Transparency continues until all you have left is the truth!
- The (expert) human touch
- Defined services with value and cost
- No more pricing shell games
Customers won’t play Three-card Monte anymore. Manufacturing still has some opaque stash jars left to play this game, but they are slowly breaking. It is no longer a matter of if, it’s when.
Manufacturing has created a labyrinth of pricing models to obscure every detail of a quotation or bid. In response to powerful supply chain managers, manufacturers armed themselves clever supply chain managers. It’s like the wild, wild west of cost-cutting. Everyone meets at the circle RFQ for an old fashioned gunfight. “ Most gunfights are portrayed in films or books as having two men square off, waiting for one to make the first move. This was rarely the case. Often, a gunfight was spur-of-the-moment, with one drawing his pistol and the other reacting. Often it would develop into a shootout where both men bolted for cover”. How perfectly this describes modern-day manufacturing contract negotiations.
The worst part of this story is how little the front line warriors know the truth. It’s a pyramid profit model hidden in a matrix organization. A model created to fight marketplace transparency with a sophisticated and byzantine model that arms salesperson with ignorance. Traditional terms like margin, profit, and expense mean nothing in the halls of these new manufacturing empires. They are all tools refined to hide the details of every transaction so that the opponent can’t hit your heart in this gunfight.
But like all Byzantine empires, the leaders get lost in building the halls and lose track of the barricades. Trapped in a maze of profit centers and coin-operated services, they eventually find themselves caught in the buildings of their creation. A simple model of pricing and value turns into a shell game of hiding the profit and kickbacks. Supply chain gunslingers are trying to get the draw on one another. Divisions and departments feud over pennies, internal agreements, and endless cross charging. In most cases, the system is so convoluted that employee bonuses are not calculated within two-quarters of the year-end to ensure accuracy. Eventually, only upper management gets paid as real profit does not exist inside of the cross charging divisions and industry incentives that only align to topline corporate accounting.
Everyone knows the truth. It’s an arms race with tighter, more demanding, and draconian contracts set up with annual reductions that work to lay siege on the manufacturer. In reality, this creates a doctrine of mutual destruction. Tired of screaming on Mainstreet, everyone retreats to slow dance of damage when the contract ends. Customers switch to one of the other manufactures in a game of musical chairs that plays every 5–10 years. That was until a new “Cloud sheriff” came to town.
Over these last three articles, I laid out a world no one wants to live within. I propose solutions for a promised land: a promised land that takes faith, trust, and a plan to find. Manufacturers have to listen to customers and provide new models for success. Customers need to appreciate that transparency and a race to the bottom line is a method, not the end goal of every contract. Most importantly, leadership and change must be allowed to grow, or the entire industry will collapse, leaving a power vacuum that will grow like an insidious cloud of doom. Oh, right. That has already happened. AWS, Google, Apple, Microsoft, Oracle, be wise. As the new sheriff in town, you are doomed to meet at the old circle RFQ for your high noon. Watch your back.
