O/T Kickback

[beav700]

I have a question for you wise people.

 

The company I work for buys roughly $8-$10 million worth of tooling (molds and dies) I'm in charge of mold design, approval of tooling and 20% of purchasing. The other person that has been in this company for much longer than me has the remaining 80% of the tooling purchasing. Few months ago I noticed that he buys most of the tooling from only two suppliers and doesn't even want the jobs to be quoted by anybody else. Lately it's getting out of control. The prices are getting higher and both shops are working every Sunday while other shops that we use before are sitting empty and asking for work. One day I plotted extra set of drawings on one of the mold I just design and got the job quoted by other shop. The quote came back 15% ($22,000) cheaper than his shop, but was thrown in the garbage and the guy didn't talk to me for two weeks. This leads me to believe that he takes big kickbacks from the two shops he dumps all the work to.

 

At this point I'm not sure what to do. I'm somewhat new to this purchasing side of the job and maybe this is standard thing when it come to outsorsing. If I let this go on, sooner or later the corporate office will shot down the tooling department due to growing costs and send everything overseas where all the engineering and mold making would take place. I was told by President of the company a year ago to reduce tooling cost by 10% in next three years. Right now I don't have any solid proof of corruption but I know if I talk to the President heads will roll. The men is all about saving money and I got quotes $20,000 to $60,000 lower then the other shops, yet all the work continue to go to overpriced shops. The president has no idea how much a mold should cost. I don't think he even knows how the mold works. This is a large company with billions of $ of sales and no one keeps track of cost per tooling. All the see is the end of the year number. The biggest problem is that I don't know how deep this goes. Who is on the payroll and who isn't. I know that the top management are not on it. They make too much money to risk the job for few thousand dollars of kickbacks. I'm new and most guys in here know each other for 10-20 years so even if they are not involved, they would hate me for exposing their buddy.

 

What would you do?

[jspangler]

Hi

Document everything, because if they find out (or even suspect) what you're up to, you're gone.

 

CYA

 

JOhn

[Thunderbolt]

It would depend on if you have a pistol or not. or maybe a flame thrower. Me I would make some heads roll and tell that dude he is why this whole department will shut down. If the other guys give you crap tell them yeah sorry I was trying to save your job and oh yeah freaking shame on me. I seen it and lived it and 90% of the compaines that use to do this are out of business so tell them to keep it up. If you deicede to do nothing you are helping the problem. Sucks trying to change things but if you do nothing hope your resume is up to date and would not tell mY next employer this; "I could have done soemthing but chose not too becuase I was AFFRAID TO ROCK THE BOAT."

[Chris Rizzo]

I'd say go right to the top- (el Presidente/upper management) make them aware of the issues, and let them deal with it....that's their job. Arrage for a professional and possibly confidential meeting with Mr. President, and get your ducks in a row (quotes, paperwork, etc.) Give him a good presentation with your "evidence" and numbers ($$$).

 

Don't waste your time getting in a pissing match with your co-workers..after all, they are the problem in the first place.

 

You will either be made a hero by the management, or tarred and feather by the lowlifes.... Maybe the heads that roll will be the ones which might provide the most difficulty for you in the future anyway! Good luck and let us know the outcome.

[gcode]

You are in a real tough spot.

If the president is not part on the scheme,

he will be pissed because you have exposed his incompetence, (Its his job to keep track of stuff like this)

I would appraoch it like this.

Don't go in alledging kickbacks.

If he's in on it, you're toast.

If your wrong, you're toast.

Go in with your cheaper quotes saying

"I think I've found a way to save some money"

"These guys are 20% under our current suppliers,

but purchasing is not interested."

That way everybody's got some wiggle room.

If you go in balls to the wall, somebody has got to die and it will probably be you.

I'm glad I'm not in your shoes.

Thieves suck!!!!

[Lars Christensen]

beav700,

 

If I am hired by a company, I work for the company not for some low life idiot who is trying to take advantage of the company. If things goes wrong and you are the one who have to go, well tough, then this company is probely not the place you want to work anyways. Go get them

 

Lars

[Lars Christensen]

Hmmmm

gcode, you might be right. A slower more "I am new and I dont know how things work around here, but I have this verly cheap quote" is a better way.

 

Lars

[MetalMarvels]

JM2C

 

1. Document, document, and then document. Have several jobs quoted by multiple shops and lay out the results in a spread sheet, including who won the job, how long it took to deliver and if delivery was on time.

 

2. NEVER even HINT at the possibility that the other guy might be taking a kick back!!! DON"T GO THERE!

 

3. When you have sufficient data, draw up a nice set of charts showing what the jobs were let for against the other quotes, show potential cost savings if the lower quotes had been accepted, if possible figure in lead times or unmet schedules due to a one-shop bottleneck. Try to figure out the lost revenue due to the lost time.

 

4. Lay it out for the President. Indicate that you don't know why only one shop is getting the work. NEVER ACCUSE the other person of ANY wrongdoing. Just lay out FACTS!!! Then ask the President what he wants you to do....

 

 

Once again NEVER make accusations... Particularly when you don't have unassailable FACTS.....

[SledGeek]

Similar condition where i work ,can't prove it though......

 

+1 to gcode and Jspangler Plus take a few months to collect quotes and scout other jobs. Sometimes upper and middle management prefer a, shall we say, less disruptive management style regardless of the cost. If the pres. is smart he will do some homework and present it to his peers and bosses and gain some brownie points for himself. You, of course , will get no recognition at all!

 

Good luck

[gcode]

quote:

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Sometimes upper and middle management prefer a, shall we say, less disruptive management style

---

Translation.... It's often easier to shoot the messenger than deal with the message

[Scott Bond]

+ at least 1 everybody

quote:

---

I was told by President of the company a year ago to reduce tooling cost by 10% in next three years.

---

Hi Beav

I think you have to many details to bring to the big chief.

So I picked one out for you. Below I have included

something that I like to call:::::

""The SIX Powers of Persuasion""

This would help a guy prepare himself for a just such a meeting.

(remember not to start with number six)

 

1] Tell him what you are trying to achieve.

example a] I want to reduce costs for the company .

 

2] Give an emotional appeal about

what you are trying to achieve.

example] I am trying to do a good job for you.

 

3]Call in a past favor.

If the company ever promised you something ---

It gives you power to ask for it.---Be Bold

 

4]Grant a current favor,

Do they need you to complete some special projects?

 

 

5]Make a vague promise the Vaguer the better.

That goes something like this

""With your support I can produce at least the 10% cost savings

in three years that you requested"" ,

again the vaguer the better. credibility is very important on this ,, not action.

[[[[[ number five must be delivered perfectly ]]]]]

 

6] Threaten reprisals,,===Have your resignation with you when you go to the meeting.

 

 

If your going to be a bear ,,,be a Grizzly .

[TheePres]

Beav...i see that you are completely "UNDECIDED" on what to do in your predicament

[SledGeek]

geez, i hate the "takes 15 minutes to write a post cause of interruptions and then you miss posts from other people !"

 

Always hurryin' !

 

Sorry guys , all + 1 !!

 

quote:

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Translation.... It's often easier to shoot the messenger than deal with the message

---

Right on brutha !

[Jack Mitchell]

beav700

 

Suspecting the kick back scheme is nothing new: please be careful, otherwise it might be you that gets turfed.

 

Best solution is to give all the work to the exact same venders as the other guy - this serves many distinct solutions.

 

#1) the other person is immediately thrown off balance since he would never in a million years expect you to use his venders. – The scariest solution of all.

#2) if the vender is giving him kick backs and not you then they will definitely give your work the preferential treatment or priority. OR you will scare the living crap out of them as well.

#3) always have, on your person, some sort of discrete recording device (solely for self preservation and not to entrap anybody else).

 

Stealing from a company probably has roots right to the very top and this really sucks; documenting or even discussing this kind of thing will land somebody in court and oddly enough it might well be you.

 

I have seen this many times and suspect much worse than you can imagine; personally this has never interested me and I refuse to partake in anything remotely like it.

An immediate change in policy is required for quote processing and approval but alas, the corrupt ones know exactly how to work the very system they have created.

 

Personally I believe that nothing good will come of exposing this predicament, whether you expose it or ignore it – something is now set upon the table.

 

Good Luck…….. Regards, Jack

[Brendan P]

Somehow this all sounds too familiar.

I would be very careful.

I think gcode and Jack have given some great advice.

Sounds to me that this is exactly what is happening with your corrupt purchasing dept.

 

Nothing worse than snivelers.

[robk]

quote:

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Go in with your cheaper quotes saying

"I think I've found a way to save some money"

"These guys are 20% under our current suppliers,

---

One thing to keep in mind also is the quality of work. Investigate a little bit. Don't accuse of kickbacks right away. We could save a dollar here and there also, but it makes sense to pay a little more and get the product in the door just right. China molds are a perfect example of this, but the bottom line doesn't always work. The 15% savings up front could be a 20% loss at the end. I try to keep all the suppliers happy, but after a while you know what to expect from everyone. This businesss is very competative, and when I get a quote that is 15% less than somebody elses I get a little suspicious. Will the lead times change? Will they do the repairs on the mold? Are they making the mold inhouse or are they outsourcing? Most of the time you get what you pay for, but one has to be very careful and always look for a better way of doing business. I hope you don't take this offensively in any way, but this is just another way of looking at this issue.

[beav700]

That is just the thing. One shop that he uses has nice quality and the other one has nothing but problems. The shops that qoute the lower prices are good quality mold shop that were building molds for as for the last 20 years and the molds still running to this day.

[d00d]

If the person who hired you was SERIOUS about getting cost down, just quote your work to the better quality shops that work cheaper you mentioned. Pretty soon the other guy who may be taking kickbacks will be on the hotseat. I know if I ran a company and had similar jobs with cost as off balance as you say, I'd investigate. If yours is allways that much cheaper and it is never recognized, you know the corruption probably goes pretty high up and there is probably nothing you can do anyway.

JM2C

[Guest CNC Apps Guy 1]

I'd go with the "ignorance" plea also. I'm new and I think I found a way to help us save a "little" money. Document quotes over the course of a month or two. Unless it's a really heavy month or a really light month you can then extrapolate the data to say. Look Mr. Pres, I found a way to save over $500,000 (or whatever the number is) per year!!!!

 

I woudl say right now is not necessarily a bad time to shop other suppliers. A lot of shops are not so busy, lead times are shortening due to the lack of a steady work flow and the owners of the shops are looking to the future "If I do this right, take a little less profit now, and do this on time perhaps I'll get moer work in the future..." could be the mentality.

 

Depending on the cost of the tool, there could be 25-30% profit in those tools from the more expensive shops. Take a drive to their shop, take a look at the President's car(s) and toys he parks in the back and you'll know how much they are gouging you for.

 

JM2C

[McRae]

Easy solution. Get a policy in place that has a minimum number of quotes to be three, one quote is not enough, unless follwed by a second and then ulitmatly a third. Four be too many and Five is right out! Special thanks to Brother Maynard and his holy hand grenade.

 

Monty Python holds the key to all things in Business.

 

GCode - The president relys on his people to help him identify areas of savings and violations of policy - the corporation is made up of individuals with a common goal - you are responsible Beav - save the economy and do the right thing!

[Fred @ Slate Industries]

We have a three minimum qoute policy.

It doesnt stop someone from giving his

Buddies shop the other guys Prices though.

[ScottyB]

I agree with Metal Marvel.

If you're the one who gets the boot...It's not the type of company you want to be with anyway.

(Easier said than done...but you'll have a clear conscience.)

[Code_Breaker]

I have been in a situation where a company wanted three quotes on every new mold order (extrusion blow molds), but one company seems to get all the buisness regardless of the amount of the quote. When we were higher, that other company got the quote at our amount. I know because they fax me the acceptance in the other company's name by mistake (I think?).

 

Later, I found out the he was working on the side for that company.

 

There wasn't much I could do . . .

 

But, if I were to expose the situation, it would have done nothing, but casue me problems. So, I just stayed the course and bit my tongue.

 

My advise, following gcode counsel, make your study, and don't point fingers.

 

 

Code_Breaker

[Rekd™]

quote:

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Monty Python holds the key to all things in Business.

---

Tru dat!!

 

Jack and gcode have sound advice.

 

'Rekd

[?Mark]

There is another issue called quality.

We have similar situation at our place, except we are at the receiving end.

Once we are almost done with a work our costumer sends in more work on which we don't even quote.

Some we loose money on but some are a money makers. They always try to keep our competitors shops busy but majority of their work always ends up here.

The reason: quality

They never (almost) need to inspect our parts.

If a dim. is out of tolerance by a .0001" then the part is clearly marked. If their inspectors decides that they can live with that they buy it, if not they get it for free.

We do a very small "lots" 2-20 pcs. and it doesn't involve any 3d work but the tolerances are TIGHT.

I know for a fact that our competitors think we are giving kickbacks but nothing could be farther from a truth.

Sometimes we are more expensive but it saves our costumer a lot of headache and time.

 

So before You grab a sword You must carefully take this under consideration.

 

 

Regards, Mark