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Stocking Odd Material Question ???

rockfish

Titanium
Joined
Aug 27, 2006
Location
Munith, Michigan
I have a customer that orders some 304 stainless steel pipe in various lengths and sizes, requiring pipe threads and some machining on the ends. The lengths are almost always at least 40" long, sometimes up to 62".

Obviously, it's far cheaper to buy an entire bar, rather than have a piece cut to the length I need, the problem is.........I sit on that bar for months, or in this case a year, until they order another piece. It seems to me, that I never actually make money on the part, because the first piece we make just barely covers the cost of the material.

This really wouldn't be an issue if it was material that you could use for other products, or if the orders came regularly, but I NEVER have any need for stainless steel pipe otherwise.

Is there any positive way to look at this, or is this a no win situation ??? Of course, if I receive an order for other parts to use up the bar, then I will make out OK. Would you just order the EXACT amount of material, even at higher cost, to avoid setting on a bar that you may or may not use at a later date ???





Frank
 
Stock on pipe and tubing for production jobs is one thing that I avoid like the plague!

But for one-seys jobs ....


I would price the job as if you were buying the short pc, even if you doo go ahead and buy the long pc. Someone is sitting on the rest of that bar. You or Alro.

If you charge it out that way - and even if you doo only cover the costs the first part or two, you should be making good money by the third part eh? :confused:


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

Think Snow Eh!
Ox
 
I see two options at first glance.

1. Charge a higher price, explaining to the customer you need to buy exact lengths.

2. Explain the situation to the customer and see if they will carry the cost of the full length bar in storage.
 
You could offer them several tiers of pricing. Lowest they provide material. Next lowest you provide material they contract for whole stick worth of parts over a defined length of time. Highest part made from cut to length stock.

I have a huge supply of materials. But space isn't really an issue for me and selling material is one of the things I do. On specialty materials (or ones that have volatile pricing) if you buy a whole stick and sit on it for a length of time make sure you get a current quote on its replacement cost before you make the next part, and build that value into your quote. I.E. price your production as though you were buying the material cut to length at current market price. That way you actualize any appreciation in value from sitting on it for a year. It can be hard buying material that may sit for years but but the value of material on the rack is increasing in value way faster than whatever interest you could earn on it in a bank.

Todd
 
Ok........this question continues to baffle me when I see it.

First of all...........

You are in business to provide "machining services" to your customers.

End of story.

If they want you to make one or two pieces and it takes 80" of material, I see two options here (and this is how I quote it).......one, you buy a full bar and charge your customer the entire cost plus a mark up. If you have left over material, you either rack it for later, or if it doesn't get used after awhile, you scrap it and pocket the lunch money.....what the heck do you care.....it was paid for by your customer.

The second option is to order the exact length you need and again......what ever the cost, that's how you quote, plus mark up.....end of story.

If it's fussy work, and the high possibility of scrap comes in to play, I will make sure I order enough to cover my butt, and guess who pays for that as well.....damn straight skippy......my customer.

Why should I absorb any added cost or risk?? Afterall, they are not my parts.........that's why the customer came to me in the first place......to provide him with parts "he" either can not make, or does not have the time to make.

Best Regards,
Russ
 
wrustle,

I couldn't agree more.

You see, when I was first approached with this job, they ordered enough pieces where ordering the entire bar gave them a substantial discount on material price...........but once that order was shipped, subsequent orders were for only one piece at a time. I should have based my quote on the material cost if only enough material was ordered to make one piece.

As an update, I requoted the job reflecting the cost of material for one piece and they accepted.




Frank
 
Explain to the customer that he needs to pay the extra price for a special 'cut bar' length from the supplier, and the freight to get it to your shop. Then, think to yourself, "Should I order the full length in and also charge the 'cut length price' myself?" Why not? Chances are that you can recover the price of the full bar in a much shorter time. No need to hand your customer the full bar length price prorated for how much his job used. That is immaterial.

Yes, you get to play the part of the evil speculator, hoping that you can make out real good in the future, selling the remainder of that bar. But a little gamble that way is a more sure bet of winning something than buying lotto tickets (if you're the type), which, for some reason, people think they have a hope in hell of winning.
 
Lot's of good answers here. A genuinely good question. We also deal with this all the time. Just had it happen this week with a 20' long stick of 7 x 7 x 1/2 wall square tubing, only needed 10'. We've used every approach listed so far; requote smaller qty, order cut to size material, order full lengths at customer's expense and keep the drops. They can all work.

My only point is don't be afraid get creative in either your purchasing or quoting. Once you start feeling like you're always backed into a corner at work, work gets alot less enjoyable (I'm working on this myself). Stay creative and don't hesitate to negotiate with your customers, worst they can do is come up with a different idea.
 
even if their quote is only for one piece. Respond to the quote with the price of the first including the full stick price, or the cut per piece price from your supplier. Then include a price for the max you can get out of the bar(say 5 pcs) Alot of time when they see it in black and white they will jump for the slightly larger order.

Or tell them if they only need the one piece, the remainder of the material is theirs and if they would like to store it for the next job you have no problem with that. (will make them feel like they are not being screwed, if they don't opt for the larger amount of pcs)
 








 
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