As Jacques and I walked to the front door of the Klinester Corporation, I turned and looked over my shoulder. You know the feeling you get when you feel like you are being watched? I had felt eyes on me all morning. I never have these feels, but this morning it was almost tapping me on the shoulder and saying, “Hey buddy, who’s watching you? I am. Don’t look now.”
Seeing nothing unusual, I turned back around and opened the door for Jacques. He was in one of his best suits. From the polished wingtips, along the tight creases in his slacks, the dark grey, pin stripe suit fit him like a shape in a drape. He said thank you and gave me nod as I made my way to the front desk. I wasn’t worried about what I had on. I have other things on my mind. I was nervous. I was anxious. But, I was able to greet the receptionist and announce our arrival.
I said, “We’re here to see Marty Moran. We have any appointment at nine o’clock.”
The receptionist pecked a few buttons on her massive phone console and spoke into her head set. She wore a pale chiffon dress, it was nipped and tucked in all the right places. He lipstick was a subtle shade of red. Her smile nonexistent. She said, “Marty, the two gentlemen are here for your nine o’clock.” Efficient. Cold. She directed us with a wave to a coffee stand by the guest seating area. I didn’t need coffee, but Jacque picked up a cup and added cream and way too much sugar.
After a few minutes, Jacques said, “We need the next order from these guys. From my sources inside the company, they are about to get a large order from a large Las Vegas hotel chains. If they do, they will need our services and a lot of them.”
I said, “As I said, my primary mission is to confirm our reliability offer. I need their feedback on what works and doesn’t work to move more deals into your sales funnel. And, I expect the hit rate to go up and you’ll need to be able to respond to more quotes and RFPs.” He was focused on making sales. That’s his job. If this meeting leads to more sales, that would be icing on the cake.
Jacques said, “And, like I said, you’re here because you won a bet on the golf course. I’m willing to take the risk because you may be on to something. You have cleaned up your act, but I’m not convinced it will make any difference to this customer. They are all about getting the best price. Always has been. Always will be.”
I said, “That’s what we’re here to find out. I want to find out if there other ways to secure more business by capitalizing on the operational capabilities we’ve built.”
I was going to continue with my explanation, but the receptionist interrupted us and said Marty was waiting for us in the main conference room. Jacques took his coffee and we made our way down the short hallway. With another wave, the receptionist directed us into the room.
Marty sat on the opposite side of the large, oak conference table. He was a big man, broad shoulders, and his muscled arms stretched the fabric on his short sleeve shirt. He looked up as we entered, stood and walked around the table. He was a hulk of a man. Taller than I expected.
He said, “Gentlemen, I’m glad you are here. I’ve set aside 30 minutes for this meeting, so let’s get to it. I’m very busy this morning.” His voice was higher than I expected.
We shook hands and I introduced myself. His grip left my hand feeling like a crumpled piece of paper. Jacques seemed to know him well and gave a nod. We took our seats on the opposite side of the table. Marty returned to his side. The field of battle was set. Marty’s dominate position, on home turf, and his imposing figure was distracting me.
Jacques said, “Stewart has something to ask you and he needs a few minutes before we talk about your upcoming order.” He looked over at me and grinned. I was the same kind of grin a lion would have after cornering its prey. I was a sitting duck and he had opened the gate to let the lion out.
I was in a curious mood. No, it wasn’t a mood where I felt uncertain or unclear about how I felt. I knew I was terrified. Pushing it aside, I wanted to hear the responses from Marty about our new offer.
I said, “Thanks for your time this morning, Marty. We are developing a new offering and I would like to check it with you. It may seem a bit unusual coming from me, but you are the best person I know to check it. Any opinions you have about it will be appreciate.”
He nodded. Out of the corner of my eye, I saw Jacques leaned back in his chair. Ready for the show. I took a slow, calming breath.
I said, “I know you and Jacques have worked together for a long time and you have been a customer of ours for over 30 years. But, over the past few years, we’ve let you down. Especially, by promising lead times and due date and then not meeting them. Sometimes by a few days, sometimes by a mile.”
Now Marty was nodding his head. He said, “That’s right. As much as I like Jacques and the services you provide, I was getting too many phone calls from my own people to find a more reliable supplier. You’ve broken your promise too many times.”
I said, “I understand and I’m here to see what we can do about that. We took some time to figure out why our processes we so unreliable. We looked in a lot of places and tried a few things to test our assumptions. Let me try to explain.”
I said, “What if you could completely trust your system integrators?”
Marty said nothing and looked at me like the RCA dog. Marty glanced at his watch and looked back into my eyes. He said nothing.
I said, “Our industry has always been focused on helping customers get what they want by creating custom tailored products. We meet your tight quality standards. And, we offer our solutions at a competitive price.”
He nodded and then was about to say something, but I continued, “But this environment is filled with uncertainty. We never design or produce the same systems twice. Your quality standards are hard to meet sometimes. And, sometimes we don’t get the margins we want. All this uncertainty effects our due date performance because its hard to predict how long all this work will take.”
I want to make sure I don’t blame Marty or his company for any of the issues I’m presenting. The way to build rapport was not talking about golf or the weather. Building rapport with Marty was going to based on understanding where the issues were and where they were coming from.
Marty said, “I see, but what does this have to do with me?”
I said, “You get what you asked for according to the specifications in the RFP, right? But, with all the uncertainty from accepting the order, the engineering, and shipping it out, you are forced to guess what you are going to receive your order. We are forced to guess, too.”
He nodded. He said nothing. Marty must have been practicing his Stoicism. He sat there with his arms crossed. The fabric of his shirt stretching even tighter. His granite face seemed to grow bigger as he waited for me to continue. So, I did.
I said, “Here’s where our analysis starts to get a little mirky. And, I’ll need your help to confirm a few things.”
He nodded.
I said, “When suppliers deliver late, what happens to your planned production schedules?
He said, “We have to reschedule the whole shop. It’s a real hassle.”
I said, “What about your workers’ efficiencies and equipment usage?”
He said, “They go down. We don’t like them to go down.”
I said, “What happens to the priorities you’ve make for your other supplier and subcontractors?
He said, “They have to change, too, since we don’t have the space to hold the inventory which is piling up waiting for all the parts to arrive. The phone calls telling a supplier to hold their shipment aren’t one’s I want to make. In some cases, I told them the week before to expedite their shipment. How’s I’m telling them the opposite.”
Now, he’s showing some emotion. But, I went for it. I continued to pour gas on the fire.
I said, “And, what about the planned commitments you’ve made to your customers when a supplier delivers late? Your lead times and work in process must go up, too.”
He said, “The customer’s procurement guys are the worst. The one thing we can’t do is blame a measly supplier for why we can’t deliver a customer’s order. They don’t care, they have their own due dates to meet.”
I tried to interrupt. He was on a role. I let him speak.
Marty continued, “Let me tell you that I’ve had to order replacement parts for some of the orders we’ve been working on. And, at expedited prices, because Engineering was forced to redesign something. If we used the original design, it would have taken too long and would have missed our due date.”
I said, “Do you see how one late shipment can disrupt many different things in your organization? But, as bad as it sounds, I’m sorry to say there are plenty of other bad things that happen to your company. Do you want to hear them?”
Jacques said, “Companies like your also want to be lean, efficient and on time, right? What happens when have to reschedule, waste resources and protect your operations from unreliable suppliers? I’ll tell you. There is a hit on labor costs, carrying costs, engineering costs, and overhead costs. Your cost of sales go up, margins are squeezed, sometimes penalties are paid, and cash get sucked up in the wrong places.”
I looked over at Jacques in surprise and gave a small nod of appreciation. This guys was paying attention after all.
Now Marty nodded.
I said, “There is a price for obtaining our products and services, but there is also a price for not receiving our products and services. The price for not receiving an order, on-time, from your suppliers is much larger than the few cents you squeeze out of Jacques.”
Marty sat back. Stunned. All the color left his face. His shoulders went limp as if being resigned to the vaccination shot he didn’t want.
On the way over, Jacques told me about a large customer of the Klinester Corporation switched to another supplier. Why? Because Klinester couldn’t meet their lead times. The large customer was a significant part of Klinester’s annual sales. It hurt. The news was all over the industry gossip line.
I said, “Integrators who deliver late and break their promises don’t make it easy to improve your company’s profits, do they?”
Marty shook his head side to side. Did I see a bit of appreciation in his face, too? I wasn’t sure. But, I had hit a nerve or two. Perfect, I had him where I wanted them. But, I’m not out of the woods yet. I may have convinced him the damage we’ve done to their company was way worse that anyone thought. Anger and resentment grew like weeds in that kind of environment. I still had some work to do.
Marty said, “Your 30 minutes are up, but I want you to continue. If you’ve got a solution, I want to hear it.”
I nodded. I said, “Before we go through our solution, let’s be clear about what a good solution for you looks like.”
My challenge now is to look at those problems with through the lens of the criteria for a good solution. I want to help Marty see that our solution is the only solution which will meet the criteria for a good solution to his problems. He’s agreed with the problems. Let’s see if he agrees to the criteria for a good solution.
He’s made commitment to other suppliers. His company has put in place things to protect themselves from unreliable suppliers. At some point, he will have to defend his decision to move more orders to our company. The main thing the other folks in his company know is that our company is not to be trusted. No more orders for you, sunshine.
I said, “Since an unreliable supplier causes so much damage by being late with their deliver, the first criteria must be to deliver order on-time, every time. Agreed?”
Marty said, “Agreed.”
I said, “The second criteria is to make sure we don’t cut the corners of any of the other things you need from a reliable supplier. Things like having competitive lead times, maintaining high quality levels, and offering fair pricing. Agreed?”
Marty said, “Agreed, but you also have to be able to respond on time to the RFP’s we send out. You take too much time getting them back to me.”
I made a note in my notebook and said, “I’ve made a note about it and I agree. That has to be improved and we’ll make it a part of the second criteria.”
How was I going to improve our quote response time? I didn’t have time to worry about it right now, but there had to be a way.
I said, “The last criteria to consider is that a supplier is reliable from the day they say they will be. Once you get used to working with a reliable supplier, all the things you are doing to protect yourself and your company will not be needed anymore. Your folks will realize they don’t have to place orders as early any more. You don’t have to hold buffer inventory anymore. You don’t have to reserve capacity in your shop to cover up the mis-synchronizations.
When all these things are gone and a once reliable suppliers delivers late again, real damage will occur. So, the final criteria is to be reliable for the long term. Agreed?”
Marty said, “I agree.”
I said, “If a supplier can meet these three criteria, the issues unreliable suppler cause go away now and into the future. What more could you ask for?”
He said, “I’m not going to give up on trying to squeeze every penny out of Jacques and try to get better deliver times.”
I nodded and took a deep breath. I wasn’t ready to go there and I wasn’t going to take the bait.
I said, “We don’t have a name for what we are offering yet, but there are some key features I want to tell you about. There are three of them.”
He nodded.
I said, “One, to provide a stable workflow, we limited the amount of work in process. This means there are no overloaded resource overloads. Overloaded resources cause slow downs. And, no resources which are starved for work. Starved resources lose momentum. Both situations cause bad multitasking. And, bad multitasking extent lead times.”
Marty said, “That sounds counter intuitive, but it’s your business. What can I say.”
I said, “Two, everyone is working on the right jobs at the right time. We agreed on a single priority system which improves our ability to focus everyone’s attention on getting orders completed on time,” I said.
Marty said, “That makes sense. Again, I’m not sure how you did it.”
I said, “And three, to sustain the ability to deliver on time, we watch the load on our resources. In this way, we will know ahead of any overloads what capacity we need to add and be able to promise delivery dates.”
I said, “Can you see how these three elements help our ability to deliver on time?”
Marty said, “I’ve been in procurement most of my working life, so I’m can’t say for sure. For the most part, they make sense. I am glad to hear you are doing different things. If you came in here blowing smoke, I wouldn’t be sitting here for very long. Please continue.”
I pulled a graph out of the notebook I brought with me and said, “Take a look at this chart. It shows our actual due date performance over the past eight months. As you can see, our due date performance was bad at the beginning. It turns out it was considered the standard in our industry.”
Marty looked at the chart and followed my finger to the 55% on time performance data point.
Marty said, “It takes guts to show this data to me. If I wasn’t desperate to find some reliable suppliers.” He trailed off and looking up at me.
I said, “We didn’t like it either. It was painful living this day to day. But, we stopped doing to stupid things, got some help, and made some key in the way we operate changes. Our performance improved and we are not in the mid-90% range.”
Jacques said, “I’ve been checking around with our competitors.” He looked at me with a grin that told me we was more interested in this than I thought. He continued, “As far as I can tell, our due date performance is well above the norm in our industry.”
Monty pursed his lips and raised his eyebrows.
There are some things we’re doing which will make this performance even better.
I said, “But, there is something I want check with you. What would it take to convince you we are serious about delivering your orders on time?”
Marty said nothing. I could see he was thinking. I didn’t want to leave him hanging too long, but it was satisfying to see him stumped for a moment.
I said, “Talk is cheap. We need to hold ourselves accountable for the promises we make. We we deliver on time, we should share in the benefits that brings. If we don’t deliver on time, we should be penalized.”
“Really?” Marty said. He looked at me unconvinced. I was ready to deliver the one-two punch.
I said, “Really. Here’s what we are proposing. For every week after we deliver late, we’ll take 10% of our selling price.”
I waited. In my mind, I came at him with my left jab getting his attention. Marty actually leaned back a little.
I said, “We want you to know that we take our promises seriously. A self imposed penalty like this should help you see that. What do you think?”
He said, “Ive tried to penalize you in the past by charging you late fees and liquidated damages. But, I would have never believed you would be come to me and offering a penalty ahead of time.”
In my mind, with my right hand, I punched him right in the nose with the second part of our penalty element.
I said, “And, for every week we are late, we’ll continue to take 10% off our selling price. That means if we are late by five or six weeks, we’ll loose our pants. Our margins will be wiped out. But, we’ll continue to take 10% off the selling price until your order is delivered. You order could be free.”
The right hook landed right where I wanted to. Right on the nose. Marty looked at me in disbelief. He was a big man and recovered well.
He said, “There has to be a catch.”
I said, “There is no catch. It’s a promise like our promise to deliver on time. We’ll even write in our response letters. But, there is some not so fine print. For example, before we make a promise, we need all the information about the order to do so.
If you make a change to the order, we’ll check and see if it effects the due date and give you a new date, if necessary. If we have to wait for you to approve a major phase of work, we could adjust the due date and give you a new date, if necessary. And, our payment terms need to be adhered to. Any issues with these things?”
He said, “I guess not. Sounds fair enough.”
He sounded encouraged. He was engaged in our conversation and I could tell he was paying attention. I took a quick glance at my watch and we’ve been with Marty for over an hour. A good sign.
I said, “Good, thank you. I have one more thing to check before I turn you over to Jacques.”
I turned to Jacques and gave him a look which I hope he interpreted as “don’t mess things up now.”
I turned back to Marty and said, “How well will what you’ve heard today meet the criteria for a good solution to your issues? Remember, the criteria? Deliveries are on time, every time. No compromise on product development, quality, customer service, lead-time or pricing. And, the supplier must sustain reliability over the long term?”
He said, “Let’s see, if you deliver on time I’ll have fewer hassles to deal with. I get less nasty phone calls from my folks because the shop will be running smoother. We’ll have more time to do good work on our orders. And, we’ll have a better chance of delivering our orders on time to our customer.”
A supplier who is on time and can deliver when they promise does bring benefits to their customer. At least in this case, but Marty is not that different than other customers of ours.
Our meeting started contentious and Marty was suspicious about why I was here. But, exposing the pain we’ve caused him and his company of the years was something he liked to bitch and moan about. We also talked about the pain inflicted on his company’s financials.
But, some relief came when the criteria for a good solution were agreed to. These criteria would clarify in Marty’s mind what to listen for from us, but also what to expect from other poor performing suppliers.
Once I showed Marty the things we did to change our environment and the results we’ve achieved so far, he was seeing things from our side. He encouraging me to continue. But, it was the penalty element which hooked him. No supplier, I am sure of it, has ever offered him to pay a penalty for poor delivery. Let’s see some other supplier do that.
And, the not so fine print was no big deal for him.
So, I said, “Here’s the next steps I would like us to take. I’ll turn you over to Jacques to review your quote response time needs and determine the best way to resolve any price and lead time issues.”
I’ll let Jacques ask about at any quotes Marty has open at the moment. I’ll have to help Jacques with the way to deliver our responses to those quotes. We will include these commitments in writing.
I said, “After you have experienced our good on-time performance, I want you to let me come back to gather some evidence that you have indeed experienced the benefits we’ve promised. Deal?”
Marty said, “You have guts, I’ll give you that. It takes a good man to come with this crazy offer and get me to agree it could help us around here.”
I smiled.
I said, “Do you have any reasons not to proceed with these steps?”
Marty said, “No I don’t. Let’s take a break, go grab a coffee while I spend some time with Jacques going through some open quotes.”
I turned left out of the conference room and taking one, then two, deep breaths. What a good meeting. We can bring benefits with the capabilities we’ve built. We can exchange those benefits for more business. Let’s see if it works out that way.
Marty may seem like a tough cookie, but that’s because he has so many problems to deal with. They would make anyone grumpy. If someone comes along and offers a solution to those problems, like us, we have a good chance of making a sale or two. If we get the chance to deliver a few orders on time, I hope we’ll get more.
I drink my coffee in the waiting area and waited for Jacques to appear. I looked through the polish glass of the Klinester Corporation’s front window and thought I saw same car I thought I saw following us this morning. The light off the glass made me squint, but I saw enough to feel uncomfortable. Never mind, I was feeling good about what we did this morning. But, that was about to change.