You Have Competitors Throughout the Process

This shop says engineering services are key to maintaining strong margins. Those services change the nature of the discussion with the customer

Standing over a die-cast die that was nearly ready to ship, William Berry explained to me one of the more important things his company does to secure strong margins for die machining work. That is: The company takes the customer’s focus off of this machining.

Mr. Berry is the president of Die Tech and Engineering (DTE) near Grand Rapids, Michigan. The shop’s approach to building mold and die tooling is profiled in this article.

But in addition to building tooling, the company also provides engineering services. Doing so is vital, Mr. Berry says, even though the shop doesn’t charge for this work. Rather, the engineering capability enables shop to seek customer benefits that can reframe the economics of a job. Instead of looking at the cost to machine the tooling, DTE wants its customer to focus on the cost to make the final product. By improving the tooling, DTE can often bring this final cost down.

The die-cast die offered an example. The customer originally saw the job as a set of single-cavity dies. DTE reconceived it as a multi-cavity die, reducing casting expense. DTE won the job this way, and it didn’t even have to bid on the same tool as other shops.

Another example involved a die for parts to be cast and then machined. The shop engineered a more elaborate die. The new die saved cost by freeing the parts from needing the machining.

“If we did not provide engineering services, then we would be in a commodity business,” Mr. Berry says. That is, the shop’s only product would be the tool as the customer defined it—and the only question for the shop would be how cheaply that tool could be made.

Instead, the shop looks for chances to sell a different product. Engineers search for whether an improved die could save the customer time or expense. In this way, the shop sells savings along with the tooling. The shop sells money.

Another way to look at the approach is this: The competition for a machine shop does not just come from other shops. It also comes from other, seemingly separate manufacturing operations.

Such operations might include assembly, inspection or finishing. For DTE, the other operations include casting, molding and the related work. All of these steps compete with machining for the simple reason that the customer has to budget for them. The question therefore becomes: Can you take some of that budget away?

That is, can you eat the lunch of any of these other process steps?

Here is where opportunity lies. Ultimately, one of the most important parts of your own process might be the attention you give to making your customer’s process better.