All Eggs In One Basket

I was talking to a client recently about his company’s business strategy. I loved his transparency and clarity about his approach.

He said that he and his management team had chosen to be an automotive supplier. He was only interested in quoting on long run, high volume work in which his company could add real value. He did not want to run a little of this and a little of that. He did not want to really diversify to even out the shifting sands of automotive demand. He would take his chances with market swings.

He is riding high now with automotive running at 18 million units in America. He knows it will change, but he is confident in the rightness of his strategy.

What do you think about this kind of the “all in” approach?

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My company, Graff-Pinkert, has a client who was running a Wickman multi-spindle screw machine 24 hours a day, 7 days a week, with a high-low clutch that was slipping badly with every index. The brass part on it, which could run optimally at 6 seconds, was running at 12 seconds, and the clutch was so hot, even with oil dripping on it, the clutch plates were starting to melt and fuse with the housing.

But the company management refused to stop the machine to replace the clutch and do other maintenance because “we’ve got to get the parts out the door or our customer will get another source.” The expedient trumped the common sense once again.

In this particular case, the machine started smoking and they had to shut it down and search desperately for a replacement clutch. We see cases like this every week, in which companies delay obvious maintenance or repairs because they are slaves to the god of production and expediency, running inches from catastrophic breakdown everyday. This reckless approach was not caused by malice, just laziness and poor planning.

Do you see this problem in your factory? How do you prevent it from becoming the norm?

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From my observation, every successful firm has a few “glue people” who keep things going despite the chaos of everyday business.

Successful companies recognize the glue people and give them wide latitude to solve problems without getting fouled up by ignorant procedures and bureaucracy. The task of wise management is to identify the key people, hold onto them, and encourage them.

There is another group of “glue people” who I see getting on airplanes every time I travel. These service mechanics going on house calls keep the world’s fragile infrastructure and machinery running despite poor maintenance, occasional sabotage, and daily wear and tear. No matter how much money these folks make they are underpaid compared to the value they add.

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I was talking to a client recently about his choice of CNC machines for his Mexican factory. He said that when they started up in Mexico they bought all Mori Seiki machines, but in recent years they have been buying exclusively Okuma. I asked him why.

“Simple answer,” he said. “Okuma opened a service center in Monterrey. They are able to send a capable service person the same day we have a problem. Mori was too far away,” he said.

I find it surprising that service is seldom advertised clearly by machine tool builders, when it is often much more critical in the perception of the buyers than technical superiority. Haas has built its long-term success on the Haas vans rolling around its markets with able fix-it people and immediately available spare parts.

Service is hard to execute well, but it remains the single most important piece of a successful machine tool business.

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I saw an email blast this week from Hardinge, America’s premier collet maker, promising 5-day delivery on collets for Swiss-type screw machines. I applaud Hardinge for raising their game on delivery. I imagine it was a decision made for competitive reasons. What I find interesting is that normal lead times for multi-spindle screw machine collets remain at 18 working days, though the company occasionally delivers faster.

I think Hardinge believes it is bulletproof on multis but vulnerable on Swiss. With the number of multi-spindle machines shrinking, and new machines all coming from Europe, they may be correct, but it would be an interesting business experiment to see if their volumes increased by shortening delivery times. Perhaps, a premium for shorter lead times, like UPS or FedEx employ, would also be a worthwhile market test.

Question: Do you believe in “all in” or diversification?