Customer supplied material - risk and policy advice needed

[rstocum]

My employer has a couple of legacy customers who supply material which we laser cut, form, or weld, and they then buy the finished product. If everything goes well, and there is no scrap, this work is profitable. When scrap does occur, the cost of replacing material, or crediting the customer is high. One problem that has happened twice with one of these customers is that there was not enough material to make the number of parts quoted. Customer insists they sent enough sheets for the total number of parts plus 6% scrap loss. We ran out of material leaving the job 15 parts short. 104 sheets of material would be required to make the total quantity, but there wasn't enough. We would have to hand count sheets of material to catch this. We can't weigh count, it's too much weight. We get inconsistent results asking our operators to keep count of sheets of material.

Here is the main question: Does anybody here have a policy at their company of not taking customer supplied material? The justification for such a policy in my view is that the non-conforming risk is too expensive, and the maintenance of customer supplied material is likewise too expensive. I'd like to sell this policy concept to higher management. An additional selling point is that higher management agrees that we want to encourage both of these customers to go elsewhere, and such a policy might help with that. Any policy advice would be appreciated.

 

[Sidney Vianna]

An additional selling point is that higher management agrees that we want to encourage both of these customers to go elsewhere,

If your organization’s top management wants these customers to go elsewhere, why do you keep taking orders from them?

 

[Golfman25]

If you ordered the material, how would you confirm you received the right amount?

Seems to me you would count the sheets when you receive the material and check it in. If it's short, that's the time to question it.

And it you really want the customer's to go elsewhere, help them out. No need to play games. We picked up a bunch of work from a company that was changing direction and no longer wanted to do the work. It was an amicable resolution on all sides -- customer, prior vendor and us. Being able to talk to each other made the transition seamless.

 

[rstocum]

It's higher management that agrees we don't want this work. Top management (owners) want to be nice to customers who were with them at the beginning. In the case of the customer who didn't send enough material, we are now going to hand count their incoming. We don't have a lot of personnel time for this. It's always 100 plus sheets, it's thin material and hard to count. We did not order the material, it is sent to us by the customer. The problem with both customers is that dealing with the material they supply is time consuming, costly, out of the ordinary compared to other customers, and risky if we have scrap. Unfortunately I am having to play games. What I'm hoping for is advice on how to sell the top dogs on the idea that the risk isn't worth the candle.

 

[CCaantley]

What I'm hoping for is advice on how to sell the top dogs on the idea that the risk isn't worth the candle.

Keep track of how much downtime there is for the counting. Management hates downtime

 

[try2makeit]

Track time of how long it takes to count the sheets at delivery and the $$ of wages paid to the people doing the counting.

We have a part that was just terrible to run, and the operators despite of telling management that it needed to be changed never got far. I decided to capture the scrap, time and convert it all to $$ and presented it to management. After seeing the $$ in red over sudden the needed changes where made.

 

[Golfman25]

It's higher management that agrees we don't want this work. Top management (owners) want to be nice to customers who were with them at the beginning. In the case of the customer who didn't send enough material, we are now going to hand count their incoming. We don't have a lot of personnel time for this. It's always 100 plus sheets, it's thin material and hard to count. We did not order the material, it is sent to us by the customer. The problem with both customers is that dealing with the material they supply is time consuming, costly, out of the ordinary compared to other customers, and risky if we have scrap. Unfortunately I am having to play games. What I'm hoping for is advice on how to sell the top dogs on the idea that the risk isn't worth the candle.

If you ordered the material, you would still need to verify the quantity. If you made scrap, you didn't have enough material, you would still need to buy more. As others have said, you can try to track the extra costs. But beware, maybe they are already being compensated for the "risk" and extra costs. You're best bet is to work with higher management and ownership and show you can be "nice" to original customers and still help them transition to a provider who is a better fit. Good luck.

 

[Eredhel]

I think you need more data before you can really decide what is or isn't worthwhile. I'd start with timing how long it takes someone to count 100 sheets. But don't get the fast fresh count, be honest and add some time to it knowing the 2nd or 50th time counting won't be as fast. I could be completely wrong but 100 sheets shouldn't take too long. Unless you're going through 100 sheets every 10 minutes.

 

[CCaantley]

I think you need more data before you can really decide what is or isn't worthwhile. I'd start with timing how long it takes someone to count 100 sheets. But don't get the fast fresh count, be honest and add some time to it knowing the 2nd or 50th time counting won't be as fast. I could be completely wrong but 100 sheets shouldn't take too long. Unless you're going through 100 sheets every 10 minutes.

And you have to add to account for different people taking different amounts of time.

 

[John Predmore]

We can't weigh count, it's too much weight.

I was going to suggest weigh count before I saw your note; maybe it would be worth the money to invest in a bigger scale. You can do the math on a $4 calculator. If you move the crate of heavy sheets with a crane, there are crane scales for a few hundred dollars. For slightly more more money you can get a pallet truck with a scale. If weighing is absolutely not feasible, can you measure the stack height while the sheets are still in a stack and get a piece count that way?