It takes nerves of steel, combined with patience, experience and ingenuity, to successfully negotiate some of today's more harrowing purchasing and pricing challenges, including coping with online auctions and with customer rebate demands. So say some plastics processor executives who've had their share of dealing with such circumstances - and lived to talk about it.
Panelists shared advice on those matters during a wide-ranging discussion at the recent SPI Western Region conference in Coronado.
On the subject of retroactive price rebates, the panel moderator suggested, somewhat flippantly, that processors should tell the customers demanding such extortionate givebacks to ``go pound sand.'' That prompted Nypro Inc. President Brian Jones to suggest, to a loud round of laughter, that, ``We have found the `pound sand' strategy to be overmarketed.''
He noted that some customers are under extreme pressure to perform and that in such cases, strong-arm tactics sometimes take a back seat to good business practices. Still, it is important to try to find ways to work with important but demanding customers to find an agreeable middle ground.
Hoop Roche, chairman and chief marketing officer of rigid-packaging injection molder Erie Plastics Co., added: ``About that `pound sand' strategy ... I, too, was an advocate for about two years. Did I mention that I lost about $30 million worth of business?'' he said, referring to business his firm had, then lost and since has replaced. ``It occurred to me that that wasn't working.''
Since then, Roche said, ``We not only have engaged in conversations about rebates, we recently were in a bid situation and a customer suggested that an upfront rebate might be helpful. We went back to our suppliers, got them to sharpen their pencils, and were able to come up with enough money that we were able to give an upfront rebate, while at the same time getting a better margin on the tooling in the package. So, I think some of these things just force you to be more competitive.''
And, he warned, ``I would urge extreme caution when telling customers to `pound sand' on rebates. Because certainly, if they decide they need a rebate, and they don't get it from you, they will get it from someone else.''
Kevin Kelly, chief executive officer of West Coast bag converter Emerald Packaging Inc., said his bigger pricing issue has been having to compete with cut-rate deals from desperate competitors who are going out of business.
``They just seem to be abundant,'' he said. ``I actually had the experience in the past month of a purchasing agent apologizing to me for taking the business away from me, because the person who took the business from me didn't perform. So, it does happen. ... They returned the business to us. ... Sometimes prayer helps in those instances!''
On the subject of electronic auctions, Jones said Nypro has ``gone through the full lifecycle on this process,'' and ultimately has found how to be successful in the online bidding game.
``The first step in the change process is denial,'' Jones explained. ``That was us at first. We said, `We're a value-added supplier and we will never participate in e-bids.' Well, that lasted about 18 months, and we kept seeing more and more customers going this way. When our biggest customer, Dell [with whom Nypro had $80 million worth of business], started using an all e-bid process, we decided that we had better figure out how to do this.'' Now, he said, Nypro participates in e-bids in the automotive, consumer-product and telecommunication markets.
Jones stressed that ``there is a way to win these e-auctions without having to beat the lowest price in the world. In fact, the e-auction usually does not go to the lowest bidder.'' In Nypro's experience, sophisticated customers use the online bidding to narrow the supplier list down to two or three final candidates, and then will engage those suppliers in a more challenging exercise to develop the final price.
``In the last 12 months,'' he said, ``we've won repeatedly - I don't think we've ever had the lowest price in those auctions. It's like any negotiation, but it's done by computer.''