I'm manufacturing for OEM and facing challenges from trade agents. Can you suggest any added value?

August 11th, 2015

My company is small and targets customers like GE, Eaton, Cummins and other tier 2 suppliers. I want to build some added value to my company in order to differentiate ourselves from other competitors. There are competitors like trade agent who has so many sources of manufacturers on hand and multiple distributions in United States for quick delivery and competitive pricing. My company's current main capability is precision machining. What type of added value I can build for my company that not many other competitors are able to achieve? What are the weakest link that these competitor generally have? Your feedback is appreciated!

Anonymous

August 11th, 2015

Evelyn,

Precision machining today is a commodity to Tier 1 and 2 manufactures. If you are competing solely on price, you cannot win. There will always be a cheaper price from a competitor, and this is especially true in machining. Your company will need to invest in the service it provides to the customers, as well as the delivered products. Just a few examples are specialized JIT delivery to reduce warehousing requirements for your customers. Also near real-time production tracking online for parts per hour, day, week, rejects, QC testing, etc. This level of visibility is not possible by "trade agents" and is very uncomfortable for small machine shops competing on price to produce. In most cases they won't or cannot do it. Also a QC guarantee of the parts to specification to speed up production and reduce labor costs of your customers are well received. This guarantee must also be able to be verified and backed by real QC testing prior to shipment, not just a rubber stamp approval. What you are building is the "feeling" a customer gets when they do business with your company. After a period of time this becomes a trust relationship that is very hard to break by a competitor. Essentially you need relationship and trust development among your customers. This not only helps acquire new customers but also develops defensive positioning of your customers from attack by other competitors.

Your customers or potential customers who are outsourcing precision machining don't care about your machines, production capabilities or ISO certifications all that much. This is expected today. You have to go above and beyond the expectations with service. That is the only way to effectively compete, be profitable and stay in business. Lastly, if you are stuck in a cost only situation, it's OK to walk away and let your competitor suffer the agony of a low ball price. Set the floor you are willing to go to. You will be respected. -- Keith

John Seiffer Business Advisor to growing companies

August 11th, 2015

Evelyn,

Do you do production runs or one-off and prototypes? I have a client in what may be in a similar business on the east coast.

Check out https://www.supplier-connection.net/SupplierConnection/index.html - It's an IBM initiative to connect smaller companies with supply chains of Fortune 500 companies and other enterprise level firms. A friend of mine oversees it.

Moshe Stern Supply Chain Consultant and Co Founder at MJ Star Consulting

September 13th, 2015

Evelyn,

You may consider developing expertise in a functional area, in which precision machining is a major core competency. Check your target customers divisions and upgrade your services from OEM to JDM (Joined Development Manufacturer).

Two examples I can think of:

- Medical and Dental Implants,

- Internal Combustion Engines,

There are several ways to achieve the engineering and knowledge level you need.

I would be glad to help,

Moshe Stern

650 218 9832

moshe.stern@gmail.com

Andrew Lockley Investments & consulting for tech startups

August 11th, 2015

Ideas : Have better customer service. Work with novel materials Offer a more integrated service - eg design Manufacturer in a cheaper place to be price competitive

Anton Yakovlev Founder of four successful businesses on two continents who can help you do the same

August 11th, 2015

You probably could bring in flexibility, ability to reach each customer particular needs, and outstanding customer service. You probably could also undermine your competitor by emphasizing local origin of your product.

All these are not easy to copy when you're a really large company with tons of customers.

Barry Bryant Strategy, Vision, Ideation, Invention, Innovation

August 11th, 2015

Hi Evelyn, Since you are smaller, perhaps you can leverage agility. A large aircraft is disadvantaged in a dog fight. Look for ways to reduce the ordering process and multi-party approval steps, automate the customer experience to reduce friction and expedite production so there's a better overall customer experience with higher quality or faster delivery. Perhaps there's an area of precision machining that the big guys can't service well that requires personal attention, agility, iteration or protyping. Finding a niche could be your hallmark. Good luck! Barry

Steve Owens Startup Expert

August 12th, 2015

No one can answer this question for you, except you; because no one knows your company as well as you.

Generally, there are three dimensions to differentiation:

Company Size (we only work for small companies)

Industry (we specialize just in the widget industry)

Technical (we only do EDM services)

Great question and I am sure you will find the right answer.

Sujit Hemadri Nobody

August 12th, 2015

Make your product strong which has good acceptance rate, may be with more OEM's. Once you have a better negotiating power on your selling side, you can try to source from multiple trade agents from whom you buy which gives you an upper hand. I am assuming you have a problem sourcing the parts for the product.

Evelyn Chen

August 12th, 2015

I really appreciate everyone left his valuable advice here!

Keith,

You have just pinpointed the added value: JIT and real time production tracking that fits my need now. My company has implemented ERP last year which increases our operation speed and reduce costs. Adding a real time production tracking can help my customer learn his/her parts production status anytime! JIT is another approach when I have a steady production for certain customer so I would be able to customize for my customer's need. I will need to present my customers about these technology I currently have in order to help them better understand what "kinds of added value" I can provide to benefit them.

Evelyn Chen

August 12th, 2015

For the pricing, it's always the first thing every customer would consider before really moving forward to do a real business. I've spent so much time in developing new customers the past years and only when my pricing is meeting his/her target pricing my customer would be thinking to do business with me. However, I take this chance (doing business with new customer) to show my agility to his/her request and how responsive I can be. That's where a "real" relationship and trust between my company and customer starts to build.

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