Firing/partially firing a customer that hasn't done anything wrong - how to handle.

[Fish On]

I'm a one man band, fabrication, not machining, been open since 2012. Without being too specific, I make components and accessories for one industry (largely consumer owned items/vehicles, but I've got a few customers supplying for commercial applications). I do lots of custom fabrication, but it's generally custom versions of a somewhat narrow variety of components - my shop is one that people come to mainly because I make X, not because I'm a job shop with Y equipment and Z capabilities.

I started out being mostly consumer direct, but over time, have ended up with a few commercial customers - either manufacturers of the aforementioned items/vehicles, or upfitters of the same. Within the narrow range of components that I make, there is one that I would say is my core competency. I've got custom extrusions for that type of part, repetitive designs, etc. All of my commercial customers are buyers of that type of component, save one of the upfitters. Long story short, I've got 21 different assemblies I make for that company, and not a one is my core component.

A few of those components, I just hate. Every time I do them, I'm irritated and figure I'm probably not making money on them and that I need to raise prices. Then, afterwards, I tally up the time, and realize that I'm doing just fine on them. These always end up being the job that I'm working on overnight or Sunday afternoon to rush to the powder coater the next morning. A lot of the problem is the component size. Some of these realistically end up being 2 a day parts. When I've got an order for 3 of one, 4 of another plus a bunch of other smaller parts, it's easy to tie up a week. I've also got a chronic health issue. Not a huge deal overall, but it does unfortunately come with some days being not as good as others - there's some parts I can mindlessly trudge through on those days, and others, not so much. Which I think is why these end up invariably getting pushed to the last minute, or worse, I end up wasting a day trying to trudge through these parts on a rough day instead of simply finishing some easy orders. I'm in fab, not machining, so process improvement options are more limited, and order qtys are too small to be practical to outsource certain operations. But, my industry is slowing down quite a bit, and profitable work is profitable work, so why upset the apple cart that is 20% of my sales?

But, I've been getting further and further behind on production, so something's got to change. It's affecting their deliveries, and others as well. Ultimately, my issue is that I've got too many big customers, and one of my other ones has expressed that their demand is going to be ramping up quite a bit this year, so it's time to make the adjustments.

I guess I'm partially ranting, but I'm also trying to figure out the most diplomatic way of handling this. Of their 21, I've got 4 that have to go. 5 that could go either way, and 10 or so that I wouldn't mind keeping. But, if I end up losing them all, that wouldn't be the end of the world, I'd rather expand within the core competency, or go back to making stock parts to sell on my site and Amazon. Heck, I want to get back into that regardless, I got away from that when demand went through the roof for recreational/outdoor toys back in 2019 and 2020.

For those that have fired a good customer, or cherry picked line items to stop offering, how have you handled it? Customer is a small business (4 or 5 people), and I generally deal with the owner/lead shop guy, so this isn't just a random nameless person in purchasing that I'm dealing with. How much detail do you provide, beyond telling them you're no longer building the following? On the one hand, picking and choosing the better parts seems a little tactless, but on the other hand, it's that many fewer parts they have to find another vendor for.

 

[HWooldridge]

Stick to the facts and simply say the bad products don't fit your skillset. Tell the owner that these few parts are jeopardizing all the other ones so his whole product line will suffer if he can't move the problem children to another supplier.

Don't dump on them immediately - most industries are small and they could badmouth you for the next 40 years. Tell him you will help him with the transition but set a date when the work needs to go away, and assure him you'll continue to make the other parts.

Good luck regardless of how you handle it.

 

[charlie gary]

Have you considered subbing out the work you don't like?

 

[Rob F.]

Have you considered subbing out the work you don't like?

That is the first thing I thought of too.

 

[Fish On]

Have you considered subbing out the work you don't like?

I haven't really, mainly because I have no idea who I would sub that type of stuff out to.

 

[Donkey Hotey]

First I'm gonna say that you have obviously thought through this and stated your reasons clearly. I don't disagree at all and also don't have all the specifics.

Flip side of this transaction: your customers need parts A, B and C to sell their package. If you want to supply A and B but, not C, you force them to go shopping for someone else. There is the possibility that C is the enabler that keeps you making A and B.

If you were a pizza restaurant with a salad bar, you might hate the salad bar. Most of your labor goes into preparing it and maintaining it. There's a lot of waste. It's hard to always have crispy, leafy stuff to serve. But if the wife can't get a salad, the husband and kids might not be able to come to your restaurant to order pizzas (man, I have lived this experience).

Are you sure that CNC machines couldn't speed up your processes or make the processes easier through tooling you design and make? This sounds like one of those markets where a mechanically beat up CNC machine could still do wonders. Like if I were doing spring shackles or something else, having an enclosed machine with a chip auger to do all the drilling, trimming and deburring would be a huuuggge advantage. Doesn't have to be super accurate but also doesn't make a mess, drills much more accurately and almost never scraps the parts.

 

[toolmaker96]

Raise the price, keep raising until one of two things happen. 1. You are making enough money, that you don't dislike the job, at least as much. 2. The customer will go away.

 

[jackal]

You could approach them and say other items are coming in that fit you better.
You want to keep doing items A thru C, but you have always struggled with their item D.
You think it would better ( probably faster and more economical) to sub those parts out.
You can offer to help them find someone , and help with details to the new fab shop, or they may say to have you sub it out ( if you are willing).
There may be a shop around there what would love to do the part D as fill in work, or someone running a CNC machine that would have time to knock those out during cycle times of the machine.

 

[Fish On]

Flip side of this transaction: your customers need parts A, B and C to sell their package. If you want to supply A and B but, not C, you force them to go shopping for someone else. There is the possibility that C is the enabler that keeps you making A and B.

That's a possibility, and I'm okay with that consequence if it comes to it. I think it's likely I'd be able to keep what I wanted (these part numbers were split among a handful of other shops prior, and all came to me due to quality issues), but even if not, I'd rather have to replace the 'good' work from them than to keep the bad stuff. With the other customer projecting qty increases, and with wanting to get back into stocking 'in stock' items, it would possibly be better for me if this one pulled everything from me, but I'm too paranoid to be the one to make that call, and don't want to hit my customer any harder than necessary.

Are you sure that CNC machines couldn't speed up your processes or make the processes easier through tooling you design and make? This sounds like one of those markets where a mechanically beat up CNC machine could still do wonders. Like if I were doing spring shackles or something else, having an enclosed machine with a chip auger to do all the drilling, trimming and deburring would be a huuuggge advantage. Doesn't have to be super accurate but also doesn't make a mess, drills much more accurately and almost never scraps the parts.

Unfortunately, there's not a lot of room for process improvement. The most problematic part is an aluminum pipe weldment. 2 mounting flanges at the bottom, and the rest is all bent and notched pipe, TIG welded into a weldment that is about 7' x 3' x 4', and has all non 90 degree angles. Sure, my pipe bender isn't the greatest - I could spend 30 grand upgrading that to a CNC, but there's only 4 bends on this part, so not a lot of time savings, and it's a $750 assembly that I they need 15 - 20 pcs a year. I'd need to take on a lot more bent pipe work to justify that buying that, and that means I'd have to turn away work to run on the late model CNC press brake I've already got.

The rest of them aren't as drastic, and with the remaining ones, there is a small amount of optimization by having some of the components laser cut, but we're talking large items, and the freight kills the savings at the qtys they require. But, it doesn't help the fitup and weld time. These are the only parts I make this large, so they're kind of the odd man out.

Contrarily, if we want to talk optimization, there's room for optimisation on my core competency stuff, especially if I increased the qty of it. But I don't have the capacity to increase that qty as it is.

 

[Matt@RFR]

I agree with everything above. Raise pricing, and just be honest about why. Your customer will either 1) understand (which tells you that you need to raise pricing across the board), 2) be pissed but still buy (which tells you that you need to raise pricing across the board) or 3) no longer order the parts. It's just business, and you need to do what's right for your business without apology.

In any case, if you're falling behind now and you are hearing whispers of increased demand, you need to get out in front of things and either automate what you can (which applies to everything... setups / setup sheets / processes / billing / scheduling, etc.) or start training an employee or two.

My vote is to NOT outsource, especially for an in-house product whose quality can presumably make or break you. There are great shops out there, of course, and I've had great luck with ONE shop that I've outsourced to. But the vast majority of my outsourcing experience has been terrible.

 

[Fish On]

I agree with everything above. Raise pricing, and just be honest about why. Your customer will either 1) understand (which tells you that you need to raise pricing across the board), 2) be pissed but still buy (which tells you that you need to raise pricing across the board) or 3) no longer order the parts. It's just business, and you need to do what's right for your business without apology.

In any case, if you're falling behind now and you are hearing whispers of increased demand, you need to get out in front of things and either automate what you can (which applies to everything... setups / setup sheets / processes / billing / scheduling, etc.) or start training an employee or two.

My vote is to NOT outsource, especially for an in-house product whose quality can presumably make or break you. There are great shops out there, of course, and I've had great luck with ONE shop that I've outsourced to. But the vast majority of my outsourcing experience has been terrible.

Option 1 and 2 don't really solve the problem, so while I could probably get away with raising prices, it doesn't fix things. At this point in my life, I'm more interested in lowering my stress level than making more money.

Don't want employees, either. I've been pretty successful running this as a one man band for 12 years, don't really have the desire to change that. I've never had intentions of having a sellable business, perfectly fine just owning my job. That said, I have used a couple different part time guys in the past, with good success. In all cases, it was someone overqualified that wanted very flexible part time work for a few months (welding instructor with a day off during the week, retired guy wanted out of the house). I'm not against that again, but when I think about what types of parts I can use folks like that for, well, it's not these, and I think that tells me something.

I'm not optimistic about subbing it out, either. Especially not whole completed assemblies - single operation stuff (laser cutting, powder coating, etc), sure, but even then, I've had to do my fair share of handholding. That doesn't really fit my desire for lower stress.

 

[cnctoolcat]

Customer is a small business (4 or 5 people),

I wouldn't fret too much about being honest with them. You can bet your ass if a business that size ever got into financial trouble, you could kiss any money they owed you goodbye.

Definitely shed the work you don't want. I started doing it a couple of years ago, and it's liberating. I have two employees, but only want enough work to keep them busy.

When you get to a good point in life and the business, focus on what work you want to do, and what you're good at.

ToolCat

 

[Garwood]

I think we have similar health problems iirc? My thyroid is bad and I can 100% relate to good/bad days and needing to keep stress down.

I make products as well and figured out doing outside work was really killing progress with my own products. Filling my head with a customer problem always derailed me from my own stuff. I regularly felt I lost momentum on projects after stopping them to fix a customer part.

I had a hard time letting my regular customers go because I'd worked hard to foster those relationships, but I knew I had to. I still do some emergency jobs, but not much and I'm probably going to sell off all my machines not applicable to my core products this year.

I have explained to local customers exactly as I have here. I've been straight up, tried to point them towards other shops with mixed results. I still help with emergency jobs nobody else will do.

 

[ducesrwld]

if you have a good relationship sit down and have an open conversation its amazing what happens with good communication. good customers will see how they can/if change their business to make it a better 2 way street. eventhough small quantities is it worth looking into blanket orders to try and build up a little more cushion so it isn't last minute work constantly? a lot of ways to skin the cat but make the next chess move and keep trucking. i'd just be careful as a 1 man band one customer doensn't end up with too many eggs in your basket.

 

[atex57]

Find an ambitious young person and rent them the job.

Ed.

 

[Fish On]

I think we have similar health problems iirc? My thyroid is bad and I can 100% relate to good/bad days and needing to keep stress down.

You have an excellent memory.

For the most part, I've been able to work around it. My end consumer customers have never balked at 4 - 6 week quoted lead times on custom fabricated parts, so that's a long enough time to be able to weather the down days and get caught back up, then fill the remaining time with stock parts for the web store. That is, until I end up with my commercial customers taking up a good 2.5 weeks a month, on top of the end consumer sales.

I don't think I've had a part in stock on my store since 2020, probably. Which is even crazier, because I'm building custom orders of parts that very likely would be stock parts if I was more heavily invested in that direction again.

In a perfect world, I'd be 100% retail sales, no commercial customers, and strictly web sales of stocked inventory. If I get behind on that, it just means that it goes out of stock on the website and no one can buy it. When I get behind on all these production/custom orders, it means I'm holding up someone's production, and dealing with impatient retail customers who are chomping at the bit to get started on their project. One is a little better for the stress level than the other.

 

[Fish On]

if you have a good relationship sit down and have an open conversation its amazing what happens with good communication. good customers will see how they can/if change their business to make it a better 2 way street. eventhough small quantities is it worth looking into blanket orders to try and build up a little more cushion so it isn't last minute work constantly? a lot of ways to skin the cat but make the next chess move and keep trucking. i'd just be careful as a 1 man band one customer doensn't end up with too many eggs in your basket.

We've done the blanket order thing for a couple years. It's helped, especially on the inventory sourcing side (laser cut blanks, and other outside components and material). We've had a blanket order that we update every couple months, and a side list of 'need next' and 'on deck'. Unfortunately, I keep having situations where the 'on deck' list gets slid onto the 'need next' list before I get the last 'need next' stuff done.

 

[604Pook]

We've done the blanket order thing for a couple years. It's helped, especially on the inventory sourcing side (laser cut blanks, and other outside components and material). We've had a blanket order that we update every couple months, and a side list of 'need next' and 'on deck'. Unfortunately, I keep having situations where the 'on deck' list gets slid onto the 'need next' list before I get the last 'need next' stuff done.

I understand the frustration of not wanting an employee, but maybe someone with some skills that has a good day job wants some afterwork/weekend hours?

 

[MakeMeChips]

That's a possibility, and I'm okay with that consequence if it comes to it. I think it's likely I'd be able to keep what I wanted (these part numbers were split among a handful of other shops prior, and all came to me due to quality issues), but even if not, I'd rather have to replace the 'good' work from them than to keep the bad stuff. With the other customer projecting qty increases, and with wanting to get back into stocking 'in stock' items, it would possibly be better for me if this one pulled everything from me, but I'm too paranoid to be the one to make that call, and don't want to hit my customer any harder than necessary.



The most problematic part is an aluminum pipe weldment. 2 mounting flanges at the bottom, and the rest is all bent and notched pipe, TIG welded into a weldment that is about 7' x 3' x 4', and has all non 90 degree angles. Sure, my pipe bender isn't the greatest - I could spend 30 grand upgrading that to a CNC, but there's only 4 bends on this part, so not a lot of time savings, and it's a $750 assembly that I they need 15 - 20 pcs a year.

Do you have drawings good enough to buy bent and coped/notched tube elsewhere?

 

[memphisjed]

If pipe is the frustration.. bend tech dragon. Once you get the exact pipe bending calibrations in it the cutting, coping, and bend layouts are spot on. It has more than paid for itself by the third rail job- long time ago.
If you are not doing square tube often the smaller one. Much of it is “hobby grade” parts, with hobby grade pricing. If you are doing a bundle of pipe a day then not best choice- a bundle a week is easy.
What is bend radius and pipe size? What bender are you using? Can you tell it to bend 112 degrees and get a 90 out every time or is it bend, check, bend, check- to far!!!
Bending al pipe sucks. Can it be changed out to stainless?