Northeast Utilities (NU), one of the major utilities companies in New England, is working very hard with the Connecticut Association of Purchasing Management and other probusiness groups and associations to achieve a reverse tradeshow in central Connecticut. What exactly is a reverse tradeshow? According to an NU spokesman, at a reverse tradeshow, exhibitors are large OEMs or first-tier manufacturers and the attendees are small suppliers who want to do business. Each exhibitor displays products and services, or parts they would like to outsource, which are self-supplied or supplied by existing suppliers. Attendees notify exhibitors if there are products or services that they can provide in place of the existing supplier. Then, the exhibitor discusses an RFQ or RFP with the attendee; exhibitors will need to have their purchasing people on-hand and ready to talk business. An attendee goes home happy with the thought that a potential new customer will review an offer and possibly buy.
This idea was developed in Nova Scotia, Canada, and originally called an import replacement show before economic development officials coined the term reverse tradeshow in order to show a similarity to reverse auctions. The concept is popular in Canada, and only recently migrated to the U.S. Its goal is clear: to generate more business for small suppliers and to counter job loss to foreign sourcing.1 Moldmakers are vitally interested in the same goal and share common ground with this initiative.
Why would an OEM with established suppliers show genuine interest in buying from a local supplier, especially when the existing supplier may be in China or another low-cost area? Buying from a local supplier supports the local economy and creates local jobs or maintains jobs that are otherwise threatened. A local show is strictly limited to local exhibitors and attendees. If an OEM buys from the state in which it has a manufacturing site, then it is serving a real vested interest by supporting the state's suppliers.
This is a version of the "Made in America" movement, but focused on a state's economy. If large companies make it a point to choose local suppliers, and are willing to pay premium for them, then the local economy will benefit. This might reduce the buyer's local tax bill since unemployment and crime may be reduced, and the buyer's esteem will certainly increase in the eyes of local chambers of commerce.
Competition with foreign moldmakers appears to be an ongoing factor within the plastics molding and die casting industry. Large OEMs are aggressively outsourcing, and small die and machine shops that are not able to purchase and use modern technology are suffering. Purchasing managers do not appear anxious to buy molds and dies from foreign sources because of inherent supply chain problems, but they will do so if domestic suppliers fail to provide reasonable alternatives. In some cases, the price differential is too staggering to ignore.
For example, a small moldmaking shop in Connecticut quoted a standard new mold for a steady customer at $39,000, knowing that $44,000 was a more realistic figure, but hoping to get the job and keep the customer. The shop's president and owner were stunned when the customer ordered the die from a Chinese source for $3,100. There is no way to compete with such a quotation. A customer will be lured to these prices even if the overall experience proves to be a bad one. If the experience is a good one, the customer is not going to voluntarily pay ten times the foreign price just because a moldmaker is American.
A U.S. company must sell on the global market if it is to survive. Herein lies the real issue. Should a customer buy an American-made product from a supplier if it is close in price to, but still higher than, a foreign alternative? If so, what kind of a premium is justifiable above and beyond quality and delivery considerations? What one is asking a buyer to do is to have a social conscience and to accept higher prices in exchange for a more healthy local economy.
A mold shop or vendor should participate in a reverse tradeshow. There may be exhibitors who believe in a "Buy American" policy, want local suppliers and are willing to pay premium for it. A local supplier has many advantages over a foreign source if price is not the controlling issue. A chance to meet an OEM's purchasing staff also should never be missed. One never knows where new business may emerge. Suppliers have no way of knowing true OEM intent; they must take a reverse tradeshow seriously and invest in a few quotes and proposals. Expectations, however, should be kept low. Every OEM has entrenched suppliers, foreign or otherwise, who will not be readily replaced by casual conversation at a trade show.
Providing an Overall Package
Customers are seeking total value, not just price. Is there a chance to do contract manufacturing for a whole component instead of supplying parts? Can that be extended to distribution and reverse logistics, including maintenance and repair? If suppliers can make a difference, then they break into the OEM's supply chain and must try to stay there. Many suppliers often lack imagination because they do not employ creative, well-informed engineers and salespeople. In mold shops, where low margins keep overheads down, there is little investment in customer analysis that might lead to proposing new solutions for a customer's problems. If one offers the same product as a foreign competitor, then one will lose if the foreign price is less. The trick is to provide a service or product package, that a competitor cannot easily match.
In his classic manufacturing fable, "It's Not Luck," Eliyahu Goldratt outlines in detail how a supplier can create unrefusable offers to lock onto a customer in the face of price competition.} Use closeness and familiarity with the end product to suggest ways that customers can increase sales and profits. Offer superfast delivery, consignment inventories and safety stocks so they can reduce inventory carrying costs. Master new fluid flow software and show how to procure molds that minimize defects. Finance mold construction or buy a finished product without investing in the tooling. Today, a mold actually is a commodity, which means that service based on the tooling, rather than the tooling itself, becomes a way to differentiate one moldmaker from another. Goldratt's thinking processes are an effective way to look at conflicts that involve resources; most moldmakers are not aware of these techniques.3 Managers also can unleash employee creativity in efforts to win, and hold onto, an important customer.
The driving force in the reverse tradeshow proposal is large power companies. Why are they promoting local manufacturing? Utilities are profitable companies, and employ economists, engineers and other specialized staff people. They are still regulated and must joust with state regulatory agencies for any rate increase or service modification. Utilities are aware that a decline in manufacturing will reduce power demand from a profitable group of industrial customers and most likely increase unemployment. A high unemployment rate, especially one built upon laid-off union workers, will make it hard for the political process to approve utility rate increases. Manufacturing jobs pay good wages, provide benefits and employ people who do not readily find employment in the service sector. The steady loss of manufacturing jobs is creating rising unemployment nationwide. Utilities and business lobbying groups are hammering politicians with the message that manufacturing supports many service sector jobs, and that a decline in manufacturing depresses a state's total economy. Manufacturing has allies who are coming to its defense.
Small suppliers and moldmakers can take advantage of the situation if they move quickly. A reverse tradeshow might spring loose a new customer. State governments are well into efforts to provide marketing and technical assistance to manufacturers at little or no cost. CONNSTEP, Inc., affiliated with the Connecticut Department of Economic and Community Development and state universities, works with small firms on a variety of marketing and technical projects at a subsidy of about 75 percent.4 Similar agencies exist in most states, and can be found in economic development and state university Web sites. In Connecticut, a state initiative is aimed at forming a consortia of manufacturers to implement lean practices and productivity improvements within specific industries. Administered by the Connecticut Economic Research Center, Inc., the Progressive Manufacturing Pilot Program is financing supply chain and lean projects involving four or more companies acting as an industry-based consortium.5 Plastic molding and moldmaking is one industry target group. In another state program tied to the Defense Logistics Agency, CONNSTEP assists small manufacturers in obtaining Department of Defense supply contracts. This program is part of New England's effort duplicated in other parts of the country. Getting involved in such state initiatives may lead to unexpected or unimagined new customers. A moldmaker now has allies who may actually be quite helpful.6
Pursuing New Business
China has an important place in the U.S. economy. It is likely that cries of "Buy American" will fall upon deaf ears. The profound effect upon local economies' manufacturing job loss will prompt states and cities to support manufacturers with marketing and technical assistance at unprecedented levels. Moldmaking, injection molding, stamping, screw machine and general machining companies stand to benefit from these programs if they participate in them. Some OEMs will participate in "Buy American" programs if they see political advantages that may lead to defense or government business. Others may be willing to pay supplier premiums to support a local economy or to maintain labor peace. Reverse tradeshows are evidence that there are forces afoot to boost local manufacturers. If an opportunity for new business exists, however strangely it comes about, it would be wise for a smart supplier to exploit it.
1. Connecticut Business and Industry Association, material on reverse tradeshow including exhibitor application, at www.cbia.com.
2. Goldratt, E.M., "It's Not Luck," North River Press, Great Barrington, MA, 1994.
3. Case study material available at www.goldratt.com.
4. CONNSTEP, Inc., serves all state manufacturers including moldmakers; programs, newsletters, and case studies at www.connstep.org.
5. CERC, or Connecticut Economic Resource Center, Inc., shares program information and newsletters at www.cerc.com.
6. Extensive material on all states and on NAFTA partners, including incentives, technical assistance programs, guaranteed loans, economic development grants, and State subsidies is available at www.areadevelopment.com. Similar material is available at www.BusinessFacilities.com, and at www.bizsites.com.