Blog #1 – May, 2024
My name is Todd Norwood and I’m the Founder and President of Intertwine Corporation. I’ve spent over 25 years working for automotive suppliers. The Automotive Supplier Chronicles is my monthly blog series where I share true stories about my experiences working for and with automotive suppliers. The stories you’ll read here are the very reasons Intertwine exists. These are true stories, but I’m not out to make fun of anyone or disparage any companies, so names are often changed.
Background:
Over my first 20 years being employed I worked for seven different automotive suppliers; and five of those companies either filed bankruptcy or were sold under financial duress. I’ve seen a lot of chaos and dysfunction. After my last job, I decided I’d had enough and didn’t want to sell metal stampings for automotive suppliers anymore.
How I got here:
Prior to accepting the position with my last employer, I was told I would be taking over the company’s largest customer account, with approximately $50 million in annual sales. My new boss, the Sales Manager, held the Account Manager position before me and said everything was running smoothly.
At the time I accepted the offer I was in a position where I was responsible for managing two different OEM customer accounts, with combined sales over $200 million per year, plus an endless stream of part launches and commercial issues.
The new job, with my last employer, also paid me about 20% more than the previous one. At the time, all things considered, the new job sounded great and I accepted the offer.
Customer Account in shambles:
Reality at the new company was the opposite of everything I had been told. I was told the account was in good standing, but sales had declined roughly 40% in the three years before COVID; and they were down another 30% post COVID. I inherited millions of dollars in outstanding commercial issues, some of which my employer had tried multiple times previously to resolve. The customer didn’t like us, and that was obvious from the hate mail my boss forwarded to me, which the buyer sent to him.
1980’s Information Technology
The lack of useful information technology at this company was almost unimaginable. My boss got upset when I joked that the company would be better off going back to the rock, hammer and chisel; however, I’m not joking when I tell you they paid me a roughly six-figure salary to spend at least 50% of my time just looking for the basic information needed to complete routine tasks or move data from one spreadsheet to another.
We used Lotus notes for email; and there are good reasons less than .2% of businesses use it. The company also had several homegrown systems that were stitched together, but they were woefully inadequate, there was no training, and they only ran on Internet Explorer which Microsoft abandoned several years ago. However, it wasn’t just the IT systems, they had the most ridiculous IT policies, including a 20 MB storage limit on email. I spent close to 5% of my time archiving email, or going into the archives to retrieve emails that were only a couple weeks old.
Quoting Process
The quoting process was remarkable for its stupidity. There’s no doubt that how we were quoting wasn’t working. In my one year with this company we didn’t submit one quote on time or win one meaningful piece of new business. Here’s a small sampling:
- I had to fill out three different forms and hold three meetings (all covering the exact same information) to get the process started.
- The big event was called the “Bid / No Bid Meeting”, which brought together the cross functional team of sales, engineering, purchasing, manufacturing, estimating, material planning, quality, etc. This meeting is the first time most of these people have seen the parts and quote package; and as the name implies we should have been deciding if it was worth taking the time to bid (quote) or not, but instead we would get bogged down trying to complete the team feasibility – before anyone had time to look at the part drawing or CAD files, plus study the specifications, to effectively make that determination.
- Nobody and everybody was responsible for creating and maintaining the bill of materials (BOM). The BOM is the document that lays out the materials and order of operations; it drives the cost of the part, and the commercial team is basically paralyzed without it.
- The company consistently showed a complete lack of regard for the instructions the customer laid out in the request for quote (RFQ). This company would quote whatever terms and conditions they wanted, or not provide everything that was requested; and we were always late.
- The company didn’t know or understand their costs, so when it came time to come up with the price for a new part: they removed the overhead portion from their cost estimate, then the President would grab an arbitrary factor out of thin air; and apply that factor to the estimated cost without overhead to come up with the price. I don’t know if you could call it magic, but it was absent of any clear logic or reasoning.
Engineering Change Management
The quoting process was awful, but the engineering change management process was worse. Literally every single engineering change I looked at had errors or omissions.
There was one engineering change that epitomized the failure and dysfunction of this company. The customer RFQ for this change was sitting in our queue for almost a year when I joined the company. I got involved because the Buyer contacted me and asked me to process the old quote because it would be holding up a new change that was urgently needed. Here’s what I discovered over the next couple of weeks, beginning with a summary of the design release history for the part:
- Rev 0 = initial design release for production
- Rev 1 = revise area of hardness requirement – instead of the hardness callout on just the pin; the new drawing also had the callout on the bracket the pin was welded to. There’s no doubt it cost more money to heat treat the bracket and pin; however, I saw it was submitted (before my time) as a no cost change.
- Rev 2 = revise from zinc plate to e-coat. The Rev 2 change revised the rust protection coating from a zinc plating process to e-coat.
My boss proposed the Rev 2 change to the customer when he was the account manager. In an email my boss sent to the customer over a year prior he quoted a savings of $.03 per Part; however, before I submitted the quote to the customer I decided to verify a few things:
- I called our Material Planning Analyst to see what level we were shipping: He didn’t know and would need to go check. What he told me the next day was wrong. He initially said the parts we were shipping were e-coated (Rev 2), but it turns out that they were still being zinc plated. In all fairness it wasn’t really his fault, since the parts were labeled wrong, as Rev 2.
- I emailed the Buyer from our Purchasing Department to get the price difference: She gave me the current cost for zinc plating and sent out a request for quote to our e-coat suppliers. When the quotes came back, I found out there was no savings, the e-coat was $.02 more.
- There was also $3,500 in Tooling Cost to build racks for e-coating. This cost hadn’t been communicated to the customer with the original quote, so it wasn’t funded when the change was approved, and the customer wasn’t going to pay for it now.
- For this application the data showed that zinc plating provided better rust corrosion protection. Both coatings met the customer’s minimum requirements; and we used both types of coatings for similar applications; however, our data showed that zinc plating provided superior protection in long term durability testing.
In summary, my company encouraged the customer to make a change to save money when there was no savings. It was ultimately decided to quote $0 cost to the customer in order to save face; and we used the explanation that inflation eliminated the savings. Here’s how this story ends:
- My company absorbed a $.02 per Part price increase x 250,000 parts per year x five years equals $25,000 over the life of the program, plus the $3,500 in Tooling = $28,500 Grand Total Cost incurred.
- The customer and consumer have an inferior product – rust protection isn’t as good.
- Fortunately, the customer didn’t catch the mislabeling of parts; otherwise, we would’ve also had a quality rejection.
This example is by no means the mostly costly error I saw there, but I don’t know how things could have gotten more dysfunctional.
Advocate for Continuous Improvement
I’m not one to sit by and let an obvious problem fester; and at this company I made several suggestions for improvement.
- I agreed that the Team Feasibility assessment was important, but suggested we move it to the end of the process, with the quote review, instead of trying to do it in the very beginning.
- I suggested we figure out what our overhead cost really was instead of throwing darts to reach a price; and I offered to help put together an activity-based-cost model to solve the problem.
- I made some simple suggestions to improve some of the forms and processes and showed examples of what the new approach might look like and why I thought it was better.
I was trying to grow their sales with profitable new business. I made a few suggestions to help us operate more efficiently, lower the price, improve the customer experience, or eliminate confusion and risk. It seemed so obvious that what we were doing wasn’t working, but yet there was a complete unwillingness to change. Day after day we proceeded with dysfunction and willful ignorance.
I’ve seen what happens to companies that are unwilling to change even when faced with a mountain of facts and evidence that says they should – those companies eventually file for bankruptcy or sell under financial duress!
Do you have a quote or engineering change management process that you know is broken? What’s being done to fix it; and what do you think will happen if the answer is nothing?