Eric could see that Patrick was agitated but also engaged. It was time to pivot away from price and hammer true costs. Clearly, the cost of having Isaac and Irene rework the door gaskets was excessive. Their burdened labor rate was high, they’d already replaced too many gaskets, and tractor production was just getting started. Before manufacturing ramped-up, the company needed the right solution.
“Operations is installing metal shims along with the door gaskets,” Eric explained. “That’s reducing the amount of rework, but the spreadsheet in your hands reflects all of their costs. Unless we get to the root of the problem and find a better way forward, we’re not going to save money here.”
Patrick looked hard at the young engineer. “You’ve learned a thing about business since our last meeting,” he said. “Still, you’re not out of the penalty box. Otherwise, you wouldn’t be here”.
“You’re right,” Eric admitted. “Look, we know the gaskets from Elasto Proxy will work. Engineering has installed samples and subjected them to leak testing. Our new test equipment is top-notch.”
“Yes, I know,” Patrick said coolly. “I was part of the vendor selection process for it. Glad to see we’re starting to get a return on investment with that fancy equipment.”
“Yes, ROI is important,” Eric agreed. “Over time, door gaskets from Elasto Proxy can save us money, too. Now that you see what our current supplier is truly costing us, can we talk about changing vendors?”
The Purchasing Director looked at Elasto Proxy’s pricing and MOQs again. Then he reviewed the spreadsheets with the true costs from Operations. Patrick put both hands flat on his desk, leaned forward, and stared at Eric. The young engineer knew it was now or never.
“The numbers speak for themselves,” Patrick said firmly. “The price of the gaskets from Elasto Proxy might be higher, but we’ll save money by buying a better-quality product that won’t fail in the field and cost us a fortune in terms of rework. I see no reason to stick with our current vendor now that we know our true costs. We will begin buying door gaskets from Elasto Proxy immediately.”
“Thank you, Patrick,” Eric said. “They are great to work with.”
“You came here prepared,” Patrick continued, “and with the type of data that this company needs to see if it’s going to remain profitable. Olivia has done a solid job in Operations,” he added, “and I’m glad to see we have a rookie in Engineering that’s capable of playing at All-Star level”.
Eric thanked Patrick, rose from his chair, and walked confidently back to his cubicle. Today’s battle had been hard fought, but he’d won the argument and, importantly, Patrick’s respect. When the time came for Eric’s annual review, his boss explained how Patrick had called him. The young engineer enjoyed hearing “playing at All-Star level” a second time. Eric also liked the raise and new responsibilities he earned during his annual review.
It came as no surprise then when Eric’s phone rang a few weeks later. Patrick’s voice was intense but not unfriendly. As Engineer’s new liaison to Purchasing as part of the company’s lean manufacturing initiative, Eric had been expecting a call from Patrick sooner or later.
“Eric,” Patrick began, “This company can’t keep waiting for parts to arrive now that sales of this new tractor are really booming. We’ve been using an overseas supplier to provide both plastic and rubber parts, but they can’t deliver on-time and the stock-outs are killing production. Plus, I’m sick of hearing about how this tractor is too loud.”
Eric agreed that these were serious problems and asked what he could do.
“It’s Purchasing’s job to find and approve vendors,” Patrick said, “but too many people around here just think about price and MOQs. Can that company you told me about, Elasto Proxy, help here, too?”