While there can be pockets of higher margin business, the electronics manufacturing services industry is for the most part a fairly low margin industry. Those margins get worse with a weak sales process. Simply put, if all contractors look equal, the decision will be made on lowest unit price most of the time. Picking the low bidder is always a safe and defensible choice. If one contractor appears to provide a better solution than the rest, slightly higher pricing is permitted.
While some salespeople are better than others at achieving higher pricing, the reality is that consistently winning projects without being the lowest bidder is a team effort and a multi-stage process. This month’s column looks at how that workload should be divided between sales and the operations team.
Many companies take a hunter approach to sales, expecting the salesperson or rep to only identify opportunities. The reality is that the salesperson really should be doing much more, since often they have the strongest relationship with at least one of the members of the prospect’s sourcing team.
Selling is about relationships. Outsourcing is a complex sale with many challenges. Focusing on the numbers behind the unit price does not really provide the total cost of ownership (TCO). However, unless the salesperson can establish a level of trust with at least one member of the sourcing team, often the key concerns and challenges don’t get shared. This isn’t about tricking a sourcing team into picking the company whose “steak sizzles best.” Instead, it is about developing a clear understanding of the unique issues associated with that project to develop a tailored solution that not only addresses both the manufacturing side of the equation and the issues that keep that team up at night by eliminating non-value-added costs and inefficiencies. In short, a good salesperson who does the right amount of homework may not be quoting exactly the same scope of work that the rest of the pack does.
Rarely does a salesperson get all that information alone. Even with a good relationship, a good sourcing manager isn’t going to provide significant amounts of information in the first sales call. Instead, information is shared over time as trust is built. It is reasonable to assume a salesperson will be able to learn:
Generally, a well-defined target price and information on who else is bidding typically isn’t shared unless the sourcing team feels the first quote is fairly competitive and there is a compelling reason to select that particular supplier.
How do you create that compelling reason? Competitiveness can often be increased with a well-structured plant tour. This is particularly effective when the team that sourcing team will be working with is giving the capabilities presentation.
Most plant tours focus heavily on generic capabilities. Some companies don’t even allow prospects to walk the production floor. In many cases, a salesperson or member of management gives the entire presentation during the tour. The more tours among competitors resemble each other, the harder it is for sourcing teams to walk away with a preference.
However, a tour that has too much detail can be equally bad. A tour that spends an hour focusing on capabilities that a prospect has no need for is as bad as a tour where the salesperson does it all. Remember, it is all about relationship and having a conversation that is relevant to the decision-makers.
The sourcing team has specific goals for that project. Cost, delivery and quality are the big three. However, they will also be looking to correct any issues that have gone wrong in previous programs. Even companies sourcing a new product or sourcing for the first time will likely have concerns about technical or forecasting challenges. The ideal time to learn that is before the plant tour so that the presentations are targeted to the prospect’s key concerns. However, if the presentations given during the tour focus on ways the company has solved issues in projects of similar size and scope, often the right conversations can be started. Ideally, the goal is to migrate from a presentation to a candid conversation about what the sourcing team really wishes they could find in a contractor.
Presentations should cover common concerns such as:
The goal isn’t simply to show capabilities, but instead demonstrate how internal expertise and processes will be applied to address concerns specific to this project.
Never underestimate the power of a good wall of fame. Having board or product samples displayed on a wall of the production floor provides a great starting point for the tour. An even stronger impression is made when the presenter can pick two or three of the samples closest to the prospect’s project and discuss project challenges that were overcome. Experience with projects of similar size and scope is always a strong selling point.
Reserve time for team socialization. A contract manufacturing relationship is exactly that: a relationship. The quality of the contractor’s team is a good indicator of how much overtime will be spent managing the contractor. A competent team that appears detail-oriented and committed to customer service is also a strong selling point. When teams meet and hit it off, critical information usually gets shared, and the sourcing team tends to remember that tour in greater detail.
Relationships matter. Sourcing teams want contractors who understand and solve their challenges. If they can’t find that, they focus solely on meeting the cost target. EMS providers who study their customers and sell as a team are far less likely to be treated as a commodity.