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Blanket orders. How do you guys handle them ??

Dupa3872

Stainless
Joined
May 1, 2007
Location
Boston Hyde park Ma.
I just wanted to ask a bunch of other guys how they handle blanket orders and pricing on them. I have a good customer who has taken good care of us for over twenty years. They pay great and have never said no when I have needed a hand.

A few times a year they place 200 to 500 piece order and spread out the delivery. I give them the price based on the order quantity and let them draw on a schedule. I try to build them in one set up but sometimes it's just too much time to tie up the machines and labor. When I don't I end up eating additional set up time and everything that goes with doing it that way. It's all small close tolerance turning work with a few milling features and not a ton of money in material. Mostly 6061 and 303 stainless. I always have work in process for them and good cash flow from them.

I might have two or three orders a year like this most of the time they take it all, once in awhile a scheduled order will be pushed out further than originally agreed but I don't worry about it.

This customer is easily 60% of my Biz and as I said they are good to me always.

What do you guys do ?

Make Chips Boys !

Ron
 
What would I do?
Different from what you're doing?
Not much.......

What are YOU thinking?
Charge them a stocking fee??
Charge for the extra setup?
You say they treat you well (for 20 years) so it seems like you can
be a little accommodating to them as well.
And possibly if you can't any longer, the next guy can?
 
What would I do?
Different from what you're doing?
Not much.......

What are YOU thinking?
Charge them a stocking fee??
Charge for the extra setup?
You say they treat you well (for 20 years) so it seems like you can
be a little accommodating to them as well.
And possibly if you can't any longer, the next guy can?

I'm not thinking of changing a thing I simply wanted to see what others were doing and if i was nuts for being so accommodating :) Have you ever questioned yourself ?

Ron
 
Honestly if this is your biggest headache your doing better than most the rest of the planet, possibly any other shop in this solar system.
 
I have close to what you have but I never get POs, orders are word of mouth, and they provide most of the materials. I do pretty much what you are doing so it doesn't sound to me like you are being too accommodating.
 
I like Blanket orders and will show my desire for them with good numbers in return.

In general it kinda works like this, they forecast a basic need, say 1000pcs over the year releasing 120pcs per month. I initially try to run a month or two depending on schedule.

As I have open time I increase my stock. If I need to buy material, but its a light order, may add a few bars for their stock. As time goes by they may ask for early releases...or hold off a bit.
If you can get a few customer doing this it can be nice on your scheduling. Busy, you already have stock, if your slow you have work and income. Have a Rush job you can push their job aside as you have parts already.
Down side...if you are real busy too long you can find yourself i a bind not having stock on hand...not good. If you have a customer that likes to change things...it can be bad although Blanket is for the item and you would still be able to sell what you have as is...but sometimes to be nice, I take some on the chin...modify at cost or below...depends.

All in all, I find it can be a big plus for both parties.
 
The only problem I see is that they are 60% of your business. .

I fell into that trap once... I would look into making that no more than 30 %...


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We usually treat a blanket order by the quarter. Sales projections are ALWAYS wrong. If they say they're going to need 200 per year, that means lots of 50. That's how I price it, and run it.
 
It is a bit risky to pre-make the order, but that is not to say that the risk is not worth it. Be prepared to be left holding the bag on the remainder of a lot of parts that have not been ordered. It is better if you are mentally prepared for such to happen, not saying that it will. That is why you don't ever give the parts away at the very lowest price, you should reward yourself for your diligence by padding the price a little bit.
 
once in awhile a scheduled order will be pushed out further than originally agreed but I don't worry about it.



Make Chips Boys !

Ron


Doo they sometimes take them sooner than planned?


I wouldn't expect to give them the same price for a qty all taken at once, as the same qty taken over a duration.
Depending on the job, but I think that I usually find myself offering the same price for the blanket, as the next lower qty break - all taken at once.

Follow?

100pc one time buy @ $5
250 pc one time buy @ $4.25
500 pc one time buy @ $3.90
1000 pc one time buy @ $3.75

1000 pc blanket @ $3.90


You shouldn't be fussing about setting up a second time. It should be expected that you will run the job a cpl of times over the year, and this allows you to work it in during otherwise slow times - should you have them, but AT LEAST you don't need to run 1000 pcs in the next 3 weeks if your schedule doesn't allow it. You can run 100, and you now have 6 weeks to fit it back in.

Maybe you ran 300 and it just gave you a 4 month winder?



I am currently there and then some (probably more like 80%). Its freaking scary!

Black guns fell off the market! (At least at my tier level)
Prolly not a bad thing, but that has been a big share of our work over the past 10 yrs.
Need to find a new gig. (feet up) :popcorn:


-------------------

Sweatin' to the Oldies!
Ox
 
And you move them from 60 to 30 by increasing sales from others, not by decreasing work from them. Their midset might change if they find out they're keeping "a whole machine shop busy".

All that sales time you're saving on their account needs to be spent on building other accounts.

Chip
 
It is a bit risky to pre-make the order, but that is not to say that the risk is not worth it. Be prepared to be left holding the bag on the remainder of a lot of parts that have not been ordered. It is better if you are mentally prepared for such to happen, not saying that it will. That is why you don't ever give the parts away at the very lowest price, you should reward yourself for your diligence by padding the price a little bit.


A Blanket Order is X amount of parts with specific releases, all parts that meet specs are to be taken whether they want the parts or not.

So the risk in Pre-making the order is minimal...kinda anyway.

That said, I too have been stuck, mostly with smaller companies that change design on the dime. Those the blanket orders are not true blankets as I make little more then the next release and priced accordingly.


As to the 60% of your business...been there, done that, scares me and being extra busy with their work is nothing compared to the work it takes to drum up more work from others to knock that 60% down to something acceptable. Then its figuring a way to get it all out keeping everyone happy, usually means early days and late nights with weekends working.

It's nice to see them come in and see lots of machines with their jobs in them, its nicer when they see ALL the others backed up with other peoples jobs.
 
Re. 60% .. quantities, value, profits matter.
IF it happens that You are making lots of money - do NOTHING.

Bank the money, pay yourself a big bonus, save the money.

In many situations, the user may be perfectly happy, and also be very profitable.

You have 99% probability that any change is a net negative to you in $$$ - and often to the customer as well in $$$ net.
You are NOT in business to make the widget better, faster, cheaper, better looking.
You are in business to make money - and crucially - to keep it.

A better widget cheaper and faster may not actually benefit the customer .. and almost certainly will hurt your profits.

If YOU are NOT making a lot of money, adjust accordingly.
 
I handle them about like you do. Before making anything that I will put on my shelf in inventory for future shipments, I get something in writing stating any engineering changes causing rework or scrapped parts of work already finished will be at added expense. And I agree with others , this customer is too much of your total sales. I had my 3 biggest customers all move off shore in an 18 month time period and it hurt, but we survived. All were 10 plus years good customers.
 








 
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