I had been with the company a few years, but only in my new role for about two months when I noticed a price discrepancy. From what I could tell, we were shipping one of our Roof Assemblies at the old engineering level while being paid the price of the new engineering level. The price difference was nearly $12 per unit, and since we were shipping over 240 units a day, it was adding up quickly.
The missing engineering change stemmed from a cost reduction proposal that adjusted the raw materials for several components in the Roof Assembly. It involved removing the rust preventative coating, changing the type of coating, or changing the thickness of coating on different components of the assembly. However, this “engineering change” was still just an idea. It had to pass production trials, customer assembly plant trials, and paint approval before proceeding. Before implementation we would also have to exhaust inventory, which alone would take at least two months. Altogether, the change was at least six months away from implementation—likely longer—and much of it wasn’t within our control.
As I dug deeper, I discovered this issue was almost a year old and wasn’t limited to this one part. Similar issues were happening with other parts. By the time I pieced everything together, my calculations showed the customer owed us over $1.1 million in retroactive payments—and the amount was increasing daily.
I was fortunate to have transitioned into my role with some overlap from my predecessor. He had provided me with a list of open issues, and there were plenty. He’d been incredibly helpful and thorough, so I’m not pointing fingers, but I couldn’t help but wonder why this particular issue hadn’t come up. Was it possible no one else knew? What if I hadn’t caught it?
I brought this to my boss, Parker. His immediate concern was that pursuing the matter with the customer might upset the Buyer, which could jeopardize a new business opportunity we were chasing. This was a big account, over $300 million annually; and Parker was keen on winning that business. It’s fair to say that Parker preferred to avoid risks that might hurt our chances of growing sales. While I understood his strategy of prioritizing new business, this was a significant amount of money. I asked him to trust me and stay patient. I believed we could recover what we were owed without compromising our chances of winning new contracts, assuming we had the best price.
The issue came to light while I was preparing a quote for an engineering change the customer requested for a future (2025) model year change. In my response, I cc’d the Engineer’s boss, knowing he had ultimate responsibility for the parts linked to the missing engineering changes. My email was friendly but direct—I outlined the cost and timing for the requested change and explained that we couldn’t proceed with the 2025 model year change until the material cost reduction issues were resolved. It wasn’t just about the money; there were procedural problems with how the engineering change was released.
I also cc’d the Buyer and called her immediately after sending the email. She didn’t answer, so I left a voicemail. Fifteen minutes later, she called Parker instead of me. She expressed her displeasure, claiming, “This isn’t how we do business,” and so on. To Parker’s credit, despite his initial hesitation, he stood firm and supported me, just as we’d planned.
The implementation schedule for the future model year change gave the customer four months to resolve the cost reduction issues—ample time. They were now motivated, knowing unresolved issues could risk their pre-production builds for the 2025 vehicle and lead to unnecessary costs.
Three months later we received an updated Purchase Order; and shortly after that came a payment exceeding $1.4 million for the retroactive price adjustment. Even better, we still secured most of the new business we had been targeting—you almost never win it all.
One final note: when the payment arrived, it was like a windfall for the company. There had been no Accounts Receivable record of the price discrepancy, so it wasn’t on the books. In the end, we were hailed as heroes—for simply recovering what the customer owed us!