Traditionally the secondary wood industry has not done well in presenting a unified front to the vendor network, partially due to the fragmentation that exists within the industry. Trade organizations such as AWI, NASFM, BIFMA, KCMA and others do offer a unifying force in establishing standards for material specifications and testing, but they have limited influence on how we interface with suppliers. 

 

I need to insert a caveat here prior to going any further. I am not faulting the supply network in what I am going to say. The simple truth is that small things that can be important to the customers are not always apparent to the suppliers, and therein lies both our shortcoming and our opportunity.

 

Numerous, seemingly minor, changes that would make your business more productive are too often simply overlooked; we accept the current state as being the way it is and thus the way it will always be. If we are unwilling to accept a less than optimum current state internally, we must be as unwilling to accept it from our external suppliers as well.

 

An example of one of these seemingly minor accommodations is the way most manufacturers receive drawer slides. They come prepackaged and assembled. The component for the drawer body and the component for the carcass are pre-assembled. So, the first thing the user does is separate the components, because separated is the way they need to be for installation. Additionally, in most assembly line applications the points of use of the two components are not coincident, so now one component is moved to a second location. Keep in mind this is all done after the vendor added cost (and possibly perceived value) by assembling these components at his factory.

 

Now the good news, the vendors (at least some of them) will be perfectly happy to supply slides disassembled; all that is required is that they be asked. This is obviously a small issue, but small issues add up and in a competitive marketplace can anyone afford to ignore small issues?

 

Another area where we have an opportunity to beneficially manage our vendors is in production machines and machine design. Here again I need to add a caveat. Some machine suppliers are intimately familiar with the manufacturing process and many of the programs their customers are using to improve performance. In fairness, I have seen cases were the machine suppliers understand these issues better than their customers. 

 

The machine suppliers can and should be your advocate with the machine builders. The machine builders are very often removed from and unaware of seemingly insignificant things they do which are counter productive to their customers.

 

The machine builders live in the same competitive world as all businesses and too often are driven by cost and not value. On numerous occasions I have had discussions with machine builders of “why did you do this,” and the answer is cost; they have made a change to reduce the cost of the machine. What they do not realize is that reduction in cost can represent a hugely inequitable reduction in value to the user. They don't realize that because they're not walking in the customers shoes; they build the machines, but they do not operate them.   

 

The dealers you work with are far closer to your manufacturing process than are the machine builders and you as customer must make them aware of concerns or omissions that can make a huge cost difference over the life of a machine. An operator function that requires 10 seconds more to complete than is necessary, which is repeated 10 times an hour over a 10 year life span equals, 260,000 seconds, or 4,333 minutes, or 72.2 hours. If that machine has an ownership and operating cost of $100 per hour (which does not require a hugely expensive machine) that 10 second “delay” will cost the owner $72,200 based on a single shift operation. Seldom will that 10 second penalty offer an attractive enough offsetting reduction in the purchase price to be justified.

 

There is another element which cannot go unmentioned. You as the customer must be aware of these operating cost issues and their potential penalties. Customers who look only at purchase price and not value, condemn themselves to suffer from those associated penalties over and over.

 

I am enough of a realist to know that the industry is not suddenly going to heal the fragmentation and all join together in some beautiful benevolent association charged with representing these common interests to the suppliers. However, I also believe a beautiful benevolent association is not required to affect the same outcome.

 

If the majority of customers look beyond the current “box” and search for opportunities to improve the value of purchased components, machines and services, that would have the same net affect as a formal industry-wide organization. It is possible to act in unison with the supplier base even as individual firms. 

 

Keep in mind also that one of your greatest potential sources of new opportunities for improvement lies in your supplier base or potential supplier base. Ask your suppliers for their suggestions of what they can do to improve their value in your operation. Keep in mind the supplier you may have turned down yesterday for a few cents higher price might well represent to your business a more than offsetting higher value. 

 

The true cost of any purchased component is its cost incorporated in your product sitting on your shipping dock and any related warranty issues. That can be distinctly different than what is invoiced at your receiving dock — that is the price. 

 

The true cost of a machine is the ownership and operating cost/part over the beneficial life of the machine, not the price on the invoice.

 

For those companies where all decisions are not made by a single person this issue of cost versus price often becomes one of contention. The purchasing department finds a widget for $0.02 less than the current widget. This new widget could be an exact equal (or even superior) to the current widget and thus represents both a lower price and lower cost (thus higher value). On the other hand it might not be the equal and comes with any number of problems:  late deliveries, large minimum order size, packaging which is expensive to dispose of, dimensional variations, more difficult installation, rework, potential warranty claims --- on and on.

 

If the performance of your purchasing department is evaluated based on variance and purchased price, the battle is lost before it begins. Change your measures. The prudent decision must be based on an analysis of total cost to you, not price. An objective and all-inclusive comparison must be done to make that cost based decision. Too often that fails to happen and the decision is based on price alone.

 

Suppliers can influence these cost/price decisions if they are prepared with factual data to build a sound business argument — not simply an emotional appeal devoid of any substance.

 

Whether a slight change in how a part is delivered to you or a significant change in the configuration of a production machine it is incumbent on you the customer to tell your vendors what is of value to your operation. Pick your vendors based on the value they bring to your table, not on price, and make them your partners — you both will win.