The lush, green grass of the golf course was bright enough to sting my eyes. At this hour of the morning sweat was starting to form on my forehead. Our top salesperson, Jacques, was decked out in his infamous lime green pants and yellow polo shirt. He looked like a character from the Moppets with his wild, blond hair. He was tall, lanky, and had a build perfect for playing golf. His low handicap reflected his commitment to the sport and so did his generous expense account.
He walked up to me and said, “How are things going back at the plant? I’m working on a major deal with one of our pissed off customers. If we get it, it could mean more business, but I want to make sure we can deliver. We can’t afford to break another delivery promise.”
I said, “We’ve made a few changes in the way we operate and I can show you the graphs of our monthly delivery performance. We can deliver 95% of our orders on time now.”
He looked at me sideways and said, “What are you doing to bring your costs down? I walked through your section of the office the other day and I don’t feel any sense of urgency. Your overhead has to be higher than it was before.”
I ignored him. Salespeople are always trying to compete on price and are always complaining our prices are too high. Sometimes it’s the only bargain chip they have. Jacques may be our best salesperson, but not if we ranked them by the size of the sales margin.
He was getting under my skin, but I was not about to show it. So, instead of letting my emotions get the best of me, I deflected his comments and asked, “What happens at a customer’s plant when we deliver late?”
As he approached the tee, Jacques said, “Someone picks up the phone and calls me to bitch and moan about their late delivery. I never like getting those phone calls.”
I said again but in a different way, “I wouldn’t either, but what do the folks at the plant have to do to respond to our late delivery?”
Jacques said, “It’s what they don’t do that bothers me. They stop giving us orders. Or, they threaten us with late delivery penalties. Isn’t that enough.” His ball sailed straight down the fairway.
As I approached the tee, I said, “Yes, that’s bad enough. And, as we know, they can find another supplier. I know. I know.”
“What’s your point,” he said it as we walked back to the golf cart. Not interested in my response or my shot down the fairway.
I paused for a second and said, “What do you think our CEO always seems to be upset with everyone?”
He said shaking his head, “What does that have to do with anything?”
In a voice urging him to humor me for a moment I said, “His position requires him to focus on the flow of cash coming into the business. If there is enough cash to cover our costs, pay our debts and have some left over, he’s satisfied.”
“Or course,” he said, “and he seems to back off and not interrupt me every five minutes to close the next deal. But, since our prices are never low enough, I can only do so much to secure new business by lowering our prices.”
See what I mean. Always complaining about price. I said, “I understand, but look where are our main costs drivers are coming from. Our labor costs go up when our internal lead times go up. Our inventory carrying costs go up when our internal lead items go up.”
I continued, “Our overhead costs and working capital costs go up when we are holding inventory longer than Finance planned on. And, our engineering hours go up when we have to do rework and take the last minute customer change requests into account.”
“Don’t blame our customers for your problems. You know customer change their minds all the time. It’s a fact of life in our business. You know that,” he said.
“I’m pointing out that when our lead goes up, one of the moan reasons is that one or more of our own suppliers delivered late. Our costs also go up since we have to work overtime and some weekends to try and deliver on time. And, before you say it, the chance to cut corners and trim some of the customer’s order content is tempting,” I said.
“I would say it’s more than tempting since there have been a few memorable field service issues I had to sing and dance around,” he said.
I said nothing. He was right. I was there when some of the tough decisions to deliver on time or take the time to deliver a quality product were made. I regretted them then and I regret them now.
Someone far off in the distance yelled, “Fore,” and we both ducked our heads.
But, isn’t the there a cost of making a decision about shipping a product on-time, but before it’s ready to go also come at a price? Somewhere down the line the cost will be a field repair, or a full replacement of the item, or reputation suffers.
He said, “I thought we came here to play golf. I wanted to get away from the stress at the office and take in the fresh breeze off the bay.”
The air had the smell of fresh fertilizer and cut grass, but I got his point. I said, “Me, too, but here’s the thing. When our suppliers deliver late, we experience the same issues our customers do when we deliver late.”
He said, “I assume they go through all the same gyrations you are complaining to me about.”
I said, “Our customers costs also go up. Their customers don’t let them change their original due date either. And, hassle of dealing with more than one late supplier is a significant issue for them. Like it is for us.”
He said, “Sum this up for me, we’ve got to move to the next tee.”
I said, “At the end of day, there is a price our customers pay for our product. But, there is also a price they pay for not receiving our product on time. Which price do you think irritates them them most?”
Jaques said nothing. He was thinking. But, I let him off the hook.
I said, “They may save a few dollars by squeezing you on price, but what is the price late supplier deliveries have on their margins? They go down. And, if they also deliver late to their customers, what is the price of losing business, or worse, losing a customer?”
Resigned, he said, “A lot, much more than what I can save them by lowering our prices.”
I said, “What if they could find a supplier who’s deliveries are on time, every time. If this supplier doesn’t compromise on their product development or quality. And, it they don’t compromise on their customer service, lead-time or price. And, what if they could sustain their on-time delivery reliability over the long term.”
He said, “I would begin to trust them again. Not at first, but I would trust them to do what they say they are going to do. It might even take some of the pressure off of focusing on price all the time.”
I said, “What if I told you the changes we’ve made in our operations have built this kind of supplier? Like I said, I can show you our on-time delivery graphs and our actual deliver lead times for the past three months.”
He said, “OK, OK, let’s finish this round and look at our calendars to see when I’ll be back in the office. I’m very busy these days.” He pressed the pedal on the golf cart and we shot off to the next hole.
I said, “It’s your shot. But, let’s make a bet on this hole. If I tie or under your strokes, not only will you sit and look at our performance charts. I want to take the lead during the next sales call with this past customer you want to close new business with.”
He froze in mid-swing and looked right into my eyes. He eyes squinted and it wasn’t because of the morning sun. His mouth turned into a small, straight slit of something akin to anger.
Before he could speak, I said, “What I’m offering is a new capability you have never sold before. Never in the years you have been with our company have you sold a customer on how reliable we are. Never have you had to convince a customer the changes we’ve made are not a fluke. Never have you admitted the reason so many of their internal problems have been our fault.”
He said nothing. His face was now blank. Only the perspiration above his upper lip shimmered in the sunlight.
I said, “I’ve had to sell our internal folks and address all these issues myself. Only then did they start to understand and agree to make the changes which made us reliable. I know how to sell this idea. Give me a chance to sell it to our customers.”
After taking a deep breath and standing erect, he said, “Fine, what do we have to lose. We are not getting business from this customer anyway. The only reason they are talking to us at all is that their internal policies requires them to get three quotations.”
I said, “Find some time and come in and listen to my pitch. If nothing else, it might be fun to see me struggle at my attempts to sell to you.”
Jacques smiled and teed off. Not a bad shot. I teed off, but mine was better.