Time to Think Like a Proton, Always Positive…

We live in the age of the urgent order. With a wet finger in the air, I’d say around a quarter of the orders we receive for graphite products and solutions are needed as fast as possible. Thanks to the flexibility of the team and willingness to work beyond their working day, we’re usually able to help with these requests. The root cause for the urgency of the orders is almost always down to one of two reasons: unplanned customer equipment breakdowns or customer cash flow protection. 

The first of these – breakdowns – is self-evidently an urgent job. As I know all too well, unexpected breakdowns are every boss’s nightmare. Breakdowns impact customer service and production schedules, resulting in increased costs. Naturally, the shorter the breakdown, the smaller the business impact. We respond to these requests to help our customers just as we would expect our suppliers to if we needed their support. 

The second – cash flow protection – is more a self-inflicted cost. These urgent requests are almost always the result of a company’s cash flow protection strategy. Ordering as late as possible means the corresponding cash outflow is also as late as possible.   

Often this approach is out of line with the wishes of the production engineers, managers, and designers that we deal with. They want to be more proactive with the ordering, holding key stock to reduce the risk of unexpected production delays.  

“Our attempts to have discussions to mitigate production risk are always a minefield,” a production engineer from a relatively new customer of Coidan Graphite told me, “when you’re dealing with what-if scenarios, it’s challenging to get Accounts to agree to release (non-essential) funds.” 

“Instead, Accounts prefer paying over the odds for urgent supply of parts paying premium rates, utilising express delivery services for parts known to be needed sometime soon. All because there is a chance that the goods will not be required immediately, and the cost can be allocated into next month’s figures.” 

“Why don’t you use a call-off order for your key parts?” I replied. “That way, there will always be stock ready to be dispatched and cashflow is protected, as spend is driven by need.” 

A call-off order is an order a supplier receives that is based on a period of usage (generally annually) and the quantity ordered is estimated as needed for the year. Deliveries are split across the year, but the supplier guarantees to have the part in stock. 

This type of ordering used to be much more common than it is now, though we still have some customers who use call-off orders for their annual consumption. Others have moved away from this type of ordering as it isn’t favoured by accounts teams, who don’t want to approve large purchase orders covering such a long period of time.   

Which totally misses the point! There’s no impact to cash flow as split deliveries mean cash is spent as parts are consumed. Stock is always available to call upon to mitigate breakdown timescales. In addition, and what is often overlooked, a call-off order freezes the cost of the part(s) until the call-off order is completed. 

The production engineer readily agreed, having highlighted all these arguments to his accounts team, but to no avail. He was very philosophical about it though, he ended the call with… “Think like a proton, always positive.” That’s engineers for you!  

That’s it for now, see you next time. 

David