I helped a company once that was having a
problem meeting deliveries. The reason was because one of their suppliers
was late and inconsistent in supplying a component in time to meet
their shipments. This was causing a secondary problem in that it was
hindering them from breaking a million dollars in sales per year.
There were not hundreds of suppliers to supply this particular
component. I will change the names of the actual companies in this
piece to protect the guilty.
The company with the supplier problem was a
company that makes a SCUBA diving apparatus that I mentioned in a
previous newsletter. The supplier with the problems was a supplier of
small engines. We will call them Big & Slow. The B&S engines
were not even that reliable, so even when they did get a shipment in,
some didn't work.
I had remembered from one of my Six
Sigma classes a story about a couple of salesmen talking about how
they were losing sales to a Japanese company. The salesmen were form
B&S and they were talking about Hound, another company that makes
small engines, (as well as cars, etc.). With this in mind, I ask why
the company didn't just switch suppliers from B&S to Hound. They
said that the Hound engines were too expensive, about $300 more per
unit. I said, well
what I would do is to offer your customer a choice. This enables
you to meet more of the consumer's customer
requirements. B&S or Hound, and just add to the unit price the
difference you pay for the Hound engines. I said that.
- Your profit margin will
still be the same by charging only the 'Out Of
Pocket' for the Hound engine.
- For every customer that
takes a Hound engines, you will have one more B&S engine for
other customers that do not
- Overall quality will
improve with the Hound units.
- You will be able to meet
- You will also increase
your product line.
So they did just that. Offered
their customers a better unit with a Hound engine for the difference
in the price they paid for the B&S engine. Each sales called they
received, they would ask the customer if they would like a better
engine for the price they paid for the Hound engine. Sure enough, a
lot of their customer had an extra $300 and was more than happy to pay
the difference for a better quality product and went with the Hound
engine. These days most of their sales are of the Hound engine models.
This put them over the million dollar sales goal, and made their
customers happier, and probably safer. It didn't cost them any more
money, because their profit margin was the same. Sometimes it pays a
lot to just ask your customers what they want. Believe me, the
customer may NOT always tell you without asking.