A Tip for Job Shops on Managing Overflow Work
Jobs sourced shop to shop are different. It is a collaborative effort between the two shops as opposed to a customer/shop relationship. The sourcing shop may have gotten slammed with orders or a machine went down. The shop receiving the overflow work wants or even needs the business. Importantly, because the receiving shop does not own the customer relationship, any future economic value from interactions with the sourcing shop is low. This means it doesn’t make sense for the receiving shop to spend much time engineering the quote.
There are two different perspectives to address, the shop requesting the quote for overflow work and the shop receiving the request. Let’s start with the first.
The Outsourcing Shop
You’ve won the job – Congratulations! But now you realize that there is no possible way for you to meet an on-time delivery. This could be for a number of reasons including equipment down for emergency maintenance/repair, a depleted workforce, increased order volume, or competing priorities. Either way, you are not willing or able to do what is necessary to get this job to the customer on-time.
Studies show on-time delivery is highly valued by buyers and is a key indicator on whether they do repeat business with a job shop. Missing a committed delivery date decreases the likelihood of winning future business with that customer.
You are in need of quick support and need an answer now. There isn’t a lot of time to wait for other shops to respond to your quote requests. If this happens to be the busy season (between September and November), chances are other shops are busy too. Your goal should be to streamline this process and make it easy for them. Figure out what you are willing to pay for this job. You already know your break even point on the job–what the buyer paid minus any expenses you have. Use this data to take initiative and set the price for the job upfront. This increases the speed of communication, and cuts down the back-and-forth between your shops. It’s an easy question – “Are you willing to make these parts for $XYZ amount? (Yes or No)”. Most estimators can easily and quickly answer this question.
The Receiving Shop
If you are a shop receiving a RFQ for overflow work, don’t spend time quoting! Someone with a similar skill set has already done the hard, upfront work to determine a price and win the work from the customer. There is very little sense in duplicating this effort. Instead, reach back out to the sourcing shop and ask them to set the price they are willing to pay.
If the outsourcing shop is not willing to set a price, do not work with them. This means that they are not a collaborative partner and they are looking to take advantage of you.
When the sourcing shop provides a price for the work, it is much easier for you to quickly assess if indeed the work is profitable for your business. This streamlines the process for everyone and allows you to stay focused on quoting end use buyers.
Today there are sourcing/ outsourcing networks that provide customers with instant pricing and then source jobs from shops in their networks. They have proven this model to be effective at cutting shop administrative costs and at the same time, increasing the speed at which orders are placed and filled. Let’s take a page out of their book and start working smarter together!
– Jason Ray
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Jason Ray is the Co-Founder & Chief Executive Officer at Paperless Parts. Jason drives the company’s product vision, while building relationships with manufactures and partners. Before Paperless, he served as an officer in the US Navy and led the implementation of additive manufacturing technology. Jason holds a BA (Trinity) and MBA (Babson).