Episode 004: Maximizing Manufacturing Capacity with Strategic Customer Relationships

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Hey, welcome back to the Find Your
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Source podcast, where we talk about manufacturing or product sourcing.
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Specifically, if you're a manufacturer and you have capacity,
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you have down capacity and you want to utilize that capacity,
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you already have that infrastructure built, right?
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You can find other customers or
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what steve recommends find more
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profitable better customers the least pain in the butt that's what i used to
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tell manufacturers when we they were going to do business we're going to be
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the least painful customer you have as long as you do what you say you're going
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to do hold us to the same standard make sure that we do what we say we're going
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to do. We agree to the terms.
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We are clear in our communication with you. We are not changing things all the time.
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Last minute change orders and then expecting you to eat it. Or if there's a
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mistake that we made, we expect you to eat it.
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Sometimes you can negotiate those things and maybe you can eat it at,
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you know, cost and then you'll do it over again.
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That's an awesome customer relationship. That's the best relationship.
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But when we screw up, we need to own it, you know, us asking that manufacturer.
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So it's super important that you work that side of it. Now, on the other side,
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you want to be that customer.
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You want that manufacturer who's thinking of you first. And so we can help you
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with that too. It's all about relationships.
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And I'm building on this concept. I think I'm up to 26 or 28 different ideas I have.
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And each one builds on each other, right? And each one develops over time.
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And the thing that you got to learn, excuse me, is you cannot control that manufacturer, right?
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As much as you want to, you're not their only customer.
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You want to become their most important customer. And how do you do that?
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Well, you pay them on time. You don't nitpick over every little detail.
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You hold them to a standard that you would hold yourself to.
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So if you screw up and you're not perfect, which that'd be all of us,
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when that manufacturer screws up, there's nothing wrong with holding them accountable
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but not being a jerk about it.
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What's really important is that you take the time to ensure.
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That they understand how important it is to you. They understand what effect it had on you.
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And then you want to know what kind of controls are putting place to mitigate
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this for the future, right?
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Very common sense. When you speak that way to somebody, as opposed to speaking
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down, how dare you, we're your most important customer, blah,
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blah, blah, blah, blah, blah. They are firing you.
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Their full-time job now, they're going to placate you for that one time,
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but their full-time job now is finding a better customer.
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And again, if you have those kinds of customers, let me know.
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I can help you find better customers. I will work with you.
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So this week, I'm going to talk about something I mentioned in the last episode,
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which I think I glanced on it in niches.
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And I said, I want to talk about cost of goods coming up. I will. I promise I will.
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But niches to me is the next step in this whole thing. Because what I have found
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over time is so many manufacturers that we work with wanted to take all of our business.
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They all said, I want 100% of your business, Steve. Okay.
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You don't make these products. Yeah, but we can make them. It's the same.
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No, it's not. No, it's not. You have, those manufacturers have a niche for a reason.
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Now, if they have an unbelievable packaging department, meaning that they can
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just, that's run separately, that just handles their products,
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can handle other people's products, then that makes sense, right?
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So if you're doing liquids and they have the bottling line and it's not a,
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you know, there's no food issues or FDA issues or EPA issues.
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You know, EPA is a good one, right? There's no EPA issues there,
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right? It's not an EPA facility and you don't have them. All right, great.
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Then it might be worth bringing them other products. The problem though is if
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they are in the automotive industry, right?
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And you're trying to get them to be in the toothpaste business.
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They'll say they can do it.
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Every manufacturer I met, oh yeah, we got the best people, we can do it, this and that.
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And their hearts mean well, and they're trying to make sure they have a business,
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and maybe this could be an expansion they can get.
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But what happens is that distraction, that learning curve could cost the other
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business, your profitable business, if you already have a business with them.
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So you want to be really cautious. And the other risk is supply chains,
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a whole bunch of things can affect things.
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Why would you want to put that much of your company at risk?
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It's better to find a second manufacturer, hold them to the same standards,
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groom them over time and become their best customer.
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And now all of a sudden you have two companies. So should one industry take a dive?
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Should that company be sold? That manufacturer that you have,
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that you love, and you have an agreement with them where they're going to continue
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on in whatever they sell, right? That's usually in those agreements that it'll continue on.
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However, are they going to run it the same way? And I'll be honest with you,
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any company that buys another company, they are going to find a way to pay for it.
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So guess what? They're going to raise prices. They're going to cut costs.
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They're going to cut labor.
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They're going to do something to make it, to make the, you know,
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back the return they want, especially if they're private equity,
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they're going to gut that place.
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And they can be like, looking at you like, eh, you're only a $50,000 customer.
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We need million-dollar customers.
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Goodbye. And then what do you do, right? So again, I think it's super important
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to stay with manufacturers that have niches and then stay in that niche with them.
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Okay for packaging. You know, hey, could you package this too?
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It's just another liquid and it doesn't affect your line. Sure. No problem. However.
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Not to bring them from different industries generally. So, you know,
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I was thinking about an industry. Here's a good example. Here's a niche.
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Automotive. Such a broad subject, right? What would you think of automotive?
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What I think of is OEM, right? So original equipment manufacturers,
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then aftermarket or private label, right?
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I have an older BMW convertible that I call my summer car.
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That car, I'll buy mostly OEM parts. I try to buy, because they don't make them,
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you know, and if I can buy it from a pull your part junkyard,
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I will, you know, cause I like the original, but I have had to put,
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you know, aftermarket parts on it.
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It's the way it goes. The other thing is recondition. There's a company my younger son works for.
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They do recondition parts, but they've got tens of thousands of SKUs, huge, massive company.
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And they recondition parts for a lot of outdoor things and stuff like that.
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And then they warranty them. So it's a pretty cool business.
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But if you think about those three, so we have OEM and then we have private
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label and then we have recondition.
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You can have them within that parts or consumables, right? So if you're going
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to make parts, here's a cool story.
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I just saw this on Facebook Marketplace. It was an auction upcoming.
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It might have just happened, but it was for windshield wiper blades.
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Now, you know, when I went into the auction and I love to buy bulk volume of
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items that are already packaged and everything, it was a name brand.
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I forget which brand it was. But this company was a distributor,
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I think they're from Baltimore area or somewhere down my way.
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And they were an auto parts distributor. So they had a, you know,
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they were buying from the manufacturer.
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They were selling it probably online or into retail or whatever.
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These were windshield wiper blades. And I started looking, I'm like,
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man, 20 cents a pair. And it's like, oh, 60 in this box.
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Well, it went on and on and on. I think after eight pages, I realized that we're talking about.
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A warehouse full of these things, multiple tens of twenties of tractor trailers full of it in boxes.
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And then think of all those different ones. Can you sell all those?
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In my mind, I could, but then I realized even at 20 to 50 cents,
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how many of those, and I think they were selling for like $19.99, that's set.
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So imagine if I did, if I was able to get it and nobody else bid against me
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and I got them for 50 cents and I could sell them for 20 bucks.
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I mean, I'd take that job all day long.
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The problem is they're not going to, you can't sell them all,
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right? There's the volume, you have to have a huge distribution network,
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not just an online business.
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You're not going to sell it. That market is big, but it's not that big.
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You're missing all the distributors. So my point is, is that if you're in the
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windshield washer, windshield wiper business, and I came along and bought all
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those things, I would crush your business.
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Okay. So is that a niche that I want to stay in, you know, when it's not my lane?
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If I had a brand, my own brand, and I knew everything about windshield wiper
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blades, I would crush it.
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But that's all I would do. I wouldn't be trying to also make fenders for escorts
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or something. I don't know.
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I'm thinking of something. Or I wouldn't want to make brake fluid.
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Brake fluid is another good example. So I was at a trade show in Nashville.
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I was at the SOCMA Society of Chemical Manufacturers, one of those,
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one of those. And it was tollers everywhere.
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No, maybe it was Savannah, Savannah, Georgia. and it was tollers.
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So there were tons of them.
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So many of them were making brake fluid. They kept pushing brake fluid on me.
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I'm like, why do I want to buy brake fluid from you?
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And apparently, I mean, in this place, there were probably only 100 and change vendors.
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Probably six people pitched me on brake fluid.
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And I thought to myself, that is not a very thick market if six people are selling
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in this out of this hundred and all it is, is a commodity. Now you're down on price.
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So, you know, I can make it. And at that time I was going to make it and sell it on Amazon.
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But the problem was, so everybody else could.
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And so if you bought more, your price could be lower and then we're going to
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compete and we're going to, you know, blah, blah, blah, blah,
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blah. So again, is that's my niche.
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Now, if I'm the manufacturer making great fluid, I'd be selling it everywhere,
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but I'm not. So is that something I want to do in addition to my windshield?
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You get my point is that you really have to find a lane and then stay in it
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and become the best in it.
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Once you exceed everything, what's your number one in all those marketplaces?
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And you think about where you're going to sell it now, right?
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So let's go back to the windshield wiper blades.
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You sell them in NAPA's and AutoZone.
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What's the other one? There's one of them that just closed a ton of stores.
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But then you're going to sell it on Amazon. You're going to sell it on your
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own website. you're going to sell it in Walmart, on Walmart, in Walmart.
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You're going to sell it retail wherever you can. You're going to go out to big
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distributors, blah, blah, blah, blah, blah.
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That's a huge market. Why would you be jumping into something else?
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So again, Steve's point here is it's cool to think, oh, that business would
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be so easy for me because I'm already successful at selling windshield wiper blades.
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Oh, the brake fluid would be a natural addition to that.
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No, not really. It really isn't. Unless you've got that name brand,
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unless you have that distributor network all figured out, unless you got all
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that done and you're crushing the windshield wiper market, all you're going
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to do is dilute your talent and dilute down your focus,
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I guess is a good way to say it.
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So my advice is to kind of look at what you are. So let's just go back to that windshield wiper guy.
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So he's selling windshield wipers now. He knows he's going to come up against
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me, but what else could he sell?
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What else would be a natural? Now windshield washer fluid, I could argue,
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could make that work, right?
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That's different packaging. That's different things, but that's where you find
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a different manufacturer. They're making it in, you know, tanker loads.
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I mean, you can get it in tanker loads, but they'll make it in 850 gallon tanks.
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Bottling it is cheap. You're going to get that stuff for, I mean,
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it's mostly, it's 90% water, 95% water. Sometimes they use magnesium.
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Sometimes they use other, I would say realistically that's to make it a gallon that's.
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Now, 20 cents? I think I'd be generous saying 20 cents. The bottle's going to cost you more.
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And so, you know, you could get somebody to package that. You can get those
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shrink-on sleeves that you see a lot of, you know, windshield washer companies use.
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They use shrink-on sleeve instead of getting labels. It's a way to lower your cost.
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You know, again, super cheap. You can blow your own bottles and get the cost
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down. And again, if you have a brand, that's a natural fit.
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Now, you would not want the company making your windshield wipers to get into
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the windshield washer business.
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And that's the point of this part of this find your source, finding that company
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that can make that windshield washer fluid.
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That's the art, right? That's not your niche currently. You need some help,
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somebody like me who can help you find those manufacturers.
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And then, you know, the approach I would take is, again, I would go to that
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Tollworth show. I would meet a whole bunch of people. I'd have my standards.
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I'd get my NDAs in place. And then I'd start working with somebody,
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somebody who's already got it or has the capacity to do it. My recently visited
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a manufacturer, they make, what is it, DEF, I think it's called,
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or something like that, for diesel vehicles.
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And it's something to clean the, it helps them with the air.
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I never knew it. I rented a truck and I had to put it in. I'm like, what is this stuff?
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And it's some blue fluid or whatever, and diesel vehicles use it,
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and it helps clean this, scrub the air or whatever.
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But that company there who makes that, that would be a natural to make that
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windshield washer fluid for you or somebody like that. So salt companies,
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the ones who make salt, salt brine, that would be another natural fit.
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So again, I would go to a Tollware trade show, find those Tollware's,
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if I don't have a current one I'm working with, find that right fit,
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make sure it makes sense, find out where their location, can they handle storage?
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Can they bottle? What's the turnaround time?
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Will they do just in time? Will they deliver for you in essence?
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Will they package it up and send it to things? There's just a ton of things
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to consider. But again, it's in a niche.
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To make that stretch from that windshield washer fluid to the windshield wiper
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blades or vice versa is not a big leap.
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It is a big leap, however, again, going back to brake fluid,
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right? That's just a whole complete different thing.
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So think about where you want to go. If you need help, reach out to me.
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But again, really focus on what you're doing and stay in those niches.
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My friend used to say the riches are in the niches and they really are.
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If you can get in there and be specific and be the one that everyone knows is
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the dominant player in that market, you are going to win.
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So hopefully there was a little bit of help in there for you about thinking
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about how to expand your market, how to grow.
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Or if you're a manufacturer and you make, let's go back to the automotive, you make that DEF fluid.
00:14:10.513 --> 00:14:13.713
Well, let's think about making some windshield washer fluid.
00:14:13.833 --> 00:14:17.793
Again, simple tank, simple blend, simple packaging. If you have all that figured
00:14:17.793 --> 00:14:21.953
out, that's an easy way to expand your market and find a different customer base.
00:14:22.153 --> 00:14:26.413
And sometimes you can upgrade in customers and make a more profitable customer
00:14:26.413 --> 00:14:28.953
and become the least pain in the butt for you.
00:14:29.293 --> 00:14:33.453
Does what you need them to do. You do what you say. And, man, everybody is happy.
00:14:34.193 --> 00:14:38.493
Again, reach out to me if I can help you in any way. This is the findyoursource.pro
00:14:38.493 --> 00:14:41.793
podcast. Take care. Steven's out.