Some customers left, but a contract manufacturer finds new ones on the Web
October 10, 2006
The fortune of Custom Tool & Mfg. Co. changed last year with a cold call from a representative of MFG.com. After signing on for the Web-based service, the fabricator is finding several fabricating jobs to bid on each week.
|Fabrication jobs for Custom Tool & Mfg. Co. sometimes are very large and intricate in nature.|
Some customers left, but a contract manufacturer finds new ones on the Web
In its 25 years of operation, Custom Tool & Mfg. Co. (CTM), Lawrenceburg, Ky., has grown from a small fixture and prototype shop to having the ability to take small or large projects—in terms of both size and volume—from beginning to end. Jobs might call for punching out thousands of small washer-size parts or the fabrication of a 35-foot-long bus chassis with 384 parts.
The company has grown from 1,200 to 45,000 square feet and services customers in many areas, including material handling, construction equipment, the trucking industry, transportation, oil well equipment, and mining. But even with a diverse customer base, the outsourcing trend definitely has affected its business.
"We, like many manufacturers, were impacted by NAFTA and other outsourcing strategies," said Richard Donoho, CTM's plant manager. "We do work for a major tractor-trailer manufacturer, and one of our large jobs went to Germany when the company moved its operations there. Then another customer went to a different design on a big fabrication we'd been doing and moved the job to Mexico. One of our larger customers in the lift truck industry suddenly had a lot of open time in their plant and moved some jobs back in-house. In all three cases, we were told that we'd been doing great work. But they were local divisions of larger operations, and the decisions had been out of their hands.
"So, we've been trying to replace that work, and we're beginning to have some real success," he added.
Some of that success is related to attracting new customers through new online tools.
CTM's core business is machining, fabricating, welding, and assembling wiring harnesses—from a single lead up to an 80-ft.-long harness with 300 breakouts. Most of the company's 40 employees are cross-trained in different areas of front office and shop floor activities to respond to an increase in volume in any department. Production operations are organized to comply with ISO, Occupational Safety and Health Administration, and Environmental Protection Agency standards, and all welding is certified under the AWS D1.1 standard.
"Every job is tracked at every level of production, from the initial quote to final inspection and shipment. This also allows us to check job efficiencies, quality, and P&L," said Rod Cunningham, CTM's president. "Using this information as a guide allows us to better determine where the company is strongest and adjust our direction of growth."
Quality fabricating efforts, on-time deliveries, committed employees, and long-term relationships with customers—all are aspects of CTM's business, according to Cunningham. Yet that still didn't prevent a slight downturn in the business last year.
|Since signing up with MFG.com, Custom Tool has won a variety of machining and fabricating jobs.|
Those fortunes changed nine months ago with a cold call from a representative of MFG.com. Fighting the urge to hang up, Donoho learned that MFG.com was an online service for OEMs and suppliers of engineered-to-order components looking for fabricating and machining help. The Web site matches buyer requirements with potential suppliers, such as CTM, that possess the right expertise, credentials, and capacity for the job being sourced.
What really caught Donoho's attention was the offer to "test drive" the service. For five months, Donoho looked at the daily request for quote (RFQ) activity.
"Frankly, I was amazed," he said.
CTM soon signed up for the service, and a MFG.com representative set up the program for the company. Within three weeks, CTM had won its first job.
Before signing up with MFG.com, CTM had tried several methods of attracting customers: making cold calls; checking Kentucky, Indiana, and Tennessee manufacturing directories; meeting with a company that said it could help them win state government fabricating contracts; and trying other online services. None of those efforts resulted in any success.
Now Donoho checks the site daily and sees anywhere from 10 to 80 RFQs. In the first two months, the online service generated leads resulting in $400,000 worth of new business and another $300,000 currently quoted. The first order they received paid for the service for the year, which can be from $5,500 to $7,500 annually, Cunningham said.
Cunningham said the site is user-friendly and contains all the information they need to decide which RFQs interest them. Checking the site several times a day, Donoho has to consider several RFQ opportunities.
"We don't quote on everything," Donoho said. "If something looks like it's right up our alley, then we'll quote. And we've been successful.
"There have been two or three we didn't get, but you can't expect to get them all."
When CTM doesn't win a quote, the online service lets the company see where it ranked in the bidding process. The site reveals who got the job, how much it was, and where the winner was located.
"The first time we saw this information was on a job we had bid on and did not get, but we could see the bids ranged from $800 to $4,000. We were right in the middle, and knowing what we knew about the job, we could see that $800 wouldn't even cover the material costs," Donoho said.
"So we're pretty sure that company didn't get the job," he added. "No one's going to award a job that's bid at below material costs."
Even in a job-losing scenario, CTM can learn how competitive its bidding is and make adjustments in future bidding.
Cunningham and Donoho are confident in their bids because MFG.com provides many of the answers that often are not addressed in traditional RFQ communications. For example, a bidder can see estimated annual usage and who pays for shipping, along with much more common information related to engineering drawings and material specs.
"It certainly beats going on sales visits, where you don't know if you're going to get to see a print or quote a job, or certainly calling someone up, hoping you get to talk to the right person, which rarely happens," Donoho said.
In the past CTM fabricated metal products that were later shipped to Asia or Europe, but now the contract manufacturer is focusing its energies on quoting mostly North American jobs.
"We might see 500 jobs a month that would not be particularly attractive to be sourced in Asia or Mexico, given all the lead-times, transportation, paperwork, language issues, and so on—especially quick turnaround and quality," Cunningham said. "We look at those jobs and try to see where we fit in.
"And we feel the people we've dealt with so far through MFG.com are not flashes in the pan—i.e., 'you guys get the job refined and then we're going to take it overseas," he added.
In fact, two of the jobs CTM has gotten through the site are government-supported, and those aren't likely to be outsourced anytime soon.
| Users of MFG.com's online bidding tool have the choice of setting up filters to limit the number of RFQs that might appear on the screen or leaving the filters open to view all opportunities.|
For example, a user can set up filters that weed out RFQs with short lead-times, from certain geographic regions, or involving certain metals. The filters help to streamline the review and bidding process for users not inclined to review every opportunity.
The other option is not to set up any filters.
"What I've done is left my filters wide open, because it takes very little effort to review the screen and make a decision on whether you want to quote or not. You can delete and continue or review it further," said Richard Donoho, Custom Tool & Mfg. Co.'s plant manager.
The company's profile on MFG.com is under machining, and RFQs for screw machining or machining from barstock on a lathe sometimes appear. Donoho said CTM is not involved in those types of machining, and he simply deletes those opportunities.