We have enjoyed many of Steve’s posts via Linked In, this one I just HAD. TO. SHARE.
I was contacted recently by a potential customer asking for our hourly shop rate. When I asked him why, he said it was so that he could compare our services against that of our competitors. I told him that our hourly rate doesn’t really matter when looking at the overall cost of manufacturing a part and choosing the right supplier.
He did not understand what I was talking about so I went on to explain it like this. Let’s say that Company X has a new state of the art Whatzit machine and Company Z has a 10 year old Whatzit machine. Company X charges $ 100.00 per hour on their machine, Company Z charges $50.00 per hour on the machine that they have. Which company are you going to choose? I’m guessing that you have decided to go with Company Z because they charge only $50.00 per hour. But, did you know that with technology improvements a new Whatzit machine is actually 50% faster than they were just 10 years ago? This actually makes the price the same between the two companies… or at least close.
But what if the pricing wasn’t the same? Let’s say that two companies quoted production of a part and Company A came in around 10% cheaper than Company B. Do you automatically give the project to Company A? If you do, you’re certainly not alone. Many companies do this all the time and the lowest price always wins. But is it really a lower price if you have a lot of rework? Is it truly a better price if the project is late? Here are some questions I like to ask to really find the lowest overall cost:
Does this company have a track record of on-time delivery?
How is their quality and what is their rejection rate?
Can they track my material and offer material certification?
How easy are they to deal with?
Will a real human answer the phone?
Are they convenient to get to or are they located in the middle of nowhere?
Are they ISO certified and do they have a Continuous Improvement plan?
Are they the newest kid on the block or are they an established, stable company with an Outside Board of Advisors?
All of these questions (and likely more) need to be answered to make sure that you are dealing with a reliable and reputable company that is going to provide you with a good value and be around to service you for years to come. I’m not saying this is the only way to evaluate a supplier. I’m just sharing some things to think about.
Welcome to our blog, Speaking of Precision. As Director of Technology and Industry Research for PMPA, I bring 38 years of hands-on experience in areas of manufacturing, quality and steelmaking. I help answer "HOW?","WITH WHAT?" and "REALLY?"