Job Shop Owners - Are you giving away your expensive investments?

In the latest The Job Shop Show podcast, I was speaking with a milling machine manufacturer who related the story of a customer who reduced runtime on a complicated part from 18 hours to 8 hours by implementing high-speed milling. The high-speed milling center was purchased specifically for this job and was a significant investment made by the shop. It made me wonder, how did the shop treat the run-time savings? Did they pass along all or some of the savings to the customer at the same machining rate that the job was won? Did they increase the machining rate but shorten run-times? Or did they keep all or some of the run-time savings as compensation for the investment they made in procuring advanced technology? What would you do?

This is definitely a business philosophy question. Here’s how I treated a specific situation at RAPID, and how I approach technology and process improvements in general. RAPID invested in $40,000 trunnion tables for several of our Haas machining centers which gave us the ability to reduce the number of setups through now enabled 5-axis machining. In essence, we could sometimes take a job that requires multiple setups using 3-axis machining and combine them into one setup. We decided to quote all parts as though they would be made in 3-axis machining centers and not in the 5-axis machining center. My belief was that we should be compensated for the risk and expense that we took in buying the trunnion tables. Therefore, the resulting setup savings was not passed along to the customer. This gave us the option that if the trunnion table was unavailable, we could run the job in a 3-axis mill and not lose money. If the trunnion table was available, we were rewarded for the investment we made.

Shops that are not continually making technology and process investments fall behind. It may seem greedy that we would not share the cost savings with the customer, but in the long run the customer benefited. These profits enabled us to continually invest in new equipment and processes that improved the customer experience such as faster deliveries, better quality parts, better communication tools, and yes, ultimately lower costs. And it is important to remember that the cost savings are not guaranteed all of the time and giving these away prematurely might actually lead to losses. Often the anticipated path of part manufacturing at time of estimating, ie 5 axis, sometimes didn’t happen at the time of manufacturing and there was no time/ cost savings. In addition, not all our investments were successful, so this helped pay for the money losers.

So, are you giving away all of your investments or are you using the savings from these investments to help you stay on the cutting edge, be competitive, and grow?

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