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Coater’s Corner

Greg Yahn
Advanced Finishing USA

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The Shrinking of the Chain

As I always tell my customers, "Powder coating is one of the last links in the chain of production. By the time the product gets to us, it's already late." This statement is a lead-in to discussing our goal of consistent on-time delivery. But I have noticed a troubling trend over the past 5 years. I call it the shrinking of the chain.

If you're a custom powder coater with a lot of good customers, chances are you fall in the 80-20 scenario. Eighty percent of your customers are relatively small volume, but twenty percent of them are fairly large volume. Business has been good, but you face a few disturbing realities. Although quality, delivery, and pricing are good, your business still faces some challenges. It seems that every time you develop a good customer, and build up their business with your quality and delivery, they turn around and put in their own powder coating line and cut you out of the picture. Sound familiar?

The fact is, most businesses today are feeling the pressures of cost reduction strategies from LEAN manufacturing to JIT (just in time). Companies that used to buy fabrications from one source and powder coating from another are n ow demanding finished products from just one source. This usually makes the fabricator responsible for the finishing. There is no help from the final customer to require the fabricator to deliver the products to the finisher prepared for coating (that is no grind marks, weld spatter, rust, magic marker, or grease pencil).Because of this change of authority, the finisher becomes a constant source of grief to his customer, the fabricator. This creates undue tension between the coater and the fabricator, which ultimately leads to the fabricator jumping from coater to coater until... he puts in his own line!

I've seen it time and time again, but the reality is, when someone is giving you a million dollars of their business, the thought of bringing it all in house becomes an enticing option. What most of these companies don't understand is that it takes many customers to keep a custom coater busy. The fabricator may feel that they produce a lot of product and can keep their line busy, but they don't realize just how much product an efficient coater can put through their line. The result is that they have excess capacity. To fill this unused capacity, they inadvertently get into the powder coating business. This can have a devastating effect on the custom coater's business. Not only do you lose a good customer, but also they can now run your other customers products at a price lower than yours because they are just looking to fill capacity. For the custom coater, this is a lose-lose proposition.

So what can you do? You may think that good customer relations and communication will insulate you from this fate, but more often than not, financial business decisions don't take into consideration standing relationships with vendors. With all of the new application technology available and the amount of used equipment on the market today, just about anyone can put in a finishing line for a reasonable investment and see an adequate payback. Granted, the smaller customers will have a m ore difficult time justifying the expense, but they're not the ones that will hurt you. It's those big juicy, profitable accounts that matter.

My advice is threefold.

  • First, work with your customers and stress the partnership you can offer. You should be an extension of their business. If they can fill that extra 10,000 square feet with more of what they do best, fabrication capacity, you can help them continue to grow. We have always stayed away from partnering with a fabricator because we didn't want to be seen as a potential competitor. They didn't worry about competing with us when they put in their line.

  • Second, try to develop a captive product line. No matter how you do it, if you make it, coat it, and sell it, you get to keep the money! Most of my customers mark up my coating price. Some double or triple it.

  • Finally, if you can develop a niche market and identify a value-added process that makes it more appealing for your customer to stay with you, you can protect that hard-earned business.

  • In summary, if you understand that the current business trend is to shorten the chain by removing links from it, your best option is to become one of the most important links. In this way you can keep from being cut out of the chain.

    Editor's Note

    For Further reading, see Powder Coating magazine's Web site at []. Click on Article Index and search by subject category. To submit a question, click on Problem solving, then scroll to Coater's Corners.

    Greg Yahn owns Advanced Finishing USA, 7401 Klier Drive, Fairview, PA 16415. He can be contacted at 814/474-5200,ext 101; e-mail {}. He holds a degree in industrial engineering with a foundry emphasis from Pennsylvania State University. He serves on the Penn State Cast Metals Advisory Board in State College, Pa.

    This column discusses problems encountered by powder coaters during the daily operation of their powder coating lines. These are in-the-field experiences from coaters. Its intent is to provide practical information to line personnel who coat all day to help them improve in their work. If you would like to contribute to this column, contact Peggy Koop, Editor, at 651/ 287-5603, or e-mail [].

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