Commodities

by

Roy Lobenhofer

Commodity:  a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price – Merriam-Webster

The bane of foundries every where is the perception castings are commodities. Every foundry owner/manager knows their castings are not commodities. They know the sweat and, sometimes, blood going into their castings. They know the effort expended getting their castings to their customers on time. And, they know the money they’ve sunk into quality programs to assure their customers are getting only the best.

There are two problems with the above paragraph. I believe the first is rather obvious. Sellers (foundry owners/managers) don’t get to decide what is or is not a commodity. Only the buyer gets to determine what he is willing to pay extra for in order to make sure to get a specific brand. It may not be fair, but that’s the way it is. Whether it’s you buying can goods at the grocery store, deciding where you get your gas, or your customer deciding if your castings are worth more to him than your competitors, the one buying gets to decide.

The second problem with the above paragraph is in the first word - “Every foundry owner.” If “every” foundry is that good, what is the difference between one foundry’s castings and another’s? You say I exaggerate, I don’t believe I do. I’ve known more foundry managers/owners who admit to their kids being brats than ones who admit they’re not as good as their competition.

Okay, you say, if my castings aren’t any better than anyone else’s, why do I have loyal customers? I have three responses to that question.

1) You may indeed be better. I have not been in every foundry by a long shot, but I’ve been in quite a few. I’ve been in many doing some things very well. Perhaps those things you do well are what are really important to your customers. A word of caution, if you are indeed satisfying your customer, I hope you know what it is that is keeping them satisfied. If not, there is the danger your next “improvement” may switch your emphasis away from what makes you valuable now.

2) Some customers realize there’s a cost to change suppliers. The few cents they’d save on each casting isn’t worth the effort/costs in verifying a new foundry would really be a better option for them. That’s good news for your current customers, but bad news for looking for new customers. Conversely, a major goof or two from a foundry is bad news to them when it comes to keeping those long term customers, but may provide an opportunity to convince those customers to give you a try.

3) Some customers are clueless. When I was working for AFS, I was called by a new casting buyer to look at their practices. The first thing I asked them about was their customer returns. They had no idea initially, but checked and found in some cases over 50% of the castings were being returned. In other cases, no castings had ever been returned. Needless to say, there were some foundries that lost their loyal customers after the buyer got a clue.

So, what are you as foundry owner/manager to do?

The first thing I’d recommend is if you have a number of “loyal” customers, find out why. That’s far easier said than done. It requires a far more rigorous approach than asking your sales rep to find out the next time he visits your customers. He’s liable to find the major benefit of your castings is the wonderful sales rep you use. (If that’s true, you’d better make sure he’s healthy and happy if you want to keep those customers.)

If you thought that was tough, step two is even harder. (If it was easy, everybody would be doing it.) You need to find out why your potential customers are using the foundry they currently are. Fair warning, these potential customers aren’t thinking along these lines at all. If you ask them what they want, they’ll tell you lower prices. But, if you have the patience to dig deep you might find out what’s also important to them beside price. Maybe asking what they really appreciate about their current suppliers will lead you to what they think is important. Maybe it’s they only take a week to go from a print to a prototype, have lead times of two weeks, haven’t shipped a bad casting in the past year, never have any problems machining their castings, or some other thing that I’m not smart enough to think of.

Of course, there are many frustrations with this plan beyond getting the information. I would be very surprised to find out your potential customers all think the same characteristics are most important to their operations. On the bright side, it may be your clue to which of these potential customers would fit your operation and, thereby, where to concentrate your efforts.

Another frustration is once you find where you are really better than your competition is proving it. We started out by saying that every foundry feels they have excellent quality and on-time shipping records. That means it’s going to take more than your sales rep saying you’re good to get a potential customer to believe it. I’m reminded of a quote attributed to Demming, “In God we trust! (All others bring data.)