BEWARE THE CUSTOMER: They Aren't Always Right

I was elated when I first heard the news from my Vice President of Sales and Marketing informing me that he had just gotten off the phone with the Director of Purchasing from our second largest customer who wanted to give us some immediate new business. The new business was valued at nearly $3 million, and we were promised an opportunity to get a first look at $14 million of additional new business that would be going out for bid in the near future if we would assist them.

We were not at all unfamiliar with the business we were being offered, as we currently enjoyed 50% of it, while one of our closest competitors had been awarded the other 50%. A common strategy utilized in the automotive business, so as not to place all your ‘eggs in one basket’, and to employ the practice as a means to play one supplier off another with threats of moving the business if price concession goals aren’t met. Now, receiving the news that our competitor was struggling financially, and our customer, a large Tier 1 supplier to General Motors was deeply concerned that if they filed for bankruptcy protection, the tooling would be held captive and unavailable to meet production demands. So, our customer’s motive in calling us was to move the tooling safely out of our competitor’s facility as quickly, and expeditiously as possible at all costs. Their misfortune was to be our gain, we envisioned.

We asked for the customary right to inspect the tooling to ensure that it had been properly maintained as required by contract, for our own protection, and was granted approval by our customer. However, when we sent our engineers accompanied by our customer’s representatives to view the tooling in operation at our competitor’s facility, we were refused access into the building. Rather, we had to look at the tooling after it had been removed from the presses, placed on skids, and taken to an outside dock. This was very inefficient, and didn’t provide us with an opportunity to closely inspect all of the cavities inside the molds. However, in order to meet our customers demand in removing the tooling from our competitors facility, and getting it up, and operating in our own facility in order to satisfy production schedules, we accepted our customers promise to work with us on any issues that we might encounter involving the condition of the tooling. Their objective was to get the tooling out of our competitor’s facility before they went under, and into ours, at all costs.

When we were finally able to get the tooling back to our shop located a few hundred miles away, and loaded into our presses we found the tooling to have been poorly maintained, and badly needing of repairs. Unfortunately, by this time we were behind schedule, and our customer wouldn’t afford us neither the time nor the money to fix the tooling upfront as had been originally promised when agreeing to work with us. Some of the parts that came off the tooling were not entirely within specifications, but were functional, a situation not entirely uncommon. That was how our competitor managed to still produce products, and not to encounter any issues. However, now that the tooling had been moved, and General Motors informed of it by their supplier - our customer - GM couldn’t have cared less about the necessity for moving the tooling, they demanded that all the parts meet specification despite having previously accepted the functional parts produced by our competitor.

Unable to shut the affected tooling down long enough to make the necessary repairs we were forced into third party containment, an onerous and costly process whereby all the affected products are shipped to an organization selected by the customer, and whose sole purpose is to sort out the offending products, and ship out only the parts within specification to the customer. The first full month of third party containment cost my company $1.3 million.

Early on, as this situation began unfolding, I had already began a dialogue at the highest levels of my customer’s organization, and directly with their Director of Purchasing. It was my intention to receive remuneration for the costs incurred for third party containment, money to repair the discrepant tooling as had originally been promised, and an across-the-board piece price increase on the affected product line to defray the costs that my organization had incurred. After 3 high level meetings, and threats on my behalf to cease any further production until the matter was resolved. My organization was finally made whole, and my demands met after living this nightmare for 3 months. Moreover, I never saw the additional $14 million of new business opportunity that my company was offered for assisting the customer when they needed help the most.