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Using strengths and experiences to boost profitability

Knowledge about material and manufacturability should be shared with customers to build stronger supply chain relationships—and possibly sales opportunities

Continued advancement in materials, forming technologies, and software offers opportunities for suppliers to improve their business models and profitability.

Suppliers of formed components frequently provide more than just manufactured product. Customers often need guidance in forming a specified metal into the desired part. You, the supplier, probably have experience and knowledge that your customers do not. Guiding your customers in the use of proper technologies, materials, and processes can help you become established as a trusted and knowledgeable partner. As a result, your relationship with your customers should also be more productive.

Understanding the value of your experience and services offers the opportunity to take advantage of your strengths, reinforce your market position, and improve your profitability. One of the risks in sheet metal forming is the perception that you are a supplier of a commodity product. The most recent (2012) U.S. Economic Census counted nearly 51,000 firms involved in the fabrication of metal products (NAICS 332). Maintaining profitability in a competitive market requires creativity and a bit of innovation. Often you need look no further than your own employees and operations to identify opportunities to develop a valuable marketing strategy, improve your profit margins, and find new ways to make money.

To establish a successful place for your product in the market, you must understand your strengths and the value of the services you provide. If you've been forming for a while, you should understand what you do well and what struggles you have. Working from your current strengths, you can best identify and target your ideal customer base and focus on supplying new customers in that segment and improving your offerings to existing customers.

Chances are you have a lab or a lab service to determine the properties of your incoming feedstock. If not reimbursed, these services can cut into your profit margin. Understand that laboratory services are critical to developing an understanding of what metal properties support quality product and what properties lead to excess scrap. Building this understanding is a valuable service to your customers in obtaining reliable, on-time product.

The first step is to recognize that you also provide valuable information and knowledge services along with stamped parts. Think about the activities that go into developing, manufacturing, and shipping sheet metal parts for customers. Each of these additional services should be identified and priced appropriately for its value to your clients.

  1. Recognize that you already are a service company. You do more than stamp parts. Your true value is in your capability to provide a consistent quality product on time and at an affordable cost.
  2. Establish business processes to stabilize your process activities. Being aware of the level of service you normally provide allows you to budget time for them, as well as incorporate them into your profit base and convince your customers of their value.
  3. Understand how to sell services to your clients. The service you provide can help you differentiate yourself from your competitors. If you have a deep understanding of a particular process, technology, or science, be prepared to explain how your knowledge and related services will support a productive and rewarding relationship.
  4. Some examples of values you may add to your stamped components are:

    • Managed inventories. Small to midsized clients may benefit if you are better able to maintain inventory and manage procurement for some of their required materials.
    • Process optimization. You should be able to assist customers to develop their prints into an effective plan for forming and fabrication. You may offer alternatives to meet a specification, such as requiring an engineering change or designing jigs to accommodate the requirement. Or, perhaps you can advise the customer on the best practices for welding formed components.
    • Improved manufacturability. As an expert in forming, you should be able to offer your clients advice on how to best design, form, and join their component.

    During periods of change in materials and technologies, suppliers can benefit from sharing their knowledge and experiences with their customers. Your specialized expertise in processes and materials can help you reframe your sales conversations to benefit your customers’ needs for timely and quality product. If you can lead the discussion, you can demonstrate competence and leadership in your market segment. By leading the conversation, you also can demonstrate for your prospects the best methods to purchase product and services from your company.

About the Author
4M Partners LLC

Bill Frahm

President

P.O. Box 71191

Rochester Hills, MI 48307

248-506-5873