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Blanket Orders

wjohn13

Plastic
Joined
May 29, 2013
Location
Norco, Ca
We currently have customers whom we will accept blanket orders for, for up to six months. They usually call and beg to extend toward the end of the order and we sometimes allow it. I would like to know what others do, when the customer is upfront and tells you they want to place an order for 500 parts with deliveries starting with 100 pieces in March 2024 and shipping 100 pieces every 3-1/2 months out through 08/2025. This is for an aerospace customer. Do you guys buy all the material and produce parts upfront? Do you buy for a couple of releases and hope when you buy for the remainder, that the price hasn't gone up? If it goes up or down, do you go back to your customer with the part increase or decrease? My boss wants to be a stickler about our 6-month rule, but I think this is going to make us miss out on opportunities that I am working hard to land. Your input is appreciated.
 
This really has so many variables for each shop, customer, material, profits.....Our main customer wouldn't provide material, but I also wouldn't ask, gotta put your big boy pants on, and take a chance.
Almost all our work is like this, usually 6 mo. due every month, We just stay one month ahead of the orders.
But if material was cheap, like small parts we do 200 per month for 6 months, I make 2,000 of them because the material is cheap. and It will repeat in 6 months again for the year.
I would say It comes down to what your willing to be comfortable loosing $$$
I have had blanket orders for 6 months cancelled at the 2nd month. As long as I didn't buy material I don't care.
Also ask the customer about terms of material drastically going up because unforeseen events, probably want something in writing. they may agree.
 
I've done work like this for MacSteel/Quanex in the past.
I knew the purchasing agent was good for it, and bought all materials upfront.
On the other hand, I did some work for GP packaging and they were a cluster @#$&.
They wanted a quote for 1000 parts, then they wanted them 100 at a time, then 10 at a time. They didn't know.
Glad I only ordered material for 100 pieces.
Made the 100 and cut them loose.
Depends on how well you know your customer.
 
I've got a job I'm quoting now that's similar, but not crazy.
7 P#'s, 170 each. They want half of each P# delivered in 3 months, and the rest a few months later, with 1A.

I feel like maybe I should just do 1 of each to get the first articles done, and the rest when I get closer? It's safer but more expensive to just bang them all out and inventory them until the due dates. I'm not super concerned about material price going up: all aluminum.
 
Depends on your relationship with the customer.

No trust or history? Quote that 200pc/month for 6 months job as exactly that... Six separate orders of 200 pieces.

Lots of trust? I would treat it as a 1200pc job in the schedule and run it straight through. I absolutely love having parts on the shelf for the next 4 months.

Quoting a 1200pc job as 1200pcs, but then running it as several 200pc jobs is crazy to me.
 
Could you quote for the material and labour separately? All of my material suppliers are only holding material prices for 24 hours. It doesn't usually go up if I order a few weeks or so later but at the start of COVID prices were doubling at times which was crazy and I got stung a couple of times - thankfully not by too much but still ended up working for free on a couple of jobs to absorb the price increase.

You could quote material at cost + 20% (or whatever your markup is) as a separate line. Explain to them that you could add a bigger margin to cover reasonable price fluctuations and hold the price or charge a fixed markup so they are getting the best pricing. I sometimes do this for sub con services like coating and NDT - usually where I may go to one of several vendors who have different pricing to suit the clients delivery requirements. Doesn't tend to work for the bigger companies though as they like a set in stone PO.
 
We currently have customers whom we will accept blanket orders for, for up to six months. They usually call and beg to extend toward the end of the order and we sometimes allow it. I would like to know what others do, when the customer is upfront and tells you they want to place an order for 500 parts with deliveries starting with 100 pieces in March 2024 and shipping 100 pieces every 3-1/2 months out through 08/2025. This is for an aerospace customer. Do you guys buy all the material and produce parts upfront? Do you buy for a couple of releases and hope when you buy for the remainder, that the price hasn't gone up? If it goes up or down, do you go back to your customer with the part increase or decrease? My boss wants to be a stickler about our 6-month rule, but I think this is going to make us miss out on opportunities that I am working hard to land. Your input is appreciated.
Dad would attach a 5% "carrying cost" to orders extended past the final order. It was written on every blanket order quote.
 
The purchase order is the contract that should govern your decision. If someone wants a year's quantity with releases, we will usually purchase all of the material and run most if not the total order at one time. Occasionally, we will run across a dead-beat customer or somebody goes bankrupt, but it doesn't happen very often.
 
Quoting a 1200pc job as 1200pcs, but then running it as several 200pc jobs is crazy to me.
Yeah I would never do that, that is crazy, you quote 200pc jobs with PO's for 6 month's, either 6 PO's, or one with intervals/ dates. Either way pricing is @200pcs.
 
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The purchase order is the contract that should govern your decision. If someone wants a year's quantity with releases, we will usually purchase all of the material and run most if not the total order at one time. Occasionally, we will run across a dead-beat customer or somebody goes bankrupt, but it doesn't happen very often.
This works for small inexpensive parts, our standing order PO's are 5,000 lbs of Aluminum bar stock a month. I'm not ordering 6 months or a years worth of that,
I don't have an extra warehouse for the stock, or the finished parts.
Also if the poster's materials are $100k in Titanium per month, He might not be ok ordering $1.2mil worth of material for the year, and warehousing it,
Like I said, a lot of variables for this question, and he didn't elaborate on a lot of them really
 
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As mentioned several times, so many variables..........
Really it comes down to the vendor/customer relationship and history.
I've done it before. But, NOT for a brand new customer. Period.
If you do buy all the material when the PO lands. Just remember, you are basically functioning as a zero interest bank loan.
While your money is tied up in inventory (and costing you if inventory rolls in to the next tax year). Theirs is sitting somewhere collecting interest.
I'm no buisiness man, or finantial expert. But, I bet those people would say:
Only purchase enough material, and carry enough inventory to make the deliveries on time.
 
All my blanket orders have padding$$$ built in. If'n I'm carrying material, labor, outside vendor cost and it has to sit on my shelf............you bet your backside the customer is paying for that privilege.
I do the same and consider it an insurance policy. Knowing the material is on the shelf and can be used at a moments notice is worth paying me to store it.

I know the supply has been somewhat stabilized recently, but spikes and shortages will be more common in the future. This is why I like to carry 6 months of stock on blanket orders.

I do price jobs accordingly, screw machine stock usually doesnt tie up much $ and can be used on lots of other parts if I get stuck with it. If a customer cancels an order, we would bill them for the remaining material.

Sometimes I will bill the customer for material seperately on net 30 terms right off the bat. Then I would invoice them for machine time on partial deliveries when they are made.
 
Sometimes I will bill the customer for material seperately on net 30 terms right off the bat. Then I would invoice them for machine time on partial deliveries when they are made.
If you absolutely must live in the net30 world, this makes the most sense to me.
I do everything in my power to stay in the COD world. I always purchase the material without invoicing. And pay COD for it.
But when the parts leave, I expect a check.
Unfortunately I may have to change this up. Because the COD world is super slow right now. And it is draining my savings.
Oh the pains of being a stubborn SOB..............
 
COD might be draining your savings,not half as quick as having a customer go broke owing you a lot.........as I see it ,the economy is built on near zero interest rates trending now into 6-7% rates .........lots more to go under yet.
 
Lots of trust? I would treat it as a 1200pc job in the schedule and run it straight through. I absolutely love having parts on the shelf for the next 4 months.

Quoting a 1200pc job as 1200pcs, but then running it as several 200pc jobs is crazy to me.
Agreed Matt Once I have something running knowing I have 5 more 200 pc orders I would prefer to keep on going to the 1200.
 
Blankets.
My suppliers have always a very standard policy stated here.
"Blanket orders are for one year. Any parts not released during the year will be shipped and billed at the blanket expiration."
Had one (SPR-630) that we had put on a blanket to get the quantity pricing put lost the job to a competitor 2-3 months in.
End of the year and I got lot of boxes (8000+ pcs) of raw carbide and a bill for all of it. Oops.
 
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If you absolutely must live in the net30 world, this makes the most sense to me.
I do everything in my power to stay in the COD world. I always purchase the material without invoicing. And pay COD for it.
But when the parts leave, I expect a check.
Unfortunately I may have to change this up. Because the COD world is super slow right now. And it is draining my savings.
Oh the pains of being a stubborn SOB..............
I hate net30 as much as the next guy. It's the single biggest stress point on me in my young business. If I didn't accept it though the amount of work I have would be near zero. Any of my large customers would laugh me out the door if I even suggested it.
 








 
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