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Sector: Manufacturing
Employees: 50
Location: Knaresborough
The big idea:- Developing a service new to the marketplace
What they do
Established in 1978, Claro manufactures precision machined parts for many industry sectors, such as medical, aerospace, sub-sea and telecommunications.
The challenge
To develop products and services that were distinctive and which differentiated the business from its competitors. Engineering is a competitive sector within the UK economy and the company needed to examine ways in which it could strengthen its relationships with its customers to achieve long term partnerships and repeat business.
The solution
To test a new service within the electronics sector, that involved compiling and supplying entire kits of parts for original equipment suppliers.
Many of these parts would not be made by Claro but bought in from various other suppliers and integrated into the kits. For the end customer this was an obvious winner as it cuts down their procurement costs but how would other suppliers react?
"We had to build a lean supply chain," explains Martin, "with supplier partnerships that could react quickly to the end customer's requirements. This meant investing around £10,000 a year in implementing suitable systems with suppliers to support ordering, inventory management and Quality Assurance. The theme of our discussions with partners was always 'how can we make this work well together long term?'"
Issues arising
Such a radical departure from their previous business model posed problems not only for the robustness of the procurement system but also for the financing of the increased inventory and its impact on cash flow.
To solve this, the company negotiated advantageous prices and payment terms with the supplier network based on longer-term orders and schedules. In addition it set up credit factoring arrangements so that it is paid on customer order, not on delivery. This eased pressures on the business, giving the management time to concentrate on making the service work.
In house, the company appointed a new member of staff whose responsbiility was to assemble, pack and despatch the kits. An important part of his job is to liaise with the suppliers on a daily basis.
The Outcome
The supplier relationships and systems underpinnng the service have, indeed, achieved excellent results. Customers are receiving a reliable, accurate, rapid service and the company is making money!
The partnership approach has fostered shared goals and helped the company secure advantageous prices and payment terms. Customer retention has improved and contributed to the company's 20% annual growth rate.
"The new service has differentiated us from former competitors, boosted customer retention and created an important revenue stream," says Martin, "Supplier relationships have been similarly strengthened and the company can now expand the service to other sectors. We would have definitely started on this approach a lot sooner if we had known the level of impact it would have on the business"
What could they do next?
Claro Precision Engineering Ltd website
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