When customer orders get smaller

JimGlass · Feb 27, 2012

I have an old customer that I do low volume production work for. He calls me about 3 times a year and orders the same parts over and over. He orders 50 or 60 parts of each part I make for him and about 6 different parts. He has been a customer for 6 years. He lives 550 miles away.

In the last year he orders about 3 different parts instead of the original 6. It is obvious he is getting the other 3 parts made somewhere else.

I realize it is a cruel world out there but I have gone out of my way for this guy. I do CNC programming for him for FREE and have made jigs and fixtures for him at no charge. I figured I would amoratize the expense over time when he ordered the same parts over and over. I'm probably an idiot working on these terms but I enjoy making his parts. His wife and my wife worked at the place years ago so this is how we came together.

Here is my question. Should I confront him about this or just keep quiet and continue to make what he orders. I would like to tell him to take the rest of his parts to the other guy. At first he was a 4K customer a year and now he is at 2K a year.

Ok, tell me what you think.

Jim

thedave · Feb 27, 2012

Business is business, make it worth your time. Raise your rates enough and he will go away, or you will make decent money. it's as simple as that.

rj newbould · Feb 27, 2012

Why are you so sure someone else is making parts for him? Maybe his sales/needs/budget got cut in half? Why not just ask what's going on?

Ohio_Ford_Farm · Feb 27, 2012

I agree with both post above here. Times are tight. Its might not be that at all. Find a easy open way to ask about the other parts if you must know. OR just take what you can and move on. IF you enjoy making his parts that why tell him to piss off on what parts you are making?

JimGlass · Feb 27, 2012

rj newbould said:
Why are you so sure someone else is making parts for him? Maybe his sales/needs/budget got cut in half? Why not just ask what's going on?

Times are tight. Its might not be that at all

The customer is building a musical intrument and needs all of the parts to make a complete unit.

Here are a few pics:

I guess it is possible the customer is making his own parts, I didn't think about that. I have seen some hints he may have a cash flow issue.

I guess we need to talk.

Speaking of "Times are Tight". Some may have seen this post I made last week. I bid 60 cents each to do this job. I was underbid by someone in Rockford doing the job for 25 cents each.

Interesting lathe/mill
Jim

Limy Sami · Feb 27, 2012

You say you are doing some CNC programmiing for him (for free) - er, on what parts?

Just curious.

cash register · Feb 27, 2012

This is a sales/customer service issue.

When I see a decrease in business, I am knocking on the door trying to find out what is going on in his business world. Be forthright and if your relationship is a good one, he should give you some honest answers.

In my experience, most people will tell you why if asked in a polite way. I agree with some of the others, don't assume anything, as he may have made some internal changes or the economy may have done it for him.

Best wishes.

Ox · Feb 27, 2012

JimGlass said:
Speaking of "Times are Tight". Some may have seen this post I made last week. I bid 60 cents each to do this job. I was underbid by someone in Rockford doing the job for 25 cents each.

Interesting lathe/mill
Jim

Does that include material?

I didn't see a material spec, but at 4000 pcs, it is possible that someone with a small screw machine bit on that one. If it is 1200 series steel anyway. They could drop the part in the time you R&R it. Of course they have more set-up time.

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

I am Ox and I approve this h'yah post!

Gary E · Feb 27, 2012

Have you kept RECORDS of the manufacturing cost over the years? My guess is no...
If you had, you'd KNOW your costs and time involved for every step in the process. From those cost records, you might have seen ways to improve and reduce costs, or raise the price a few % each yr...

So what to do now?....
Run some cost studies, then decide....

kpotter · Feb 27, 2012

I get lots of parts lazer cut but before I was getting them lazer cut I was using a guy who did cnc plasma. I gave him about 20 grand a year in business then, on a whim I took some of my parts to a big lazer cutting shop and they quoted me 40 bucks a piece, I had been paying 98 bucks. I never called or even asked him to bid I just started using the lazer cutter the quality is amazing and the cost was so low I didnt have the heart to even ask him to beat it. He called and asked why I stopped coming in and I told him. I felt bad but the cost difference was huge.

xdmp22 · Feb 27, 2012

"Mr. Customer, I have noticed that you have only been sending orders for a few of the parts as opposed to all of them lately....was there any issues with the ones I (we) did for you? Just wanted to check to make sure we continue to satisfy your needs as a customer"

Its that simple

Joe T. · Feb 27, 2012

My view is it's a free country. If someone tries a different vender I don't take it personal. My ex-boss would "confront" customers from time to time when he suspected customers spending their money other places. It seemed to create a problem from nothing.

As long as you are busy I would just do what is asked.

SND · Feb 27, 2012

Pretty simple really, just have to ask casually. We're not talking multi-million hush hush company. Looks like some fun parts, I see no reason to turn that away.

Lots of us do the fixtures and what not for little or no $ just to get the job, and it can well go to anyone else any day, just business.
My largest customer for the first 3yrs in business became my smallest, didn't order a thing in a few months now, didn't add it up but I'd guess 60-70K in 08.

Laurentian · Feb 27, 2012

Joe T. said:
My view is it's a free country. If someone tries a different vender I don't take it personal. My ex-boss would "confront" customers from time to time when he suspected customers spending their money other places. It seemed to create a problem from nothing.

As long as you are busy I would just do what is asked.

We have a good account that will always maintain and order from
a couple different vendors. No way we ever get 100% all the work
they order out even if we are constantly best, cheapest and fastest.
It used to irritate me lots before but by always going the extra mile and
chalkling up the lost orders to experience I feel we have gotten
the bulk of the orders. It's their policy to have acces to different
vendors for obvious reasons and as soon as our workload is
too great, prices even a tiny bit higher or missed delivery dates they
wil play it against us to beat us back into shape.

Hope this helps. Yeah I'm never too shy to ask but will keep it freindly :scratchchin:

SND · Feb 27, 2012

I've actually told a few customers before to shop around and compare prices and service offered.
Don't want anyone saying later on " oh but we just got a price for half, you've been ripping us off all along " meanwhile the half price is probably crap parts but I'm the bad guy. Nope, figure it out now, gauge the quality of a few potential vendors, and we'll work from there. I do the same when I'm shopping, I hate surprises.

JimGlass · Feb 27, 2012

Gary E said:
Have you kept RECORDS of the manufacturing cost over the years? My guess is no...
If you had, you'd KNOW your costs and time involved for every step in the process. From those cost records, you might have seen ways to improve and reduce costs, or raise the price a few % each yr...

So what to do now?....
Run some cost studies, then decide....

Actually my records are fairly good. I work off the same old drawings all the time and always document quantities, material costs and time studies. I have found ways to reduce setup costs but do not charge this particular customer for setups so all I'm doing is reducing my own losses. When the job is running I barely make my hourly rate. Some parts are more profitable than others

On the positive side this customer keeps comming back and they pay me in 7 to 10 days.
His work is used as fill in work between jobs with my other customers.

He and I will have a friendly talk tomorrow to see what is up. I'm just curious.
Thanks,
Jim

matt_isserstedt · Feb 28, 2012

I have made parts for a guy 600+ miles away, bought a forklift from him

Manual machine parts for now. But same issue, I used to be busy about every quarter cranking out parts. Been on the decline ever since around 2005 (?) or so. However his end product interfaces with the home building industry...so I can easily understand how its declining, I checked his website which is still up and was happy to see that he's still there. Last order was about a year lapse from the previous one and I still have some "nearly finished" parts I would sell to him at the longstanding price just because I bought the raw material at the "old" price....but I may have to eat them too...I just don't worry as its something out of my control. After those are gone then I am going to have to reprice just because I know the material is much higher now...

My .02 is let customers be customers, if they go elsewhere its because they got a better price or liked their (turnaround, quality, etc) better. Perhaps someone else is sweating over making what they thought to be trivial (??) Its just business. Keep hammering for new ones if thats your gig, OR, invent your own product and sell that...then You are in control

dstryr · Feb 28, 2012

JimGlass said:
I have found ways to reduce setup costs but do not charge this particular customer for setups so all I'm doing is reducing my own losses. When the job is running I barely make my hourly rate. Some parts are more profitable than others

This quote says that maybe it was a good thing he isn't ordering from you anymore? Why work for free to barely make an hourly rate?... :willy_nilly:

LKeithR · Feb 28, 2012

JimGlass said:
He and I will have a friendly talk tomorrow to see what is up. I'm just curious.

This is exactly what you need to do. I've run my own business for over 40 years and I can't imagine having a customer I couldn't call up and ask some questions if something in our relationship changed. No need for confrontation. It's just a conversation; touching base, seeing how things are going. To my mind it's an essential component of a healthy client/supplier relationship...

Limy Sami · Feb 28, 2012

SND said:
I've actually told a few customers before to shop around and compare prices and service offered.
Don't want anyone saying later on " oh but we just got a price for half, you've been ripping us off all along " meanwhile the half price is probably crap parts but I'm the bad guy. Nope, figure it out now, gauge the quality of a few potential vendors, and we'll work from there. I do the same when I'm shopping, I hate surprises.

X2 on all those points, though when sugesting a customer get other quotes for comparison, I ''tell them'' to make sure they're comparing apple with apples.

I once made a mistake on a quote, (it happens) any way the price ''seemed'' high but the customer swallowed it and I got a PO.

Checking through when I ordered the materiial I found out just how much too high it was, so swallowing hard! I called the customer and told him what had happened.

After a stunned silence

we agreed the new price.

I went on to make a lot more out of that customer than I would have on that one job.

When customer orders get smaller

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