Donald has a very successful business manufacturing and marketing doodads. As a matter of fact, Donald is the most successful purveyor of doodads in the world. He got his start when he was very young, thanks to his family: his dad was an important builder of thingamajigs, and turned the small family business into a national thingamajigs empire. Pops is now retired; eldest brother Horatio claimed his birthright and runs the business, which still chugs along at a reasonable pace, if not quite as bullish as before. Donald, the second in line, decided he wanted to break away from the family business and make his own way in the world: so, with Pops's blessing (and a large stake which represented Donald's share of the family fortune), Donald struck out on his own and started building and selling doodads. The early days were a trial, and there were a lot of lean times . . . but with his business acumen, dedication, and strong family manufacturing background, Donald managed to persevere. Of course, being more or less fully capitalized and debt-free from the very beginning sure did help out.
Thirty years down the road, Donald is a doodad titan. Once he slogged through the first ten years with very little to show for it, he was established in the market; and then he was able to reap the rewards of his good fortune. Donald's doodad empire rivalled the thingamajig empire that bore the family name.
Lately though, Donald has faced competition. There have been inexpensive imported doodads for a while, but they've only made inroads within the last five years. Before that, Donald was able to maintain the public perception of the superiority of his "original, authentic, made-in-America" doodads over the cheaper imports: but now, his PR edge was eroding as fast as his profit margins. Online reviews are hammering home the message that the imported doodads, which come from places like Vietnam, India, and China, are very nearly as good as Donald's doodads at almost half the price. Some contrarians even assert that the Indian doodads might just be a little better. Donald has been leaning on his advertising boys (and they are, by and large, boys) for a while now to slow down the erosion of his market share . . . but with the "new media", customer reviews, and the interwebs, which give any moron with a laptop the forum to say what he thinks he knows, controlling marketing message becomes a futile exercise not unlike herding cats. So now, thirty years in, Donald either has to make changes, or sell his business, unless he wants to risk losing it and everything he has built.
Just as anyone who finds their cash cow slowly dying in the fields would do, Donald hires a guy (yup, another guy) with university accredited initials after his name to help him come up with a solution. After signing a six-figure retainer, this guy calls upon the vast reserves of knowledge imparted to him at great expense by the university, and comes up with a solution: cut costs. Donald, duly impressed with the sagacity of this suggestion, promptly empanelled three more guys (yup!), also at six figure retainers, to help him streamline the business. Donald was going to turn his doodad empire into lean, mean, manufacturing machine. Donald was going to save money, no matter what the cost.
It is here where Donald's friend George comes in. Donald has known George for a while, ever since George dated Donald's younger sister in high school. The relationship didn't last long, but George managed to continue to be friendly with the family afterwords. When George, a promising young mathematician and design aficionado, decided to matriculate, he followed Donald's advice and went to his alma mater. Once at school, George decided to pledge a fraternity, so naturally he chose the same elite fraternity that Donald joined, and enlisted Donald's help in getting his pledge. During and after college, George attended the same church as Donald and his family, though Donald was a much more avid churchgoer than the somewhat ambivalent and apathetic George. Donald and George were not exactly close, and Donald tended to run in somewhat more monied circles than George, but still there was plenty of overlap in their social life. Whenever Donald and George inevitably ran into each other at a church mixer or an alumni club shindig, they would step up to the cash bar and order (J & B and soda for Donald, Sierra Nevada Pale Ale for George), then spend some time commiserating about the ol' college football program, city government, the new downtown arena, or whatever it is that crossed the mind of two above-working-class guys of roughly the same age. Donald and George were never close, but they were always chummy, and both seemed to somewhat enjoy the limited encounters they had with each other.
When George, fresh out of school, needed a job, he (naturally!) tapped Donald as his mentor, and Donald found him an entry level job at the company that manufactured the widgets that were necessary for the production of Donald's doodads. Privately, Donald confided to George that the company was becoming moribund, and that maybe a bright young kid like George could restore some vitality to the company. Sure enough, after George had been there a handful of years, the original owner of the widget company, deciding that he had had it with the rat race, announced that he was looking for a buyer. Donald, without actually putting in any of his own money, managed to help George line up the financing to get the job done . . . so here was George, at a tender young age, owner of his own (somewhat stagnant) company, up to his eyeballs in debt, but with a friend . . . or maybe close acquaintance is more accurate? . . . as his main customer and, presumably, benefactor. Indeed, with the rising power of Donald's doodad business, George's widget business flourished. And while he still wasn't quite in Donald's social circle, he did manage to get flush, and pick up a boat, vacation home, nice cars, and private school for his kids to boot.
When Donald's cost cutting team started their work, George was producing widgets for Donald at 30 cents apiece, and delivering orders every six weeks. Donald never really bothered with George's pricing before, since the business was booming, and George was delivering his orders on time. But the cost cutting team insisted that George needed to deliver his widgets at a lower price, and faster as well, since they ultimately hoped to ramp up production at Donald's plant. Donald held out against this cost cutting move, since he didn't want to squeeze his friend George, but after the cost cutting team did their work on Donald's foreign suppliers, after they cut the work force and squeezed every penny out of everyone left on the factory floor, George was the only expense left. So, Donald made a call:
Hey Georgie, it's Don. How you doin'?
Don, what's up? What can I do for you today, pal?
Well George, you know I got these damn kids with their fancy degrees down in accounting looking at all my books. We've been fighting against all this shit coming from Asia for years now, you know that, we've talked about it before. Anyway, these sons of bitches are telling me we're spending too much damn money making our shit. So we gotta cut costs, right?
Sure, I know what you mean, bud.
I know you do, you're the man, you know what is going down. Thing is, we've cut costs as much as we can on the factory floor - we've managed to keep the damn unions out, which, thank God, literally, right? - but still, we squeezed it as much as we could, and we're still not in what those little shitheals calls "the green zone".
Sounds rough, Don.
Shit, you don't know the half of it, Georgie. Anyway, now they're looking at my suppliers, and they tell me I got to start going overseas for my parts.
(Silence on the line as George tries to process what Don is trying to say . . . is Don dropping his account? After a moment, Don continues)
Now Georgie, you know me. There ain't no point in making these damn doodads if I gotta make 'em out of all foreign parts. May as well close the fuckin' doors, 'cause it ain't happening. I told 'em 'Georgie's my man, he'll stay my man'. Together we can lick this, right?
Sure, Don. But I'm not clear what you want out of me here.
You gotta sharpen your pencil, friend. You gotta help me out here. They want to open up this job for bid, but I told 'em no. But you gotta help me out, Georgie. You gotta sharpen your pencil.
'Sharpen my pencil'? Exactly what are we talking about here, Don?
You gotta give me a break, Georgie. They want to open it up to bids, but I told 'em no. I told 'em you would tighten it up.
Okay, but what exactly do you need?
Just sharpen that pencil, George, and get back to me. Let me know what you can do it for, let me know how much of a break you can give me. If it's good enough, we can keep it out of bid, but you really gotta squeeze it for me.
Okay, Don, I'll see what I can do.
Great George, I knew you would. No worries. How soon can you get back to me?
Gimme a week, Don. I'll sit down with accounting and see what I can do. But you need to know, Don, I'm not ripping you off. You're getting a good price. I don't know how much I can come down.
Sure, sure, Georgie. Do what you can, I'm sure it will be good enough. But get serious about it, okay? These guys ain't foolin'.
You got it, Don. We'll talk again in a week.
George is a smart guy; after reading between the lines, he's pretty sure that Donald would drop his account in a heartbeat if another supplier comes in cheaper. And as far as "keeping it out of bid", George knows better, even believing that Donald already had quotes on his desk. Now George knew that the widgets he produced for Don were unique parts, and that even his foreign competition used US widgets in their doodads, so the "foreign suppliers" weren't a threat, but he figured there were people around the area who were. So, after "sharpening his pencil", he decided he could give Donald his widgets for 25 cents apiece, and drop the turnaround time to four weeks. He called Donald and gave him the news.
Well, that's great Georgie, that's a pretty good price. Now those guys, they went behind my back, they did, and they got some prices. Now two of the guys, they were in the same neighborhood, one of the guys was at 23 cents and four weeks, another guy comes in at 25 but says he can roll an order in three weeks. But all that, that's water under the bridge, 'cause even though you're a little higher, you're the devil we know, if you'll pardon the expression. We know you, you know the business and they aren't beating you by enough to make the change. So that's good.
Great, Don, so we're good at that price? I'll get you an official quote emailed today. I don't know how I'm going to do it, that's a big price drop, but I'll make it happen.
Wait, not so fast, Georgie. I said you beat two of the quotes . . .
Actually the last time I talked to you, the job wasn't even up for bid, but go ahead.
That's all the guys down in accounting, you know me, we're good. But what I'm saying here is that you're okay with two of the bids, but we got this guy Chester down the road a bit, he came in at 19 cents and three weeks turnaround. I mean that . . . that's hard to ignore.
Wait, Chester? I never heard of that guy, and I know everyone who makes widgets.
He's new, just opening up, says he can be ramped up by the end of the month. Me, I don't know how he's going to do it, but he says he can.
There's no way, Don. There's no way a new shop pulls that off, unless he's using slave labor. No way.
I know, Georgie. I mean, it kinda looks like he is using slave labor, if you know what I mean. And if I go with this guy, I guarantee you, we'll be sorry, and we'll be back to you at the higher price before the year's up. But we gotta give that deal a shot. That puts us where we need to be.
So that's it, I've lost the bid?
No, George. You and me, right now, we're just talking. Far as I know, you haven't submit a bid, I can give you until the end of the week, then we gotta decide, because every day we put this off, the more money we loose.
That price is not realistic, Don. There's no way Chester pulls this off.
I know, George, I know. But we gotta make a move. Here's the bottom line: the winning bid is going to be 19 cents per unit with three week turnaround. Beyond that, a more experienced shop obviously has an advantage over a new shop, especially one we've worked with before.
Well, I might be able to come down a few pennies a unit . . .
George, the bar has been set. Get back to me later in the week and let me know if you are the man.
So George is stuck: he has to meet Donald's price, since Donald is his only real customer. George still had a few side jobs, but those would barely cover his boat payments, much less payroll. His only chance is to lay off staff, knock a bunch of the remaining workers back to part time and cut their insurance, and then hire new part timers to double production capacity, George knew over the long run this wasn't sustainable, but he had to buy time to cultivate new jobs, to diversify his income. He was in a corner.
By the end of the week, he had lined up new materials suppliers to cut his costs. He had started outlining the timing on the layoffs. He emailed Donald his quote, providing widgets at 19 cents each with a three week turnaround. He hoped Donald wouldn't notice that he removed the clause guaranteeing a defective rate below three percent on his widgets, since he felt it was unlikely that he would hit that goal with a new, cheaper materials supplier and a faster assembly line with inexperienced part timers and disgruntled vets. He couldn't believe that any body else made that guarantee anyway.
But, because he was Donald's crony, he had the contract, and Chester did not.
Yes, Virginia, there is a part two. We will link to it here as soon as it is posted.
No comments:
Post a Comment