Shop Relationships

Hello All,

As I learn more about the economics involved in the manufacturing business, it is easy to see that most shops have one or more trade-offs. For example, size of machine limiting workpiece size, type of machine limiting economics of large or small scale production.

Being a very small shop myself I'm slowly learning about other shops and trying to build relationships for when I get a customer than needs 10 parts I can do myself and 1 part that is too big for my machines.

My questions for everyone:

1. Can this relationship work in the other direction? Do larger shops ever offload some of their smaller packages due to non-recurring costs being too high? (Thought is smaller shops potentially have smaller overhead, therefore smaller jobs have more potential to be profitable than some larger shops)

2. Is it worth mentioning to larger shops I meet or will this come across wrong and do more harm than good for the business relationship?

Thanks

We are next door to a high precsion aerospace shop when someone walks in my door with a cad file I walk them down the street. When someone walks in his shop with a piece of steel and a crayon marking an x where they want a hole he points them to my shop. I get lots of work from other shops that wont do one part. They will be happy to send work your way. I dont want to make a dozen of anything.

Praxis said:

Hello All,

As I learn more about the economics involved in the manufacturing business, it is easy to see that most shops have one or more trade-offs. For example, size of machine limiting workpiece size, type of machine limiting economics of large or small scale production.

Being a very small shop myself I'm slowly learning about other shops and trying to build relationships for when I get a customer than needs 10 parts I can do myself and 1 part that is too big for my machines.

My questions for everyone:

1. Can this relationship work in the other direction? Do larger shops ever offload some of their smaller packages due to non-recurring costs being too high? (Thought is smaller shops potentially have smaller overhead, therefore smaller jobs have more potential to be profitable than some larger shops)

2. Is it worth mentioning to larger shops I meet or will this come across wrong and do more harm than good for the business relationship?

Thanks

Click to expand...

Once - early 1970's, company without ANY prior subcontracting history, 45 years since novation (newly Unionized, first contract expiration, ten week IBEW strike) - we had to build those relationships from bare-ground. And out-of-state to boot. Clocked a lot of air-miles. Was authorized to "just buy" companies up to $2 million bucks with but a phone call to HQ if need be.

Never let any firm I had any control over get that deep into a hole again.

Everywhere ELSE I have been, contract work was already part of the plan because no one WANTS to staff for peaks and have to carry excess staff, excess machinery, and their respective overheads through the slower times. More of a volume and deadline variability issue than a machine-size issue.

FAST turnaround has a lot of value, IOW. Even if the price of it is not rock-bottom. And even though "overtime" is actually the cheapest time a company can buy. There is only so much OT to be had before work expands to fill the time available, krews get too tired, too accustomed to taking it for granted, and you really, really do have to cut it back and get healthy before doing it again.

So yes. Contract opportunities exist. Many industries.

Just don't go sniffing around the shop floor at any UNION shop, though!

Get to know the middle-managers, Materiel Manager / "Purchasing" krew, and decision-makers in general outside of working hours, other venues.

Present from a position of quiet, proven, strength, confident competence, good references. Make yourself low risk.

Never beg from hunger or annoying desperation. Most especially not if you ARE starving! That's how you become a meal.

It is seldom just about price. Reliability as to hitting RDD's, goods on-spec, and costs on or under budget is what rules.

Decision makers are HIGHLY "risk averse". There ARE NO "good" surprises.

We have to be that way. Else our replacements will deliver that instead.

Contracting is much the same, BTW. Not a lot of "loyalty" involved.

It is rather akin to incandescent light-bulbs.

One fails, you screw it out, screw in a replacement.

Notice the emphasis was on "screwing", both times?

NOW you understand life as a sub-contractor.

kpotter said:

We are next door to a high precsion aerospace shop when someone walks in my door with a cad file I walk them down the street. When someone walks in his shop with a piece of steel and a crayon marking an x where they want a hole he points them to my shop. I get lots of work from other shops that wont do one part. They will be happy to send work your way. I dont want to make a dozen of anything.

Click to expand...

haha like the analogy.....

to the OP some shops live off of sub work....not the best business model if that's all the type of work you get but not a bad way to fill some of the portfolio

As long as you make it clear that you don't plan on taking any business AWY from them, it's no different than any other merchant to merchant relationship. IMO its healthyer for everyone when these kind of relations are in play. Even among competitors, customers tend to respect when they see companies working together instead of trying to sabotage eachother.

kpotter said:

…When someone walks in his shop with a piece of steel and a crayon marking an x where they want a hole he points them to my shop. I get lots of work from other shops that wont do one part. They will be happy to send work your way. I dont want to make a dozen of anything.

Click to expand...

Excellent example of finding ways for each party in the relationship to benefit.

thermite said:

…
FAST turnaround has a lot of value, IOW. Even if the price of it is not rock-bottom…
…
Just don't go sniffing around the shop floor at any UNION shop, though!

Get to know the middle-managers, Materiel Manager

Decision makers are HIGHLY "risk averse". There ARE NO "good" surprises.
…
It is rather akin to incandescent light-bulbs.

Click to expand...

Excellent advice on all accounts, thanks. I’m definitely not interested in mingling with unions right now (Not a stance on unions, merely understanding I don’t know enough to not have my foot in my mouth the whole time)

M.B. Naegle said:

As long as you make it clear that you don't plan on taking any business AWY from them, it's no different than any other merchant to merchant relationship….

Click to expand...

I hadn’t thought of it that way before, but that makes sense and is a really good outlook. Thanks.

ducesrwld said:

to the OP some shops live off of sub work....not the best business model if that's all the type of work you get but not a bad way to fill some of the portfolio

Click to expand...

Helping the portfolio is certainly attractive. Being able to expand my knowledge and become a better machinist is always the goal.

the world is full of partnerships.
.
many are informal like 2 shops trading some jobs for various reasons like keeping some special machines busy rather than machines sitting not being used for months
.
many big companies might have a dozen machine shops and jobs and people are moved around routinely. this can help tremendously in people learning or seeing how other shops do stuff. many a job is not done cause a machinist might not be aware of how it can be done often with the shop equipment they already have. apprentices learn alot by moving around to different shops and seeing other ways to do stuff

From my experience, if you are trying to stay a small quantity parts shop. Your best customers will be large shops and large scale MFG. We specialized in mid to large size parts. We both received and sent out work on almost a daily basis for lots of reasons our machines were busy, parts weren't sized for our machines, not having best tooling to do a job efficient.
My advice to you is under promise and over deliver no quicker way to loose a business relationship than to promise delivery in 2 days and take 5, or quote a part and ask for more money. 90% of a shops success is it's reputation for doing what it says it will.
I will also mentioned larger or more established shops watch what is going on with the industry, competition, and suppliers they are involved in. They also talk with each other, if you get known as a quality vendor who can do what they promise it won't take long and you will be sending out work yourself, on the other hand if you miss a delivery that also is discussed and might take years to undo that reputation.
Good luck, business can be the most satisfying or biggest nightmare in your life.

work trades between shops all the time, if for no other reason the ebb and flow of workload. I'm going to take a customers order vs turning them away, even if I have to outsource some of it.

One thing to keep in mind as you navigate the jungle is that a key tenet of business is to differentiate yourself. You're the only guy in the town with a such and such machine or ability and they'll come to you. Near my plant there is a company that with a 6000 ton brake press (not a typo, its a monster) they bump curves into 12" thick slabs. That giant press brings them work from across the continent....just pointing out that initially your differentiator might be as simple as they're overwhelmed with volume and your not , but as you develop the business, look to develop unique things you can offer and the better the margins you'll end up with.

I own a gear shop. A lot of my business is sub contract work. Sometimes it's more than 60% sometimes it's less.

I would be out of business if it was not for other shops. Currently, 80% of my work is from a single shop that is very busy. He gives me the single and small quantity work that they don't have time to bother with. If it will interfere with keeping the gear shapers and hobbs running, then I get it. If it is complicated and requires CAM, then I get it. I also do all of their surface and cylindrical grinding unless the part is too large for my equipment. If he has programs for the parts, he will run them. If it is a part that I have done before, then I will continue to get it regardless of how busy he is.

It is a great relationship for me. He also keeps me supplied with inserts and supplies all raw material. He gives me a check when I drop the parts off. Helps to keep his customers happy. I pick up and deliver, make special trips, and try to find ways to help make his life easier.

I don't think there are that many shops that do everything. And those that do, may not want to. Filling in the gaps has worked out very well for me.

Bill

I always prefer to work with other shops instead of against them.

I have my niche and it keeps me busy, other shops that gets jobs like that either hand customers over or they sub out to me.

People who come in with jobs that are tough for me to handle do to size, I send them to shops better suited to larger work. High tolerance work, I send to someone else, sheet metal another place etc.

I think together we work stronger. Ground rules are no touching each other customers, no trying to hire their people...basic Golden Rules stuff.

I am a one man shop. I've worked at some of the bigger shops.
They sell me material, and I send jobs to them that are to big for my machines.
They usually send me the work that is too small for them to mess with.