Paying a heavy price for purchasing only on price

March 13, 2014

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As fabricators become more selective about jobs they accept, OEMs need to rethink purchasing procedures.

You don’t have to remind me just how difficult the metal fabricating business can be. I get reminded almost on a daily basis.

On this particular day, I received an e-mail from a reader who works in the purchasing area for a large OEM. He was looking for a reference that would give him an idea of what metal fabricators charge per hour for their services by machine. He said he had such a list for the plastic injection molding industry, but lacked one for metal fabrication.

I responded that I wasn’t aware of such a list and that type of information might differ significantly based on the metal fabricator’s location. I sent him a link to the job shops listed in thefabricator.com’s Forming & Fabricating® Industry Directory, so that he could reach out to some shops and establish a ballpark number for hourly machine charges. Then I shook my head, thinking about how difficult it can be to win work when so many buying decisions still are made strictly on price.

Many job shops have participated in this cutthroat world of the price is right, but ultimately find that the whole process is wrong. They want to establish relationships beyond their customer’s purchasing department. That way they can build relationships with design engineers and other decision-makers, helping them to design more cost-effective and robust components or find other ways to add value to the part fabrication and delivery process, such as inventory management services.

Senior Editor Tim Heston touches on this scenario in his story “Sustainable growth in the sunny Southwest,” In his profile of CAID Industries, Tuscon, Ariz., Heston describes a company rich with engineering talent and blessed with a diversified business model, especially with the launch of an automated machinery division in 2012. In its contract metal fabricating business, the company seeks to avoid customer relationships that are based on the lowest price or just because it can deliver parts ontime to a nearby location. Those relationships are good, but they are also expendable if business conditions worsen.

Instead, CAID Industries wants to develop relationships that can be described as truly difficult to sever. One fabricator once described it as being a hard-to-kill virus infiltrating a customer’s defenses and taking root. Now that does sound a tad grisly, but the metaphor is accurate. A critical supplier of services and parts is less likely to be cut out of the supply chain when compared to a company that is known only as a name on an invoice.

DeWys Manufacturing, the Marne, Mich.-based shop that was honored with The FABRICATOR’s 2014 Industry Award (“Professionalism in precision sheet metal manufacturing,” February 2014, p. 64), is a perfect example of a company that looks for the right customers, not just any customers. Because DeWys is interested in controlled growth, C.T. Martin, DeWys’ vice president, said it can be more selective about the customers it does business with.

“We’re only looking for a handful of new customers per year,” Martin said.

Sometimes that means DeWys Manufacturing has to say “no” to prospective customers if they simply don’t fit DeWys profile of a company that the metal fabricator can serve today and grow with in the future.

The message that metal fabricators need to be more than just print-to-part shops is not a new one for readers of this space. However, the following might be a new message for OEM readers: Value your metal fabricating service providers. These fabricating shops increasingly are able to align themselves with a select group of customers that occupy a majority of their time and manufacturing capacity, which just shrinks the potential pool of fabricators. Take these shops for granted, and they might not be so quick to take the phone call or respond to an e-mail.

Purchasing strictly on price may seem like a good short-term strategy, but it lacks long-term vision. Sometimes the best metal fabricating partner won’t have the lowest price per piece part because it has to cover other costs related to advanced manufacturing technologies, engineering, or training. The end result, however, is a manufacturing partner that will be more responsive and engaged.

There’s no easy-to-find value menu when it comes to metal fabricating services. If you do find one, be careful what you order off of it. The first bite may seem OK, but a constant diet may prove harmful to your health.



FMA Communications Inc.

Dan Davis

Editor in Chief
FMA Communications Inc.
833 Featherstone Road
Rockford, IL 61107
Phone: 815-227-8281

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