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  1. #1
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    Default Staggered delivery question.

    Hello All.
    Can you please tell me how you would handle this situation. I quoted a customer for 50 pieces of each part as they requested. They responded with a possible po where part delivery will be every month for 10 at a time. What should I do? I can cut them all and hope they don't cancel or charge them more to make 10 at a time? The parts do not take a whole month to make. Should I also ask for payment each time I deliver?

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    Quote Originally Posted by plutoniumsalmon View Post
    Hello All.
    Can you please tell me how you would handle this situation. I quoted a customer for 50 pieces of each part as they requested. They responded with a possible po where part delivery will be every month for 10 at a time. What should I do? I can cut them all and hope they don't cancel or charge them more to make 10 at a time? The parts do not take a whole month to make. Should I also ask for payment each time I deliver?

    Iv'e seen this a thousand times if i've seen it once. Customer gets you to bid a large quantity then comes back wanting to deal on a smaller amount. Just remember, that PO is just a paper. The whole purpose of them having you quote 50 of each is for you to set up once and run 50. Sure, you could run 50 and hope they buy 40 more later, but do you want to sit on their inventory hoping they will take the rest on their word and a non contractual piece of paper? This is just a common tactic, they know what they are doing......

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    Quote Originally Posted by plutoniumsalmon View Post
    Hello All.
    Can you please tell me how you would handle this situation. I quoted a customer for 50 pieces of each part as they requested. They responded with a possible po where part delivery will be every month for 10 at a time. What should I do? I can cut them all and hope they don't cancel or charge them more to make 10 at a time? The parts do not take a whole month to make. Should I also ask for payment each time I deliver?
    If you deliver in quantities of 10 out of an order of 50, then the invoice you generate should be 20% of the total, and should be what ever you terms are, net 30, 2%10 etc.

    I have one customer who might order 50pieces and want 10/month. If I told him I'm going to run 50 and leave inventory on the shelf for effiecincy, then I know they will not cancel the order half way thru and leave me holding inventory I can't use.

    I have another customer who might want 50 pieces, at a 10/month rate. I know from experience if they can get it cheaper from china after 2 months they will. So for that customer I would only run 10/month on the expectation that their not going to honor the original PO for 50 pieces.

    So it may come down to how well you know your customer.

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    tell them it'll cost more. You probably bid it so buy all material in "bulk" and set up one time. Now they expect you to cover the cost of material as it sits on your shelf or worse, finished parts on you shelf.

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    I don't quote work as a shop, but I send RFQs to shops like yours all the time.... If I ask for a quote on a large quantity, and it ends up that I only need say 1/2 of that quantity, I always ask the vendor to requote, because to me it's the honorable, honest thing to do, I know they quoted based on a certain run size, and amortized setup time into all the parts, so to order a different quantity at that price doesn't seem fair to me. My shop is big enough, and sends out enough work that most vendors would probably just eat the difference rather than risk angering purchasing, but I don't want anyone to have to do that because of an error or readjustment on my part.

    The farther I get in this industry, the more I see how weird I am.

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    It's called a blanket order and has been going on since the beginning of time. If they order 50, 10/month, that's what they're obligated to take. No different than if they ordered 50 all at once. You're basing your price on doing one set up, not 5 and that's the way you need to run them. As mentioned, your comfort level depends on how well you know the customer. Make sure there's an understanding that they can't cancel, and they need to buy all existing stock before a rev change. (lol)

    Unfortunately, there's always the old, "Our sales projection were off, don't ship anything this month". Not much you can do about that.

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    I would just politely let them know that you need to re-quote the job based on the change in quantity, and then bill as delivered for 10 parts a month. If there is no tricky intentions behind the change up then they might just decide to revert back to the original deal, or should be fine with the need to re-quote. Even if they were to pay for all 50 parts upfront and ask for 10 a month delivered, you will either be paying extra for multiple setups or storage space for their parts in your shop.

    Not going to speculate what the intentions are in your current scenario, but I agree with a previous post that this can be one of the oldest tricks in the book. (albeit a very obvious one usually once you have any experience) For me it has usaully been that the customer needs a price for X amount of parts (say 500) , but first wants to get 4 sample parts from me before placing the order. I send these quotes out as such:
    A) If you place the full order I will of course deliver a sample part for final approval before producing the full run (helps protect me just as much to have had an actual physical part approved by them)
    B) The cost for full order is $X amount, and the cost for 4 samples is shop time and materials, a portion of which is applied to your bill if you proceed with the full order.

    People usually dissapear after that. If you ask for qty500 of an identical part, but also ask me to provide more than 1 sample part, then I usually try not to invest much more time in getting that bid out as it seems you want to scam me for 5 free parts.

    Funny how the random guy or small shop no one has ever heard of is " probably gonna need 100 of these, but just the one for now...so you should maybe give me a deal right?"

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    If it is material heavy or you're not comfortable with the customer, you could ask for 1/3rd of the total (for all 50) up front, then 2/3rds of each release upon shipment. That gives them incentive to not disappear leaving you with a bunch of material that isn't paid for.

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    Hello.
    Thank you all. I will adjust my approach to this and see how they take it.

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    Tell 'em to pay up front for all fitty................then tell 'em you'll ship 10 a month just like they asked. Or just tell 'em you need to re-quote I suppose...................

    I hate customers like this. Penny pinchin' corner cuttin' money grubbers..............A very very small percentage don't have a clue(a part is a part to them no matter the qty) but the vast majority is always trying to get more outa ya than is fair.

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    Staggered delivery is fine, if perhaps the parts are expensive due to lots of intricate work.

    Make the customer commit.

    Aka parts 1-25 are 200% of final cost, and 25-50 are free.
    Or signed invoices for 50 parts, for 180 days payment, net. +20% financing, perhaps deductible in last invoices.
    This costs them nothing, but they are liable (technically) for all parts even if they never buy them.

    Tell the customer the truth in advance.
    Most of the time they are willing to pay a lot more, if you are very flexible.

    If the customer wont sign checks in advance or approve nre costs to be deducted, etc. they typically never would pay you anyway, for expensive items.
    So price accordinly, 4x normal and pre-pay by client at least half.

    I made lots of money on expensive 60k$ (200k$ today) items by carrying customer payments 2 years, with the customers (mostly happy) approval.
    At 100% interest per item, so 120k$ (then) at a net 72% profit margin, 2 items per month for 12 months.

    There are many legit. reasons small or big companies may want staggered deliveries.
    Cash available, cashflow, authority to purchase, etc.
    Everyone legitimate will happily sign intent letters and comfort letters and future checks on contingency.
    Or liens, letter of credit, whatever.

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    lean mfg, keeping minimum inventory on the books.
    Seen it in the plant I work at. Unfortunately management doesn't always identify critical spare or understand the real lead time to reorder. I and others have had to drive hours to another plant, or had parts sent up by taxi from Chicago supplier.

    Dave

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    Probably repeating what some have written but I've experienced this a couple of times.

    You give them 2 quotes. One for making 10 at a time and one for all 50 (also to be sent at one time).

    The price will of course be (much) higher for 10 at a time so if they don't go for 50 at one time they're just trying to play you for a sucker.

    With that type of customer I'd also require at least a depositum or chances are you'll regret it. As mentioned, been there once and never again.

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    I do this constantly

    It really depends on how your costs are structured.

    If the part is a 1 inch piece of aluminum, with two holes in it, who cares, run the 50 you were going to buy a length of stock anyway.
    If the part is a 13 inch piece of aluminum with an hours work in it, you run the 10

    Also, in my case, I have usually made the first run, already written the program, made the setup on that first 5 or 10, so my costs are going to be somewhat fixed going forward, again, depending on what stock costs or stock discounts look like.

    IF you determine that there are real significant differences to you on you costs, quote them the staggered delivery differently.

    It is their decision about which way to take deliveries. Remember, you are not quoting against zero, you are quoting against what other shops will quote

    Real grown up companies take staggered PO's

    At the end of the day, if you do not trust that you will get paid on future deliveries, don't take the job at all.

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    To add, real costs like

    plating
    painting
    any other outside work

    greatly affect the lot pricing

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    Quote Originally Posted by gustafson View Post
    At the end of the day, if you do not trust that you will get paid on future deliveries, don't take the job at all.
    To me the OP was only about if the "customer" was using the tactic to get a lower price on the 10 pcs.

    As said I fell for that once. Asked for a price for 25 and 5 were ordered. They wanted the 5 at 1/5th of the price of 25 to "try" them. I believed them but never heard more from them. It would have been just as easy to just buy and try one. Once bitten, twice shy.

    It's all a question of who the customer is as to how much I'd trust them.

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    I would write the bid in two parts, the first part would be for 10 pieces but contain all your setup and programming costs, the second part would be for the subsequent delivery of the the remain parts (without the programming costs, etc). This way, even if they drop off the face of the earth after the first 10 or 20 parts you have your costs covered.

    JMHO

    -Ron

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    To be clear, if this is a first job for this customer, they get the 10 price for 10.

    New customers the burden is on them, the risk is on them, not you

    Even new buyers have to be treated with suspicion

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    Are you FDIC insured ?

    No ?... Well then, your "not a bank".

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    We order parts like this often - and the order confirmation from our supplier states that they will ship per our purchase schedule.

    This would be for things like Exlar servo gearmotor actuators which run about $4k each - we would order 50 or 60 and take them 10 or 15 at a time. Our supplier never blinked on orders like this and even accommodated the odd delay in shipping when we would request it due to project delays from our customer.

    And we often get orders for machines (anywhere from $100k to $2million+) and are faced with customer generated delays for delivery (or cancellations as in the case when the Marcal Paper Company burned to the ground). We generally trust our customers unless they prove themselves to be untrustworthy (and we have run into a few of those) . . . but things like blanket orders with scheduled deliveries over several months wouldn't cause any heartburn with us.

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