A 'Dear casting supplier' letter.

A conversation with a foundry executive last week on the subject of today's foundry-customer "partnerships" ended with my receiving a "get-a-load-of-this" fax. It was a "Dear Valued Casting Supplier" letter his foundry received from a customer. Take my word for it, the tone in this form letter that demanded a 4% price reduction (or else pay a rebate) was less than cordial, and flies in the face of what OEMs so often preach about their dealings with suppliers.

This correspondence, and a few other things, has had me pondering the frequent misuse of the word "partner" that has now rendered the buzzword near meaningless.

This foundryman attributed such OEM "demands" as a continuation of the trend set by General Motors' Jose Ignacio Lopez de Arriortua in the early 1990s. It was Lopez that redefined purchasers as "warriors" who were commissioned to mercilessly slash the prices of purchased goods.

Since the time that the Lopez name reached infamy status in the supply community, "partnering" has become a popular cliche. All of us have seen instances in which this concept works, as well as those consultant Edwin Rigsbee (author of The Art of Partnering) has dubbed as "cotton candy partnering." That is, all fluff and no substance.

With the economy expected to slow, OEMs will enjoy a buyer's market for their metal components. With that and the increased competition they will face, OEM cost-cutting initiatives will increase as they search for an edge. Knowing this, can you count on your key customers not to abandon you by shopping your patterns?

While no one is comfortable with "letting business go" (particularly when things are slowing down), foundries may be wise to once again identify their real "partners" and map out a plan to keep such relationships as solid as ever. If, on the other hand, a particular customer continually fails to hear your foundry's positioning efforts on characteristics other than price, that may indicate that patterns could soon be on the "shopping block." When that's the case, look out.

A true partnership can't exist without some balance between the parties. If your customer sees little to evaluate besides price, the relationship seems to lack balance, regardless of what words are used to describe it.

With the ill effects of Lopez' approach (Rigsbee calls it the "boomerang effect"), why are some suppliers still treated in this thinly veiled adversarial nature? Because some short-sighted OEMs still think it's the way to achieve results. They know there will be another foundry willing to take on the job, if only to spread its overhead. Some foundries would say they'd rather go broke with idle capacity than produce at zero margin. Meanwhile, due to foundries' poor costing data, wild optimism or "production mentality," less-attractive jobs will always find a home. However, unless the OEM undergoes a 180 [degrees] change in philosophy, these "job-buying" foundries will, sooner or later, see their customer moving the pattern again. It's the cheating wife syndrome.

When two firms are truly committed and linked, there are few problems that together can't be solved. On the other hand, a customer who pulls out at the first glitch or one that can't see beyond your quote's dollar signs may not be worth the sweat and agony at the beaten-down price agreed upon. This is especially true when you consider the time and energy that could be focused toward developing another relationship worthy of the long haul.

A partnership in the truest sense exists when OEMs realize that combined efforts reap the best results for both. It's shared responsibility and reward. Take Honda, for instance, which has assisted its casting suppliers in many ways, including sending its own engineers to assist in problem solving at foundry sites. Or Chrysler, which has split the savings achieved by its suppliers. According to Rigsbee, Chrysler purchasing executive Thomas Stallkamp understands this well. "In general," said Stallkamp in a 1993 Wall Street Journal article, "the cooperative approach is the quickest route to better, lower-cost parts. When you start to see your suppliers as the experts, then they become valuable partners instead of a switchable commodity."

In addition to identifying customers worthy of your best efforts, foundries can prepare by fine-tuning their costing systems to make informed decisions about jobs when the next round of demands hits. At an AFS Regional Conference several years ago, an automotive purchasing executive urged foundrymen to "hurry and find the right partners, or else the good ones will all be gone."

Still good advice, it seems, especially since aligning yourself with the "best" customers could be the most important element in the success formula for the 2000s.