Are We Being Commoditized?
As a buyer, you have to understand how you’re perceived by the supplier world…
Look around. Whether you’re a supplier that thinks you’re special or a buyer that thinks you have a product that no one can afford not to bid on, you’re fooling yourself.
There are many reasons for this. If you’re a supplier, you have to realize that machining or designing a part or product isn’t what it used to be. You used to work in the channels that allowed you to profess your capabilities in ways that let you get work readily, with little effort beyond your own capabilities—you relied on word of mouth and reputation. You worked—or continue to work—these channels, and you stood on your quality and good name.
If you are a buyer of services, you’ve likely maintained a reputation for honesty and accuracy that transcended the quote, that has shown a consideration of the product beyond the initial quote and that has shown knowledge of the processes that are required to make your part useful. In short, buyers of manufactured parts and assemblies once knew something about how to make the part. But that has become less the case these days.
If you’re a supplier, you know that’s the stark reality. The ability to carve out parts or meet tolerances is easily come by because of relatively inexpensive technology and shared experience. The opportunity to differentiate one’s self is becoming more difficult to present to the markets.
But as a buyer, you have to understand how you’re perceived by the supplier world at large: You’ve been commoditized, too.
In the past, buyers or specifiers have had a better understanding of the manufacturing processes that went into the creation of their products. Recently, as larger corporations have focused more on cost savings of spending and purchasing as purely bottom-line affluence and ignored the total cost of ownership through the product cycle, we’ve eroded the technical aptitude of our purchasing arms to the point that many ignore the "unseen" costs in favor of the almighty bottom line.
The fact is, suppliers don’t trust buyers these days because they don’t understand suppliers’ businesses and the discrete processes that go into the creation of product, whether something should be casted, machined or created by multiple processes. As buyers have lost the ability to participate in process and material selection, more of that responsibility falls on the supplier.
And here’s the rub: As large corporations focus more on the cost of spending and less on the long-term quality of their product, we all suffer. What we’ve done to purchasing in the past 15 years—divorcing them from the very processes that they should be embracing—is a sin.
Commoditizing spending and marginalizing our suppliers in ways that ultimately neuter our ability to function as a thriving manufacturing base is simply wrong for manufacturing in the U.S. because it ignores collaboration and creates dysfunction in supply chains.
Cost structuring and reduction is right. Knowing where to cut costs and when to infuse efficiency is the benchmark of our manufacturing base. We must be free to create value.
But when buyers are marginalized to the point where they are unfamiliar with the processes that are required to make our products efficiently and effectively, something’s gone very wrong.
If you’re a buying organization, think about what you do as an organization to purchase supplier services and select vendors beyond the price. Selecting a vendor solely on price, regardless of the complexities of a given product, places us all in a precarious position. Price should be considered over the complete life of a product.
Do your buying practices force suppliers into untenable, or unprofitable, positions that you hadn’t expected? Our manufacturing base deserves better than that if we’re expected to compete in the next century.
Mitch Free, president and CEO of MFG.com, can be reached at (770) 444-9686 or at firstname.lastname@example.org.