Choosing the Right Customers During the Peak of all Peaks
American manufacturers are experiencing the most robust market in decades – and possibly ever. Some people are deeming the current state of the industry “the peak of all peaks.” Everyone seems to be above their targeted volumes, and product innovation is happening at an unprecedented speed.
As an Account Executive at Paperless Parts, I speak to at least ten shops per week. In my discussions, they all say the same two things: “I cannot believe how busy we are,” and “I cannot believe how much we are paying for material.” At the same time, they’re wondering “Are we already at the peak? And if so, how long will it last?”
Considering the amount of uncertainty around that last question, the best thing shops can do now is prepare for the peak to taper off. This is an incredibly exciting time for so many reasons, but it’s important to focus and make smart decisions that will enable your business to thrive in the long run.
Striking While the Iron is Hot
So what opportunities should your shop be taking advantage of today?
Use your leverage. Unlike in the past, suppliers have most – if not all – of the leverage when negotiating price increases, part selection, and the type of work to accept. Use this time to win the parts that fit well inside your business model at the price you feel good about.
Prioritize stickiness. For OEMs, finding shops with capacity is difficult these days. Take advantage of the fact that you’re more likely to win more business by winning more sticky parts that may be harder to move away when things inevitably slow down.
Advertise any available capacity. That being said, more OEMs than ever are actively searching for shops to help with their supply base, so it’s important to make it clear to your customers (and prospective customers) that you do have capacity.
Have honest conversations. If you are performing well as a supplier in terms of on-time delivery and quality, make sure your customers are recognizing this with new work and opportunities. Start having conversations with your customers about where your business stands in their supply strategy and communicate your ambition to take on more of their work.
Questions to Consider
Use the leverage you have today to better understand who you want to partner with – and why. It’s so important to understand a potential customer’s business, from their overall spend to the type of work they contract, to establish long-lasting relationships and diversify your business into end markets.
Here are some questions to consider asking your customer base:
- “Are we one of your top 3 suppliers for [insert the process you’re looking to gain insight on here]?”
- “How can we become one of your top 3 suppliers for [process]?”
- “What are the qualities that your top suppliers share?”
Pitfalls to Avoid
During times like these where it may feel tempting to chase after quick cash, remember to avoid these pitfalls:
“Peak Shaving.” This term refers to a common trap job shops fall into chasing after quick cash. For instance, let’s say your customer is vertically integrated and they are shopping to move 300 hours of laser time into your building each month. While you may be driving new revenue by taking on their business, you’re also at risk of affecting OTD with your other customers. This might make taking that deal not worth it in the long run.
When this peak inevitably tapers off, where do you think that work is going? Most likely right back under their roof. To avoid peak shaving, align your organization with “sticky work” and “sticky customers” that will be around when things slow down. Consider if it makes sense to expand your capabilities or capacity to ensure that the work you have isn’t quickly insourced or moved to another supplier.
Tying yourself to one market segment. Be cognizant of a linear customer base. Consider your primary market: what if it falls out? Can you backfill that work with opportunities from other markets? No matter how busy you get, it’s critical to quote work for a variety of industries and prospects. You never know if they might suddenly become your biggest customer someday.
Preparing for the Pendulum Shift
The industry is riding on an incredible wave. But like all great highs, this can’t last forever. Hopefully things don’t pan out the way they did in 2009, but any extent to which the peak tapers off will be felt by the entire manufacturing industry. Now is the time to make sure you are aligning your business with the partners, customers and products you want to be there when the pendulum shifts.
If you’re looking for technology to help automate and streamline your process when taking on new business, consider Paperless Parts. You can check out an on-demand demo of our automated quoting platform or request a live, customized demo with one of our experts today.
What’s the key to triaging your quote backlog? Watch this on-demand webinar to find out.
Jeff Ganas brings 22 years of industry experience as a Manager of Business Development in Metal Fabrication. Jeff started his career in Suwanee, GA in a $4M shop which he helped grow to $10M. He then spent the majority of his career in Dawsonville, GA, helping to double the shop’s revenue in just 8 years. He was also at one point the lone sales team member for a multi-state $300M fabrication company. Before joining our team in 2021, Jeff was a customer and consultant for our platform at two different companies.