Almost all industrial manufacturers deal with machine shops in some form or another.  A typical scenario is that a manufacturer will provide their print (or that of their customer) to a machine shop to fabricate a component or sub-component.  In the manufacturing law world, business to business disputes with machine shops outnumber those up the supply chain.

For that reason, I was particularly interested in a recent blog post by Peter Zelinski, who is Editor-in-Chief of Modern Machine ShopThe blog post, “10 Reasons Why Machine Shops Vary So Much in Quoted Pricing,” is an interesting read as it identifies factors as to why there is a variation in quotes from machine shops for identical machining work.  Two of the factors identified that I thought were interesting were entitled “interpretation” and “qualification.”  First, that one machine shop might quote a higher price because of their interpretation of the job (which another shop might interpret differently).  Second, one machine shop might quote a higher price in an effort to recoup costs associated with qualifying for a certain industry.

From a manufacturing law perspective, here are a few best practices for dealing with machine shops.

First, like everything else, you often get what you paid for.  A “low bidder” mentality – particularly if you are in a highly regulated space like aerospace – can lead to problems down the line particularly when the machined parts are out of specification.  Do your terms and conditions have audit / inspection rights?  How long do you have to complain about parts being out of specification and what is your relief?

Second, it is important to protect your intellectual property (read:  processes, know-how, etc.).  Manufacturers should ensure that their terms and conditions are clear on who owns the intellectual property being provided to a machine shop.  While that might seem simple when it comes to a print, it becomes less clear when you are talking about processes – particularly when the machine shop wishes to adopt those processes for other customers.

Finally, read the fine print if the machine shop has its own terms and conditions.  What happens if your customer cancels the order?  Can you then cancel the order placed with the machine shop?  Do you have to pay a termination fee?  This is where a manufacturer is faced with the dreaded “battle of the forms” (we have written several blog posts on this) where your T&Cs are in conflict with that of your supplier.

 

 

Print:
EmailTweetLikeLinkedIn
Photo of Jeffrey White Jeffrey White

I am a partner at Robinson+Cole who handles corporate compliance and litigation matters for both domestic and international manufacturers and distributors that make and ship products around the world. My clients have ranged from publicly traded Fortune 500 companies to privately held and/or…

I am a partner at Robinson+Cole who handles corporate compliance and litigation matters for both domestic and international manufacturers and distributors that make and ship products around the world. My clients have ranged from publicly traded Fortune 500 companies to privately held and/or family owned manufacturers. For those looking for my detailed law firm bio, click here.

I am often asked why I have focused a large part of my law practice on counseling manufacturers and distributors. As with most things in life, the answer to that question is tied back to experiences I had well before I became a lawyer. My grandfather spent over 30 years working at a steel mill (Detroit Steel Company), including several years in its maintenance department. One of my grandfather’s prime job duties was to make sure that the equipment being used was safe. In his later years, he would apply those lessons learned in every project we did together as he passed on to me his great respect and pride for the manufacturing industry.

Because of these experiences, I not only feel comfortable advising executives in a boardroom, but also can easily transition to the factory floor. My experience has involved a range of industries, including aerospace and defense, chemicals, energy, pharmaceuticals and life sciences, nutritional and dietary supplements, and retail and consumer products. While I have extensive experience in litigation (including product liability and class actions), I am extremely proactive about trying to keep my clients out of the courtroom if at all possible. Specifically, I have counseled manufacturers and distributors on issues such as product labeling and warranties, product recalls, workplace safety/OSHA, anti-trust, and vendor relations, among other things. I always look for the business-friendly solution to a problem that may face a manufacturer or distributor and I hope this blog will help advance those efforts.