employees know more about the equipment they're using.
And at DJ, every partnership is based on a handshake. "The bigger the contract, the less likely it will work," says Pelle. He notes that not every partnership works. He says DJ has agreed to partnerships with some suppliers who just didn't hold up their end of the bargain. "They don't tell you they're unwilling to partner, but they are," Pelle says. It's only by actually trying a partnership that a molder can know how responsive a supplier will be.
The only downside of partnering, Pelle notes, is that by choosing one supplier, a molder generally doesn't see what competing suppliers can provide. "There's a risk," he says, "in that you can get stuck in somewhat of a vacuum. It becomes your supplier's responsibility to keep you up to date."
Four years ago, Pelle thought partnering would sweep the business world off its feet, making service the driving force of business, not price. Now he's not so sure. As evidence, he points out that DJ used to have partnerships with almost every customer, in which DJ became the supplier, interested in and integrated with its customers' business. But right about the time those relationships really started working well, Pelle says the "bean-counter mentality" took over.
Many of his customers are publicly held companies that he says are more subservient to the bottom line - the "short-term master," Pelle calls it. As a result, many customers stopped partnering and reverted to the traditional practice of soliciting bids from molders and choosing the cheapest, not necessarily the best.
But DJ's partnering with suppliers will continue. And Pelle expects to strengthen his company's partnering relationships with the recent acquisition by Nypro. Like DJ, Nypro is privately held and shares DJ's operational philosophy. Pelle says he expects Nypro to provide diversification as well as access to new and global markets. - Jeff Sloan
DJ, Rapid make it work
DJ is known for partnering - with customers and suppliers. One of the molder's suppliers that is reaping the benefits of this relationship is Rapid Granulator (Rockford, IL).
"We'd been buying granulators from Rapid for years," says Wayne Sweasy, director of purchasing at DJ. "It builds a tough, reliable granulator. But we made it clear to Rapid that we needed more than just its granulators to make this partnership work. We needed to move both companies to a new level of understanding and commitment."
The result of that commitment is better, faster service. Sweasy says that when DJ opened its El Paso, TX plant and expanded its Louisville facility, it needed new equipment fast. In response, Rapid cut its lead times for DJ from four to six weeks to two weeks. In the shop DJ has standardized its tool cribs to stock only Rapid's parts; and Rapid established a spare parts shipping arrangement that allows DJ equipment to run around the clock.
Harry Pelle, vice president at DJ, points out that his business and expertise is in molding, not in grinding. The partnership makes Rapid a closer ally for grinding training and technical support - where its expertise is. As an example, Pelle notes that Rapid pointed out that DJ was improperly sharpening blades, thereby shortening blade life and costing the molder money.
The partnership is not a one-way street, either. Pelle says several of his staff have visited the Rapid factory to learn more about how Rapid does its job. Says Kirk Winstead, vice president of sales and marketing at Rapid, "All of our employees know who DJ is and what DJ means to us, from our president to our machine assemblers. We work hard to maintain our commitment to DJ and we're confident that this relationship will continue to grow and benefit both companies."
And Rapid staff members are welcome at DJ any time. The important point is that DJ and Rapid have moved beyond the traditional salesperson-purchasing agent relationship. "The salesperson wants to close the sale, and the purchasing agent wants the best discount," says Pelle. "Our partnership has broken through these traditional barriers to cooperation. We're now working together to realize much greater savings through dramatically improved operator efficiencies."
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