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  1. #1
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    Default New Machine for one customer..............

    So most of us know about Wheelie's predicament...........bought that Brother for one customer and now the work tanked. I had a post over on his thread about how we can learn from his situation.......So, how to bring in that new equipment and not get hung out to dry if things head south?

    I'm not quite in the same boat, but I do have one customer that has been steadily growing and the last 2 years has really ramped up orders both in volume and frequency. I've been making OEM parts for this outfit for close to 14 yrs now. Great customer, ALWAYS pays on time, doesn't balk at price increases, very open about design/ease of mfg, etc............. Started out with prototypes and small runs.....now I have over 40 part numbers and volumes just continue to rise. It's gettin close to affecting my output to other customers..............nothing huge, but my lead times have grown a bit...........and nothing anyone is getting upset about. But I want to stay ahead of possible issues.

    As of now, no new machines are needed....................but, they have a pile of more work and it would require a dual spindle Y axis lathe with a barfeeder. Sure the work could be knocked off in a 2 axis rig and then over to the mill. But being a one man band, I need done in one capabilities. Only so many hrs in the day.............

    So my question is............... how have you shop owners approached customers with the concept of bringing in that one piece of equipment? This outfit maybe open to a contract...........at least to the tune of enough work to cover the cost of the machine. Is that possible? Any customers ever agree to that? Any shops here agree to that? Any other avenues? Just looking to cover my A$$ets.................

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    Save most of the money so it doesn't leave you stuck with big payments(or any payments) if they pull out, then buy the thing if you really need/want it. Worse case you can sell it, or keep it for other work and new customers, but not be in a position where it risks your survival and putting food on the table.

    I believe telling a customer too much about how " that new machine is for their work " is the best way to jinx it and have them vanish.
    We probably all get regular emails from used dealers with brand new "contract canceled" machines for sale.

    The new cnc lathe I bought 1yr ago has about 150hrs of cutting time on it so far. I've not sweat about it 1 minute. I plan to keep it that way.

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    I believe in being a black box. orders in parts out. doesn't mean you have to die on every hill your customer decides to charge up

    I believe in buying equipment when you cannot avoid it.

    Farm work out

    hire on help

    when you cannot avoid it, buy the equipment.

    What percentage is this customer of your work.

    I have had several big percentage, great people, great companies disappear

    Companies get sold[ two times] run out of funding[two times] or whatever.

    It is not always their fault that the screw you over


    The best way is to already be doing the work then buy the equipment so you can make more money[pull the work back in house, fire the temp worker]

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    When you are ready, sell off your one lathe to put down payment. Don't even let this customer know you have done so, otherwise they may see it as leverage. However it may allow you to price it as "normal" 2op , but now in 1op and you are making more bang for the buck. You only have so much shop floor space to begin with.

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    I recon nobody at that business is going to share their strategy with you so why would you do the same... now if its the right move for your company is sadly something only you can(or can't?) answer. I feel like its a tough time to be pouring money in, there must be a recession on the way, how can it not be. It seems like a no brainer, especially if you aren't wanting to hire. If it was easy everyone would be doing it.

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    [QUOTE

    As of now, no new machines are needed....................but, they have a pile of more work and it would require a dual spindle Y axis lathe with a barfeeder. Sure the work could be knocked off in a 2 axis rig and then over to the mill. But being a one man band, I need done in one capabilities. Only so many hrs in the day........................[/QUOTE]

    So, What is a "Y" axis on a lathe? Is this a live tooling thing? Could it it not do other work? A bit lost here.

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    First, don't let one customer be more than 40% of your sales. Even 40% is probably too much, depends on how fast you can scrape up work to replace it if they pull out, go bankrupt, get sold, get closed by the govt, etc.

    If after buying the machine they will still be less than 40% and you will be more profitable, consider it. But don't fill them in that you are taking a risk for the sake of serving them, communicate it that you are growing and want them to be part of that growth. Ask for forecasts of future requirements but assess them as though they might be total BS, no matter how secure you feel about the customer.

    I have heard of/seen large companies buy a machine and put it on a job shops floor for the exclusive use for their parts, I don't know how that is structured but my instinct is that you aren't robust enough to withstand manipulation by a customer like that just because you are a one man shop. I've been bigger and still fallen prey to that when i thought I had it handled.

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    have seen/heard several shops work it out with said customer that customer helps pay for the machine or a portion of the machine. basically get a chunk of money up front lower the risk, eliminate the cash flow and money out of pocket til the first few rounds of parts to get out the door and eliminate waiting months on seeing a check. all types of ways to get creative. from the sounds of it you've been working with them for a long time i'm of the belief that if its a good two way street that said customer would be open to making things work better moving forward. how you pitch it and discuss details....only one guy that has all that history and most importantly the relationship....dat you big guy!

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    I can't say "it won't work", but there is some risk in approaching the customer. The biggest issue is if they just want the "black box" scenario that Gustafson mentioned (i.e. they don't like "drama"). I understand the one-man gig, but it sounds like a less-risky approach would be to hire another operator, if that's possible (enough operations to keep two people busy). Also consider farming out operations that don't currently make you enough money. What it boils down to is how much risk you're willing to take. Buying the new machine could be swinging the needle a bit towards playing the lottery.

    At some point, to grow a business, you need to hire employees. Decide if that's something you're willing to do and, if so, make a financial comparison between that option and buying the new machine. Hiring employees isn't risk-free but laying them off can be a lot less costly than eating up monthly payments on a machine that's not producing income. If your goal is to stay solo, do the comparison to farming out. Have some kind of financial analysis that won't let you keep questioning whether you're making the right decision (with the alternative ideally not "doing nothing").

    Wishing you well,
    The Dude

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    If you're thinking about it, and preparing for it, it's a high possibility that you'll be needing it...
    Are there any used around that's a couple of years old - low hours and the odd 100k cheaper than new (liquidation?)
    They'll no doubt be a learning curve to get it running as you want it, and if you leave it too late, that could turn into a panic.
    So sooner rather than later, providing it doesn't harm your finances.
    Your customer sounds great, but they'll never be guarantees. They could sell-out tomorrow and the new owners lift and shift the lot.
    Written contracts are great for a "warm feeling" but useless when it comes down to handing over money etc - if someone doesn't want to or can't afford to pay because of a cancelled contract, the cost in lawyers fees etc makes the size of the contract look small...

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    Quote Originally Posted by ducesrwld View Post
    have seen/heard several shops work it out with said customer that customer helps pay for the machine or a portion of the machine. basically get a chunk of money up front lower the risk,
    As a lowly manufacturing engineer I don't know the contractual details, but this sort of thing has been common for the almost 30 years I've worked at various Tier 1 automotive suppliers. It saves our butt when the forecast volumes don't appear.

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    It begs the question that a lot of people don't seem to ask. How long would it take doing this work to pay the machine off under realistic operation.

    We have been getting a new machine a year to the tune of $200-$350k)(as a small shop)and they have paid for themselves within the year. I wouldn't take a 3 year loan on a machine that services just one product for one customer.

    If one of our big projects moves on I could fill these machines with any work from any industry. Could you keep that machine running on other work?

    I smell a recession which will mean a lot of low hour machines being unloaded. Although there is the opportunity cost to not usingthe right machine from the beginning.

    Good luck

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    It is a good time to put some $ in the bank, but I think the US is in good position vs "the world" for a few years yet to come, and some industries are pretty recession resistant. Though some have been trying real hard to plunge it into one asap...

    I also no longer see much problem putting all the eggs in one basket, so long as it pays good and don't over extend that you'd be in trouble if it goes away.

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    Just a word of caution. I had the same scenario with a customer, but had the equipment and time to handle the work. He had been a customer since I started job shopping in 2008. Almost everything he came up with turned into a repeat job, most of his stuff was bar fed with a very nice expense to quoted price ratio. Other than a few titanium parts, most of his stuff were out of very easy to machine materials. He never complained about prices and said he wished he could find a mill guy who had my quality and pricing on lathe work. He said he had probably used two dozen mill shops with no luck in the time we had done business. After ordering the most he ever did from me in the first 8 months of 2018 and placing weekly orders for 10 years he vanished.

    I sent him an e-mail at the end of 2018, he responded saying he found his mill shop in China and also gave them all the lathe work he was sending me. In the first 8 months of 2018 he was 40% of my business.

    Not sure what the moral of the story is, except no matter how good something looks it can go to hell over night. If I was in your shoes and was already working myself to death I think I would just look to hire some part time help for starters before committing to buying a machine. You never mentioned how big of a machine you need as those dual spindles get real pricey when they grow in size.

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    Quote Originally Posted by Mud View Post
    First, don't let one customer be more than 40% of your sales. Even 40% is probably too much, depends on how fast you can scrape up work to replace it if they pull out, go bankrupt, get sold, get closed by the govt, etc.

    If after buying the machine they will still be less than 40% and you will be more profitable, consider it. But don't fill them in that you are taking a risk for the sake of serving them, communicate it that you are growing and want them to be part of that growth. Ask for forecasts of future requirements but assess them as though they might be total BS, no matter how secure you feel about the customer.

    I have heard of/seen large companies buy a machine and put it on a job shops floor for the exclusive use for their parts, I don't know how that is structured but my instinct is that you aren't robust enough to withstand manipulation by a customer like that just because you are a one man shop. I've been bigger and still fallen prey to that when i thought I had it handled.
    I understand why you say not to let one customer be more than 40%. But, don't necessarily agree with it.
    If that were a hard/fast rule? I would be out of business right now.
    Yea, the point could be made that I may not be in the crappy position I am right now as well.
    But, had I stood fast on your 40% rule, I would have left a whole lot of $$$$$ slip right through my fingers.

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    Dave, could that dream machine replace your haas lathe and a mill?
    If you are adamant about remaining a basically one man band (I dont blame you!) that scenario could possibly increase throughput?
    # of tools, and live toy speed/power would be the limiting factors.
    But, if you could get in to something like an Integrex? That has a real tool carousel, and powerful spindle?
    With a big enough tool count, bouncing from part# to part# could literally be as simple as swapping collets, and calling the program.

    One thing I do know for sure. The fewer times you have to handle a part, the better!

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    If your going to have a 40% rule to one customer, you probably should have percentage rules for industries served.
    When I was Dualkit I had 23 active customers, none more than 15% of sales, but the limousine industry I was serving was the opposite of recession proof. I went from 23 customers to none in less than two years.

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    Quote Originally Posted by Dualkit View Post
    Just a word of caution. I had the same scenario with a customer, but had the equipment and time to handle the work. He had been a customer since I started job shopping in 2008. Almost everything he came up with turned into a repeat job, most of his stuff was bar fed with a very nice expense to quoted price ratio. Other than a few titanium parts, most of his stuff were out of very easy to machine materials. He never complained about prices and said he wished he could find a mill guy who had my quality and pricing on lathe work. He said he had probably used two dozen mill shops with no luck in the time we had done business. After ordering the most he ever did from me in the first 8 months of 2018 and placing weekly orders for 10 years he vanished.

    I sent him an e-mail at the end of 2018, he responded saying he found his mill shop in China and also gave them all the lathe work he was sending me. In the first 8 months of 2018 he was 40% of my business.

    Not sure what the moral of the story is, except no matter how good something looks it can go to hell over night. If I was in your shoes and was already working myself to death I think I would just look to hire some part time help for starters before committing to buying a machine. You never mentioned how big of a machine you need as those dual spindles get real pricey when they grow in size.
    Sounds like you should have bought a mill and kept the golden goose happy... I don't say that to kick you in the nuts just a different way to look at that same story.

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    If you have the funds go for it. All part of being a business owner. Need to take risks.

    "Dont allow one customer to be over 40% of sales". Sure it is a good guideline but realisically how do you control that. You have a good relationship, money is good, they pay good, but you cut them off because they are giving you too much work. SOunds crazy in my book.

    Contract, forget it. Worthless. Customer can make up any reason to break it. Quality not how it should be, delivery 1 day late, etc. etc. Plus how are you going to enforce it. Sue him. Good luck. Just gonna make lawyers richer.

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    Quote Originally Posted by wheelieking71 View Post

    One thing I do know for sure. The fewer times you have to handle a part, the better!
    Isn't that the truth, to me there is nothing worse than short cycle time ops a monkey could do. My personal efficiency on that type work is terrible. I just set a goal of 50% efficiency if it goes on for more than an hour. The worst ones for me are the cycle times in the 45-60 second range. Long enough where you have to wait on the machine, but too short to have time to pick up a broom or do anything else.

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