While manufacturing has been showing positive growth as a whole in 2017, one trend that we have noticed is the closing of many machine shops across the United States. These closures have led to a lot of new business being up for grabs for the machine shops still in business. This has led to what in one respect is a “quoting heaven”. However, this can also be a nightmare when it comes to trying to compete with the prices these potential clients have been paying and expecting to continue to see. Moving forward, their thinking is that they will be seeing the same or similar pricing as from their old supplier.
Machine Shop – Client Relationship
Many customers develop long term relationships with their machine shops for the parts they require. It takes work by the customer to find a supplier to make a part that meets all specifications at a price that meets their budget. On the machine shop side, production should always refined to improve production time and limit unnecessary costs. Once perfected, a relationship is developed between the client and manufacturer that can last years, because both sides know what the specs of the part they need, as well as the price and related production costs. Machine shops should work diligently to improve production. This improves productivity and keeps the cost down for their customer. Yearly labor price increases and frowned upon. Old repetitive jobs occasionally need looking into. It is in the interest of the supplier to seek ways to improve production at their end to keep the work. If the supplier doesn’t study their processes, to realize efficiencies and profitability, that is when the machine shop closes down. However, that client still needs their part, causing them to request quotes from many other shops.
As a machine shop receiving requests for quotes for new parts, we have been noticing a trend where the customer is looking for a much cheaper price than we can offer. They expect this price because it is what their last supplier offered, but they do not realize that price is due to long term relationship they had with their old manufacturer. Familiarity with the part when you run the job for years keeps the cost of production down. Yet, by not paying attention and assuming all is good can be devastating. The process is continually refined to see what can go wrong, where time can be saved, and how production can become more efficient. Materials also cost more today than in the past, but often those changes in prices are not added for customers who have long standing relationships with. When running a part for the first time you also do not know how it is going to go until you actually make the part. The process is then refined each production run made, which can lead to costs going down, but is difficult in the quoting process as you must budget for worst case production scenario to make sure you will not lose money on the order. If you win a part to run, be sure you look for better ways to create efficiencies. Then two things happen, you can hold your price, while still making money and not have to raise the price to the customer, next time. This is exactly what the last guy did, except he became complacent, lost track of his overhead, increased material cost, while letting the part continue to run PO after PO, thinking he was making money. When this catches up to a company they are forced to close their doors. Think of the seconds to produce a part as pennies. A second saved is a penny earned. Never lose track of the seconds.
At Mid-West Screw Products we just launched our new website which contains a Quick Quote section for our customer’s convenience. We are ISO 9001, ARM 9009, AS9100 certified to make sure we can meet all your needs. Contact us here for more information on the parts we can provide for you.