Who actually runs your Foundry?

The automotive industry in Europe is crumbling. Sales volumes of cars have plummeted, and tens of thousands of people have been or are being laid off this year from OEMs and Tier 1 suppliers. This effect is amplified down the supply chain and is hitting the foundry industry hard.

Projected ramp-up curves never met reality, and capacity sits empty, for which you have to pay interest. New projects are getting canceled, and months of free engineering work become worthless. And the cherry on top is that some Tier 1 suppliers are now charging up-front, lump-sum payments for future business opportunities, while begging for governmental support.

And there is an unchangeable minimal cost basis of a foundry. The operating costs of an HPDC machine do not change significantly whether it is in operation or not. You need skilled people to design parts, tools, and to produce them. While the foundry organisations are still discussing energy cost reductions, they miss the point.

Yes, energy costs increased, but what is killing the local foundry industry is the lack of revenue. Saving on energy costs or even receiving governmental subsidies doesn’t help you increase your revenue. The key to increased revenue is business development. Business development requires resources in terms of capital and manpower, and has no calculable ROI. So, let’s see who actually makes the decisions on where to allocate these resources:

• Automotive Customer

Is it the purchasing department of the large automotive OEMs and Tier 1s that tells you to go in a specific direction and promise large contracts?

• Board of Directors

Does your Board of Directors know where castings can bring the biggest value without being able to project the revenues or timelines? Or are they focused on reducing costs to smooth out quarterly reports?

• CEO

Does your CEO have the power and the resources to scout applications and industries where castings are desperately needed without the others knowing about it? Or is the CEO constantly occupied with firefighting?

• CFO or Controller

Business Development doesn’t come with guarantees. Initial costs are easily calculable, but potential future earnings can not be predicted. How does your CFO react when you want to allocate your best people to developing new business outside the known paths without any guarantee of payback?

• Production Manager

New parts in new industries have different requirements and alloys. How does your production manager react when you tell him about a new opportunity that requires changes in the production processes and starts with low volumes at the beginning?

• Sales Manager

Does your sales manager have the capacity and capability to market your foundry and develop a dialogue with a new industry? Or is he/she fully tied up with the 27th meeting about upcoming tooling replacements and wall thickness changes?

What do in Times of Crisis?

As you read, and as you already know from your organisation. Business Development relies on constant inputs and unknown outputs. Given the industry’s crisis, this seems like a terrible investment. However, let me tell you, expansion is the only way out of this situation.

It’s time to go out there and market casting to new industries in a way they understand and are eager to work with you. For that, you have to leave your spreadsheets and start communicating. This business development requires new tools outside the known portals. This is a skill you need to learn quickly, or consider hiring help.

If you’re struggling to find new business for your foundry, reach out. I have a few applications and industries that may be of interest to you. However, you must be aware that new opportunities require effort and investment and don’t come from thin air. No one is willing to pay a premium because of a connection. The oversupply in the market is real, and you need to deliver solutions that give you a competitive edge. Rheocasting delivers that “unfair advantage” in Business Development. Schedule a Free Consultation Call for more insights.